Category: Economics

This category will explore how economic systems impact both individual freedom and the ability to create wealth.

Of Liberty and Property

Of Liberty and Property

“We must love them both, those whose opinions we share and those whose opinions we reject, for both have labored in the search for truth, and both have helped us in finding it.” – Thomas Aquinas

Jon McDonald is an energy economist in Texas focusing on the international trade of natural gas and natural gas derivatives. He has a master’s degree in energy economics from Rice University. Follow him on Twitter @jonnymack1010.


Derived from a labor theory, the Lockean theory of private property has received considerable attention. This theory of private property set the stage for what has come to be known as liberty. John Locke’s theory of labor hinges on the idea of self-ownership; that is, no other human being, regardless of status, race, or religion, has the right to own another person. “The natural liberty of man is to be free from any superior power on earth, and not to be under the will or legislative authority of man, but to have only the law of nature for his rule.”1 This argument was the leading case against slavery and authoritarian governments following the English Civil War in the 1640s and 1650s. 

The theory of private property is simply an extension of this thought. Self-ownership necessarily implies individual ownership of the mind and body. Anything produced from nature will require the labor of the mind and body. The produce is the ownership of the person engaged in the act of production unless a voluntary agreement is struck between a laborer and employer to trade labor for wages. However, this theory has nothing to do with the value of that produce. Value, which depends exclusively on the purchaser’s subjective wants and needs, is determined by the market.2 The act of labor, itself, towards the production of some good or service does not imply value in the marketplace. This fact may come as harsh to some, but it is unavoidable. 

The term ‘Liberalism’ originally belonged to the philosophy of freedom and private property, of which Locke is considered the founder. ‘Liber’ of Latin origin meaning ‘free.’ The word reflects little of its origin in the United States today. The meaning of ‘liberalism’ was changed to mean something altogether different, and it now refers to government intrusion into economic and social affairs and increasing the welfare state. This new definition was given to us when former US Senator, Joseph Clark Jr., stated in 1953 in the Atlantic, “…a liberal is here defined as one who believes in using the full force of government for the advancement of social, political, and economic justice… A liberal believes government is a proper tool to use in the development of a society which attempts to carry Christian principles of conduct into practical effect.”3

No matter the definition, modern-day “Liberalism” reflects more closely that of the anti-Christian, anti-private property doctrine of Karl Marx than the New Testament. Jesus Christ did not ask the Romans to tax the wealthy for their exploitation of the working class, infringe upon the private property rights of Roman citizens, or create money from thin air using a printing press to give to the people as “stimulus.” Today’s “liberal” believes that poverty is an unforgivable iniquity brought about by uncontrollable or materialistic circumstances rather than a matter to be overcome through fortitude and perseverance in a free society. This view has the effect of leading many of the unfortunate into desolation and dependency. The modern-day “liberal” solution to poverty is brought through the force of law and the coercive apparatus of the state. Yet, the law in the US has become egregiously perverted. Rather than protect individual property rights and the right to self-defense as the law is originally intended, the law has been given into the hands of the corrupt and unscrupulous at the request of the collective to dispose of and annihilate the person, property, and liberty of others. As such, a law fraught with iniquity cannot drive out iniquity. 

The ‘liberal’ logic is as follows: “Steal from Peter to pay Paul. There, we have now forced you to do your Christian duty.” As if theft and coveting a neighbor’s property in the name of Christian principles were to confuse the Christian observers completely. According to this logic, the only way to absolve the blaspheming poor, who they have never met, is to commit the act of theft. The modern-day conservative is not much more logically advanced with his quasi-fascist corporative schemes and lust for glory on the battlefield in the name and sanctity of democracy. Both sides of the American political spectrum are branches of the same collectivist tree, but we will defer that conversation to a future date.

Freedom is mocked at every corner. The United States government believes all property to be under their ownership to do with as they please, as do the socialists because only the ruling political class knows what is best and morally proper for the entirety of society. Under this doctrine, the natural right to freedom and property is immoral, selfish, or exploitative. The contradictory nature of this logic is difficult to fathom. But it is not the purpose here to discuss the logical and moral fallacies of the socialist order that has flown under the stolen name of liberalism in the US. However, why the socialists must attack the institution of private property will be illuminated.

Life is not a perpetual state of uninterrupted happiness, and the earth is not a utopia. Though this is not the fault of social institutions, people are apt to make them the culprit. The foundation of all civilization, which has given rise to the highest living standards since time began, and during periods of exponential population growth, is the right to private property. Whoever wishes to criticize the problems they witness in society must therefore diagnose the problem beginning at the foundation of private property. Private property is the perpetrator for everything that does not please the critic, especially those that resulted from restrictions placed on private property rights. For instance, slaves were denied the right to private property in respect to keeping and utilizing the product of their labor, the freedom to voluntarily exchange the products of their labor in return for agreed-upon wage rates or prices as well as, and more importantly, the right of self-ownership which forms the cornerstone of private property rights.4 But this fact does not stop the socialists from blaming private property rights and the system which accompanies it, called capitalism, for the abhorrence of slavery. It was the pre-capitalistic era that withheld the natural right to liberty and property for all. Liberty and property were to be owned by the aristocrats and the elites. It was not until the pre-capitalistic era ended that the infant mortality rate, the scorn of all the ages, began its rapid rate of descent. That the infant mortality rate has dropped to its current level is perhaps the greatest achievement ever known to the history of mankind. 

The typical procedure in the socialist line of thinking is to imagine how great everything would be if only they had their way. They fantasize that if all those who object to their ideas for society were non-existent (deceased, enslaved, or brainwashed), everybody would be better off. All those who condone slavery never imagine themselves as slaveholders or slaves. The exhorters who preach democracy to the masses never imagine themselves as dictators, but they often dream of themselves as advisors to an enlightened economic dictator. No socialist crying out against the so-called “capitalistic exploitation” of the working class aims for the position lowest on the ladder, to be under the oppression of another or among the underprivileged. The fantasies and daydreams of life by the socialist critics of private property is the only life of value, and they will strike down those who oppose their delusions of utopia by violent means if necessary. There is no room for private property or self-ownership if the allocation of all of society’s resources, including the direction of labor, are to be determined by the moral codes of the voters that make up the Majority in a system with democratically held means of production and democratically determined resource allocation. When this becomes common practice, we would soon find our moral compass to be shot full of holes.

Regardless of the economic system, there will always be detractors for each end-use and allocation of the scarce resources available. But this does nothing more than to emphasize the importance of recognizing the beneficial functions of profit maximization, competition, private property, and opportunity costs for the efficient allocation of those scarce resources. To work around this fact in promoting their utopia, the socialist will go so far as to say that scarcity does not exist, as if an infinite supply of wheat used in bread production would magically grow itself at no cost in the socialist heaven. What is considered profitable for private individuals versus the community or society will not always coincide in any system, whether the means of production are owned collectively, by the state, or by private individuals. Among economists in the early 20th century, many understood that the socialist system could not operate entirely differently than the capitalistic one without completely crashing. Even if it were indeed true that it could, one cannot simply assume that a socialist society would always do what is right while continually condemning capitalism’s system of privately held means of production and property rights for deviating from accepted moral standards. It is worthless to pay attention to the daydreams of the socialist. In his dream, everybody will obediently submit to his commanding vision immediately and right on time. 

Suppose we work under the assumption that the equal distribution of total output, under some arbitrary standard set by some altruistic group of economic planners, was a sufficient mechanism to increase the livelihood of each member of society. In that case, we must ignore simple mathematics and statistics. This, however, is not the crucial point. The socialist assumes that labor productivity will be equal if not greater in his system and that a socialist system will automatically eliminate unnecessary and unwanted expenses. This erroneous assumption is due to the ignorance of the fact that the quantity and quality of the goods produced are not independent of the way production is carried out in a capitalistic economy. 

Every stage of production in every sector of the economy has not only innumerable antecedents unknown by any one individual and procured through the division of labor but, more importantly, the special interests of those engaged in the production process tied closely with the productivity of the labor performed during the process. On the first point about the antecedents, it is easy to confuse a socialist with something as simple as a pencil.5 To this end, no socialist can confidently quantify, regardless of mathematical prowess, the future number of pencils required in the economy to determine the number of bulldozers necessary for graphite mining. These calculations arrive via the price mechanism and the profit and loss system. To establish prices, one needs a market. For a market, one needs private property rights. For profit and loss, one needs prices. On the second point, each member in a capitalistic economy must exert his best effort since his wages are determined by the subjective value his labor provides to the output, and every entrepreneur must strive to innovate to accurately meet the demand for his products at the lowest cost.6 Such incentives disappear when the collective determines the allocation of resources for the “common good,” and these incentives are why the capitalistic economy based on private property rights produces the wealth it commands. 

Wherever private property rights are upheld, liberty reigns and a prosperous society follows. Private property rights constituting the material factors of production are not a restriction of freedom. On the contrary, it ensures that property can be held even by the most common of all men without violation and gives him complete command of all his economic affairs. A wealthy businessman may have a range of economic influence in society but, in a system that upholds private property rights, it is never complete control over the whole life of a person. The liberty found under private property rights is the mechanism that stimulates a nation’s most innovative men and women to exert themselves, free of involuntary coercion, to serve others to the best of their abilities.

JM


1) Locke, J. (1689). 1st and 2nd Treatise of Government. Pantianos Classics.

2) Menger, C. (2007). Principles of Economics. Ludwig von Mises Institute.

3) Clark, Jr, J. S. (1953, July). Can the Liberals Rally? theatlantic.com. https://www.theatlantic.com/magazine/archive/1953/07/can-the-liberals-rally/376242/

4) Mises, L.V., Raico, R., Goddard, A., Spadaro, L. M., & Greaves, B. B. (1985). Liberalism : In the Classical Tradition (3rd ed.). Foundation for Economic Education/ Cobden Press.

5) Read, L. E. (2015, March). I, Pencil. Foundation for Economic Education. https://fee.org/resources/i-pencil/

6) Mises, L.V., Raico, R., Goddard, A., Spadaro, L. M., & Greaves, B. B. (1985). Liberalism : In the Classical Tradition (3rd ed.). Foundation for Economic Education/ Cobden Press.

Inflation Resistance: A Comprehensive List

Inflation Resistance: A Comprehensive List

“It does not do to leave a live dragon out of your calculations, if you live near one.” – J.R.R. Tolkien

Jordan Taylor Swaim is a social service worker, podcaster and producer out of Calgary, Alberta, where he resides with his wife Janelle, and son TJ. Check out his podcast, The Peaceful Way, and learn the concepts, ideas, and strategies behind making a more peaceful and nonviolent world.

This article was originally published on Medium.com. Read the original article.


The SARS-Cov-2 pandemic has skyrocketed international government spending and stimulus to unimaginable proportions. Dwarfing the 2008 financial crisis, worldwide government debt soared orders of magnitude higher in 2020 and shows no signs of slowing down in 2021. Nearly 24% of all dollars in existence in the US were printed in the year 2020 alone, while many other countries are well over that 20% mark. Fears over a sovereign debt crisis loom, while there is very little political appetite for austerity measures.

Anecdotally, I see evidence of the economic chickens already coming home to roost. All sorts of general consumer goods, from groceries to textiles, are rapidly rising in price. The stock market appears to be a stimulus-fuelled bubble, and stores of value like real estate and bitcoin are witnessing record levels of trading volume. Inflation, unlike the west has ever seen before, seems highly probable if not inevitable. Central banks globally are rushing to inject liquidity to artificially prop up the economy until it can become productive once again. As the meme lords so eloquently put it: “money printer go brrrr.”

So the question is, how do you protect yourself against it? Well, what I want to do here is create a comprehensive and routinely updated list of products, services, and ideas that can protect your financial situation from being eaten away by the falling value of your dollar. To be clear, this is not investment advice, merely a reference/resource, and there is certainly no silver bullet to protecting against inflation.

A disclaimer, this may not help you in a total economic collapse; in that case, you will need guns – lots of guns. Furthermore, for every example of an inflation hedge I give, there will always be an exception to the rule. Like everything in life, you are taking a risk.

Precious Metals

Let’s start with the most obvious hedges against inflation, precious metals. I am not covering every metal, but rather the most prominent ones.

Gold: The gold standard in stores value, literally. Used as currency for 5000+ years of civilization, it is hard to go wrong with the shiny yellow metal. It‘s difficult to imagine a future where gold would not hold its value, and if you have a decades-long time horizon, there are potential profits to be made.

Pros: – low volatility – valuable everywhere on earth – has industrial uses – a very small amount of gold can be very valuable, making it easy to store and transport – privacy.

Cons: – not easily divisible – you need to spend money on securing your gold either through a personal vault or holding it at a financial institution.

Silver: The little brother to gold, silver has been a humanity mainstay in terms of value for millennia. Industrial uses for the metal have skyrocketed over the last few years and only added to its demand and value. Many believe that the value of silver will leapfrog gold in terms of percentages over the next few years.

Pros: – low volatility – valuable everywhere on earth – much more affordable than gold but has a similar upside – industrial uses.

Cons: – not easily divisible – money spent on securing your silver – can get heavy and difficult to transport with even a modest investment – holds value everywhere.

Copper: Though neglected by many precious metal collectors, the price of copper has nearly doubled in the last year. Not only that, being the primary material used in electrical wiring, it’s here to stay. Commercial real estate landlords have even had problems with copper thieves pulling copper wiring out of their buildings in recent years.

Pros: – high industrial use – affordable – global demand is on the rise, which means its price could be on the rise

Cons: – heavy and difficult to store and transport substantial amounts.

Platinum: A bit cheaper than gold, platinum bullion is available to collect and use as a hedge against inflation. Platinum is a far more rare metal than gold or silver but also has fewer industrial uses. Primarily used in engines.

Pros: – low volatility – rare – a small amount can be very valuable, making it easier to store and transport.

Cons: – difficult to find retail vendors due to low trading volume – costs associated with security – fewer industrial uses than other precious metals.

Real Estate

Like precious metals, real estate is as close to a sure thing as you can get in terms of parking your money. Though there can be large market pullbacks every decade or two in the real estate market, it has always remained one of the most liquid markets in the world. For the purposes of this article, real estate is a longer-term hold, not house flipping or trying to buy low and sell high. You may not make a substantial profit in real estate, but on a long enough time horizon, you most likely aren’t going to lose money as you would to inflation. Though there are many categories of real estate, I am only going to cover two very broad ones:

Residential: People will always need a place to live. Residential real estate, particularly in big cities, tends to be a pretty safe bet. The other benefit is that you can live in and use your investment, so I like owning a home for the pure practicality of it.

Pros: – you can live in it – you can use it as an income property – statistically very good at retaining value.

Cons: – upkeep can be costly in terms of time and money – Can be a rather large commitment – is not a very flexible investment.

Commercial: Though a lot riskier than residential, commercial real estate can have huge upsides. The trick is picking an industry that will remain relatively stable for the long term; retailers and shopping malls are probably a bad bet. However, some commercial investments like RV parking and storage lots show a lot of future promise and have been a booming industry for years.

Pros: – potentially a high income earning asset – has some flexibility in terms of what kind of business can be operated (E.g., the old Kmart gets converted into a trampoline park.)

Cons: – more volatile than residential – upkeep can be costly in terms of time and money.

Cryptocurrency

If you haven’t been paying attention, the digital financial revolution is happening right under your nose. Starting in 2009, and in response to the 2008 financial crisis, the bitcoin white paper was unleashed into the world. A peer-to-peer permissionless currency that cannot be controlled by a cabal of central banks, governmental, and corporate interests. Whether or not BTC ends up the dominant blockchain token, in the end, remains to be seen, but what is a near certainty is that cryptocurrency is here to stay. As institutional investors pile on, the value continues to rise to new all-time highs. Some even believe Bitcoin to be replacing gold as a store of value. Though I doubt it will replace gold, it will certainly compete with it in that regard. 2020/21 seems to be an indicator of where people are putting their cash to protect against an onslaught of inflation. Though there are still detractors claiming it to be a scam, they will most likely be forgotten in the dustbin of history; there is no putting this cat back in the bag.

I will not be covering specific cryptos here (as there are thousands of them). I would recommend learning about Bitcoin, Ethereum, Litecoin, Bitcoin Cash, and XRP for those new to the topic.

Pros: – open distributed ledger making it impossible to forge or fudge numbers – Massive potential across hundreds of industries – easy to store on a computer or hardware wallet.

Cons: – highly volatile – it can be easy to lose your assets on a computer or hard drive.

Human Capital

A too often ignored aspect of fighting off the debasement of the currency is you. Building your own human capital can be one of the most effective tools to avoid the worst effects of a high inflationary environment. The way I like to define HC: it is the combination of your skills and knowledge, having both a theoretical and practical component to it. What you know and what you know how to do can be invaluable assets in bad economic times. There will always be some service or knowledge that other people will need and are willing to pay for that you can provide. It’s also never been easier to grow your human capital. You can learn how to change your oil by watching a youtube video, day trading through a Udemy.com class, and there are all kinds of online forums and communities that can give you free and usable advice on almost any topic or problem you can imagine. Personally, I try to constantly be reading as well as a goal to do one online class a month.

I would also add that physical and mental health are very important in terms of protecting your human capital. If you are sick or having a mental breakdown during a crisis, it can make economic problems exponentially worse for you and your family.

Pros: – relatively cheap – time flexibility (you can work on it at your own pace and convenience) – high upside – knowledge and skill go everywhere with you.

Cons: There is almost no downside to building human capital. The only word of caution would be not putting all your eggs in one basket in terms of what you can do and what you know. Spending your time learning to be a long-haul trucker, for example, maybe a bad time investment due to automation.

Okay, so now that we have covered the big ones, let’s talk about some more obscure stores of value that may not have immediately crossed your mind.

Guns & Ammo

It’s time to put a *pew pew* into that inflation killing your monetary gains. Firearms can be an excellent store of value. With a little bit of love and care, they can potentially be fully operational for decades and even centuries. Guns also track like a can of coke with inflation. They can also be fun toys and useful tools. Whether it’s for shooting at a range, hunting, or personal defense, there will always be a demand for guns.

The market for ammo fluctuates pretty drastically every few years, and a lot of private citizens will even stockpile ammo while it’s cheap and sell it when demand picks up. However, ammunition does not have the same shelf life as guns and can be damaged by rust or oxidization if not stored properly. They will still degrade even in the best of environments; though it could take years, it is going to be a much shorter time period than a firearm.

A final point on guns and ammo, depending on where you live, there can be extremely onerous regulations. This can make it very difficult, and in some cases impossible, to own guns. If your jurisdiction allows you to keep non-registered firearms, there is far less risk of losing them because of gun laws, though the financial risk is mitigated as most countries will do gun buybacks in the event of a ban.

Pros: – can last a very long time – always in demand – low volatility.

Cons: – difficult to store and transport (depending on where you live, there are storage requirement laws) – the risk of being regulated.

Honourable mentions: Compact bows, crossbows, and knives.

Collectibles

This category is vast and somewhat complicated in regards to being a hedge. Many collectibles fall in and out of favour over the years. If they become really popular like sports cards in the 90s, they get so mass-produced and plentiful that when demand dries up, they aren’t even worth the paper they are printed on. If you want to get into collectibles, you have to have very specific knowledge of the niche in which you are collecting; lukewarm investors will spend too much money on items that don’t have any long-term value. However, if you know what to look for, it can be extremely lucrative. Generally, when collecting, you are looking for pieces that have historical significance, like a signed Jackie Robinson card or a first issue of Action Comics.

Here is a list of examples of collectibles:

  • sports cards 
  • comic books
  • toys
  • retro video games
  • antiques (furniture, glassware, books, etc.)
  • sports memorabilia (signed ball, jerseys, etc.) 
  • cars
  • art
  • war artifacts
  • Coca-Cola collections

Pros: – fun and interesting for hobbyists – Great for displaying – preserves history/culture.

Cons: – risky investment with low information – many collectibles require expensive restoration or protection – vulnerable to theft, fire, and flood.

Musical Instruments

I got my first guitar when I was 14, a cherry red Fender Strat made in Mexico. It was purchased for under $500 CDN 18 years ago and now retails for anywhere between $750–$1000, tracking close with inflation. If kept in good condition, instruments of all kinds, from brass to wood to string, have great resale value. If you take care of them properly, they can easily last for decades, and it’s actually relatively simple to repair minor damage. Anytime I have had to get a guitar repaired, it always cost me under $100.

If you already play and love music, this one is a no-brainer but may not work for the non-musically inclined. As with all of these ideas, it’s optimal to find an inflation hedge that you can use and enjoy rather than just leave it to collect dust in an attic. And let’s not forget gear like pedals, cases, straps. These items can also solidly retain their value.

A caveat to this is old stand-up pianos. These instruments are hard to give away for free for the simple fact that they are abundant, hard to move, and take up a lot of space. Grand pianos and a Nord-Stage are safer bets.

Pros: – low volatility – high utility for musicians – minimal maintenance – stable demand.

Cons: – they take up space and may require storage – vulnerable to rapid climate changes and humidity levels – vulnerable to theft, fire, and flood.

Shure SM58

I thought about including this in the Musical Instruments section, but honestly, this mic is in a category all its own. If there was a fictional universe in which musicians controlled the monetary system, they would most definitely make the Shure SM58 Dynamic Microphone the reserve currency of the world. All your dollars would be backed by SM 58’s, and for good reason. This mic has hardly changed since its inception in the ’60s because there’s literally no reason to. It’s affordable, durable, and gives quality vocal and instrumental recording. I personally use SM 58’s for all podcasting and vocal needs. Is it the greatest mic in the world? No, but it does not need to be. You can find it in virtually every professional recording studio around the world, and almost all touring musicians have it in their repertoire. They last forever and are easy to repair. There are youtube videos of people using the mic as a hammer, baton, and even dropping it in water then using it with no issues. Purchase 20 of these mics, leave them in your basement for 30 years, and they will most certainly work perfectly. Not only that, you will be able to sell them for nearly what you bought them for (adjusted for inflation); try looking for them in used markets, and they are 10% less than retail at most.

Even if you know nothing about instruments or microphones, take it from me; you would not go wrong purchasing an SM 58.

Pros: – always in demand – very durable – easy to maintain.

Cons: – heavy – requires storage space.

Tools

This may be obscure, but power tools, and tools in general, hold their value exceptionally well. To be fair, you are probably never going to resell a tool and get what you paid for it. Still, as inflation rises, consumer goods like power tools will rise in price with them, so if you are looking to get rid of some extra cash, this is not a bad option. If you use or need tools, now may be a good time to invest in that table saw you have been humming and hawing about. If you get a good brand, it can last for years, perhaps even decades, and it can often take a beating. The motors in power tools are also fairly easy to fix. They use simple electrical schemes making soldering severed wires a relatively simple job.

It should be noted, I am talking about household tools, not work tools. The amount of mileage put on work tools will wear them out much faster. However, you will most likely use home tools a fraction of the amount you would use work tools, and therefore they should last orders of magnitude longer. A hammer you bought for ten dollars twenty years ago is probably as good as new and would cost you 20–30 dollars today. It will pay in the long run to spend a few hundred dollars getting high-quality tools that you would generally use around the house.

Pros: – always handy and useful – low volatility – a lot of upsides, and there is always a market for used tools if you ever needed to offload them.

Cons: – electric tools may not last more than 10 years – storage space required – theft risk – tools degrade faster in humid environments.

Livestock

As with many items on this list, this may not be for everyone; however, if you have an acreage or even a large enough yard, livestock holds their value very well. There is always a demand for them, or you can use them for your own consumption. Cattle and horses might be for more experienced ranchers and can be more expensive, but animals like sheep, goats, chickens, and even rabbits are relatively easy to raise and maintain. You can use their eggs, meat, milk, and fur. Depending on municipal regulations, you can sometimes get away with raising small game like chicken or rabbits.

Pros: – recurring resource – high utility – can be lucrative.

Cons: – high upfront costs in building habitat and purchasing animals – costs for food and medicine/veterinarian – high commitment.

Jordan S.


Economics in 10 Tokens

Economics in 10 Tokens

A free eBooklet devoted to The Austrian School of economics

The Liberty Quill is pleased to offer “economics in 10 tokens” as a free resource for download. This eBooklet presents ten principles of Austrian economics using a tokenized approach. Please share the file found below as often as possible: that’s why it’s there.

Towards liberty.

The War on Reason

The War on Reason

“The curious task of economics is to demonstrate to men how little they know about what they imagine they can design.” – Friedrich August von Hayek

Jon McDonald is an energy economist in Texas focusing on the international trade of natural gas and natural gas derivatives. He has a master’s degree in energy economics from Rice University. Follow him on Twitter @jonnymack1010.


It is true that history gave us some philosophers who believed, through the power and process of human reason, they could predict the future of mankind as if it were as simple as watching the hands on a clock or the sun rise and fall. They claimed they were granted this power by a higher authority. Through their own arrogance they sought to produce absolute eternal truth. These utopian philosophers prepared schemes for paradise on earth but neglected the fact that what they believed to be eternal truth was just their own hubristic creation. The belief in this divinely awarded position led them to promptly establish absolute moral codes binding on all men. To free themselves from criticism, they raised themselves above fallibility and incorporated the intolerance and violent oppression of those who would dare disagree with their philosophy. Only these philosophers knew what was best for mankind so they sought dictatorship for themselves or for those who would put their ideas into practice. Only their ideas could end suffering. 

History gave us Georg Hegel and Auguste Comte. Hegel from Germany and Comte of French descent. Hegel knew everything in the universe that could be known. His doctrine held that to fully know anything required the knowledge of everything. He said the “truth” was revealed to him by Geist, or “The Absolute Spirit”. Though a brilliant thinker, nobody could interpret his work. Some took it as a reason for the autocratic dictatorship of the Prussian Church while others interpreted it as the reason for atheism and revolution. Comte said he could predict the future and he thought this entitled him to the position of supreme lawmaker. Comte worked to establish a new religion to replace Christianity and picked out a woman to supplant Mary. Comte was insane.1

The war on reason was borne out this line of thinking. It was not the result of careful self-examination, modesty, caution, or humility on behalf of the utopian philosophers nor was it caused by the failures of the natural sciences. The economic freedom which emerged as a by-product of the political freedom obtained in the late 17th and 18th centuries gave rise to the freedom to maximize knowledge towards the application of human needs. The result was the marvelous growth of science which ultimately changed the face of the world. It would be pointless to attack the technological improvements of the human race over the course of history as they speak an undeniable language of great progress and human ingenuity. Those who would wage the war on reason took aim at another target – Economics.2

The war took shape out of the conditions which existed in the 19th century. The classical economists – Say, Smith, Ricardo, and Bastiat among others – had laid socialism in its grave. They were yet to find the solutions to the classical system as drawn by Jevons and Menger, but they had done enough to expose the delusions of the socialist utopians. The communists were finished. There was only one way left open that could resurrect the collectivists ideas. They could attack reason and replace it with magical intuition.

History would choose Karl Marx to propose this solution.

Based on the omniscience granted to Hegel by Geist and the mysticism of Comte, Karl Marx gave himself the ability to predict the future for all of humanity. Karl, being the supreme knower of all things, was better informed than Hegel and Comte on the plans of Geist. In Marx’s vision of the future, the final outcome of humanity’s evolution must be the establishment of the socialist utopia. Socialism will inevitably arrive as time progresses as if it were natural law, he declared. Since every stage of human history improves upon the previous, the ultimate result of mankind’s evolution will be socialism and it will be perfect. Socialism is the highest form of civilization that man could ever achieve. Time is all that is necessary to bring about our socialist destiny and time will arrange everything for the best. There is no reason to listen to the advice of mere mortals. 

Marx still had one more hurdle in his path. The critique of the economists stood in his way, but he had a solution in mind. Human reason, he claimed, was insufficient to find truth. Universal logic and truth do not exist. Marx, replacing Hegel and Comte as the chief exhorter of “truth”, asserted that the different classes of society formulate logic in fundamentally different ways simply because the different classes have different incomes. Proletarian logic is different than bourgeois logic, he claimed. The bourgeois mind cannot produce anything other than an apology for their capitalistic exploitation of the proletariat. Therefore, bourgeois logic is irrelevant, and the proletariat class will soon abolish all classes to convert the earth into a socialist heaven. Marx stated that whatever the mind produces is ideology which can only demonstrate the selfish interests of the theorists own social class. To Marx, universal truth and reason were not available to the human mind. Yet, according to the supposedly higher mind of Marx it was universally true that socialism was mankind’s destiny.

Fittingly, some members of the bourgeois were granted the ability to logic like the proletariat. By the work of some unspecified miracle, Marx was endowed with this special ability. Karl Marx, the son of a wealthy lawyer and married to a Prussian noble, was a member of bourgeoisie awarded the knowledge of the logic of all class’s past, present and future. His collaborator Frederick Engels, a wealthy textile manufacturer, was also granted this special privilege – an obvious coincidence. That Marx and Engels both attained a wealthy status by what they called “capitalistic exploitation” by other members of society was irrelevant. They had the approval to determine absolute truth by Geist and were therefore exempt from their own theory. 

In the Marxian universe, everything revolves around the income of someone else as if it were the gravity that holds that world together. The Marxist doctrine is a false prophecy that attempts to teach the world how to properly covet, envy and despise the position of another. Marx asserted that the logical structure of the mind is dependent on class, or, essentially, income and status. Thus, the Marxists reject the economic concept of scarcity as outlined by Lionel Robbins. They reject it not only because the socialist order cannot account for this reality in its operation, but because Robbins rose from the humble life as the son of a farmer to the ranks of a prestigious professor at the London School of Economics. To a Marxist, an economic theory developed by a member of the bourgeois is spurious. The Aryans reject the theories from economists like Ricardo, Rothbard and Mises because they were Jewish. The logic of a racist differs only from Marxian logic in that it ascribes to each race a different logical structure of the mind and holds that all members of certain races, regardless of class, are endowed with this logical composition. 

Now, it is irrelevant for economics to critique the concepts of class and race as prescribed by the Marxists. It is not the purpose of economics to ask a Marxist when and how the logical structure of the mind changes when a member of the proletariat succeeds in joining the ranks of the bourgeois. It is not necessary to ask a racist to explain the logic of people who are not of a single race.

Economics has more important arguments to put forward. 

The belief that simply discussing the background of an author will suffice in the attempt to illuminate the fallacies of a theory is entirely asinine. What is necessary is to construct a system of logic to counter the contested theory to show why the theory contains invalid logic. Neither the Aryans nor the Marxists have ever been able to design such a system. Nor have they been able to demonstrate precisely in what logic the proletarian logic differs from that of the bourgeoisie or the logic of the Aryans from the non-Aryans. If such a system of counter-logic cannot be constructed, a Marxist or an Aryan would have to consistently maintain that certain ideas are false because the author is not a member of the proper class, nation, or race. However, consistency is not their strength. The Marxists and the Aryans will approve any thinker whose doctrines fit their own ideology. Anybody else is their enemy guilty of treason.

In a free market system where individuals with the natural right to choose the pursuits to which they will direct their labor, either for necessity or desire and unobstructed by the arbitrary powers of another, every change in the market setting will affect the short-run interests of several different groups of people. This dynamic makes it easy to expose every single change in the existing conditions as a change which benefitted the “selfish interests of greedy people.” Many authors today fall victim to this low-hanging fruit and Marx did not discover this procedure. It was known long before his time. It never occurred to the supporters of such dogma that where there are selfish interests in favor of certain changes there must always be selfish interests against such changes. It is completely unsatisfactory to explain any event as an affair that favored a special class. The question that is necessary to answer is why the rest of the populace whose pursuits were injured by such an action failed in challenging the efforts of those who were favored by it.3

Every firm in every sector of a free and competitive economy is interested in a higher quantity of sales for its products or services. In the long run, however, there exists a prevailing tendency towards the equalization of profits in the various sectors of production through the process of competition. If the demand for the products or services of a certain branch of industry increases, prices will rise until sufficient productive capacity can be built to meet the rise in demand. The rise in price signals a shortage and an arbitrage opportunity to a profit maximizing agent. Investors rush into the sector attempting to capture a return on capital. In consequence, more capital flows into the sector increasing the productive capacities of competing firms. The dynamics of new entrants and higher production results in lower prices and the competition of new enterprises brings the height of net returns down to a more equal level.

Those at the helm of the already high profitable firms have little interest in the preservation of free competition. They are, however, opposed to new entrants expropriating their profits and would rather keep competition at a minimum to ensure higher prices. On the other hand, they are in favor of government measures which prevent new business from challenging their position in the market. Those who fight for free enterprise and free competition do not defend the interests of the rich. They want the opportunity left open to the unknown entrepreneurs and innovators of tomorrow whose ingenuity will make the life of coming generations more agreeable. They want the way left open to further economic improvements. They are the watchtowers of human progress.


*Special attention was given to the work of Ludwig von Mises in the writing of this essay. The majority of what is written here can be found in Human Action – ‘Economics and the Revolt Against Reason’. My hope was to bring this work back into discussion in a condensed version.

[1] Ludwig von Mises, “Human Action”, 1949. Hereafter abbreviated LVM.

[2] LVM

[3] LVM


Did Jesus Despise Money?

Did Jesus Despise Money?

Jesus never turned up his nose at the concept of a medium of exchange, or honestly earning it in productive commerce.

Lawrence W. Reed

Lawrence W. Reed is President Emeritus and Humphreys Family Senior Fellow at FEE, having served for nearly 11 years as FEE’s president (2008-2019). His website is www.lawrencewreed.com.

This article was originally published on FEE.org. Read the original article.

“Jesus Christ regarded money as ‘filthy lucre’ and the root of all evil!” pronounced a student at one of my campus lectures a few months ago. That’s not an uncommon view but it’s also manifestly erroneous—completely and utterly false.

The student was responding to my lecture titled “Was Jesus a Socialist?”, based on a short essay I wrote in 2015.

I greatly expanded that essay into a book by the same title, and it’s available for pre-order now from FEE, Barnes & Noble, ISI Books and Amazon.

The book examines a larger question of which money-related issues are a small part. Daniel Hannan of Great Britain wrote a terrific foreword. Editor/publisher Steve Forbes calls it “a learned and well-argued masterpiece.” Historian Burton Folsom says, “Thanks to this book, progressives will never again be able to claim with any credibility that Jesus would stoop to be a socialist.”

I hope you’ll order a copy for yourself and one for your pastor or priest or other interested party because, on this important topic, there’s nothing on the market as convincing and comprehensive. (Thanks to readers for indulging my advertising).

Money in Jesus’s day and what he said about it are interesting subjects, worthy of attention regardless of one’s faith, denomination or lack of either. Let’s take a look.

Jesus himself never used the phrase, “filthy lucre.” It appears only four times in the entire Bible. In each case, it’s employed by someone else and always in reference to theft or dishonesty, as in “loot” or “ill-gotten gain.”

Theft and dishonesty are targeted for unqualified condemnation throughout both Old and New Testaments, and from numerous prophets and sages. For example: “Don’t take money from anyone by force or accuse anyone falsely,” advised John the Baptist when questioned by a group of soldiers (in Luke 3:14). In Proverbs 11:1, we are told that “A false balance is an abomination to the Lord but a just weight is his delight.”

Jesus never suggested, even remotely, that money per se was an evil. He praised the earning of it through productive work and investment, as in the famous Parable of the Talents. He advised careful stewardship of it in business, as in Luke 14:28-30. He encouraged the private, voluntary giving of it to worthy purposes and charities, as in the Parable of the Good Samaritan. He praised those who supported ministries, missions and the temple by their tithes and offerings, as in the story of the widow’s mites in Mark 12:41-44 and Luke 21:1-4.

On many occasions, he urged people to help each other—including by way of donating money—to meet legitimate needs and improve conditions. You and I have done the same, perhaps on a daily basis at work or at home. Encouraging someone to help a person is one thing but compelling someone to give to help someone is quite another. Jesus called for personal, individual and free will-based generosity, not coercive, state-run redistribution programs.

Why do so many people think that because Jesus endorsed charitable giving, he would also embrace a compulsory welfare state? There’s a world of difference between the two. If I recommend that you read a book, would you assume I would support the state forcing you to read it? When your mother told you to eat your broccoli, did you think she was endorsing a federal Department of Vegetables?

More than once, Jesus cautioned against letting one’s character succumb to the harmful temptations and excesses that often accompany money. Similarly, he favored eating but not gluttony, sleep but not sloth, fasting but not starving, drinking but not inebriation.

And Paul, Jesus’s most famous and prolific apostle of the 1st Century, warned against the love of money but not money itself. In fact, to argue that a medium of exchange is somehow inherently evil would be one of the dumbest things for anybody to claim. Any economist will tell you that money—especially honest money that isn’t adulterated by fiat, fraud or false weights—facilitates a level of trade and standards of living that neither a primitive barter system nor a state-run allocation scheme could ever hope to produce. Biblical censure of dishonest money issued by inflating governments is at least as old as Isaiah’s excoriation of the Israelites, “Thy silver has become dross, thy wine mixed with water.”

Paper money made its first appearance a thousand years after Jesus’s time. Money in his day consisted exclusively of metallic coin. Judea being a Roman province when Jesus lived, its money was officially that of the regime of imperial Rome’s first emperor, Augustus, who ruled from 30 BC to 14 AD and that of his successor Tiberius, in power from 14 AD to 37 AD They issued a gold aureus and a silver denarius in a bimetallic regime whereby 1 aureus was equal to 25 denarii. When Jesus asked the Pharisees whose image was on the denarius (Mark 12:15), the reply was “Caesar’s.” It was probably that of Augustus.

Jerusalem was a center of international commerce at the time, so citizens of the area likely saw coins from many places and composed of other metals as well, giving rise to a thriving business of money changing. Jesus famously drove some of those money changers from the main temple (and never from a bank or a market) because it was not an appropriate activity for such a holy place. Certainly there was no reason to tolerate any disruption of services or harassment of worshippers. Ancient coinage expert David Hendin tells us:

Money changers and animal merchants were ubiquitous around the temple, even in the outer Court of the Gentiles. The money changers and sellers of livestock were forced to operate outside of the temple. Indeed, archaeological excavations along the Western Wall of the Temple Mount in Jerusalem have revealed a street and a row of small shops that likely housed money changers, sellers of small animals, and souvenir merchants.

Theirs was a good business, especially during the pilgrimage holidays. It’s easy to imagine how money changers and other merchants could become rowdy while competing for business (“Change here! Our commissions are lower!”). This competition must have reached a point of offensiveness when Jesus upended their tables…

Once, a man approached Jesus and asked him to use his power and influence to redistribute the wealth from an inheritance (Luke 12:13-15). The man claimed his brother received more than he should have, so Jesus should see to it that some of his brother’s money be taken away and given to him. Jesus’s response was to rebuke the man for his envy. “Who made me a judge or divider over you?” Jesus asked. Clearly, Jesus didn’t see money as a convenient instrument by which we can rob one to pay another to achieve wealth redistribution.

Frequently misunderstood is this important admonition from Matthew 6:24, repeated in Luke 16:13. Jesus said:

No one can serve two masters, for either he will hate the one and love the other, or he will be devoted to the one and despise the other. You cannot serve God and money.

Some readers interpret these words as a blanket repudiation of money. If the choice is starkly defined as God or money, one or the other and no in-between, then of course a believer should opt for the former. But note the context: Jesus was not talking here about a consumer in a physical marketplace. You wouldn’t get very far if you said to the clerk in a department store, “Instead of cash for that shirt, let me give you a sermon.” When Jesus made this statement, he was speaking to a group of Pharisees, who were notable for their love of money above everything.

The key words are “serve” and “masters.” Jesus was referring to a reverential relationship. What do you worship? Which “master” do you listen to when their directives contradict one another? In other words, prioritize properly. Money has its place in economic life but should never be one’s most important focus. Don’t allow it or its associated temptations to rule you.

Bottom line: Whatever your faith may be (or even if you presently possess none), don’t make claims about Jesus and money that can’t be supported by his words and historical context. He never turned up his nose at the concept of a medium of exchange, or honestly earning it in productive commerce. He never suggested there was some magical limit to the material wealth a person should earn through peaceful trade. He did, however, advise against allowing money to run your life and rule your relationships.

Econ 101: An Austrian Economist’s Dream

Econ 101: An Austrian Economist’s Dream

Human Beings Behave Purposefully

Arthur Foulkes

Arthur Foulkes writes for a daily newspaper in Indiana.

This article was originally published on FEE.org. Read the original article.

On the first day in an economics class the instructor tells us that “resources are scarce,” but human “wants are unlimited”—hence the eternal “economic problem.” How do we know resources are scarce? We can observe this fact with our senses; we can see that nothing is available in unlimited quantities everywhere and at all times. And how do we know human wants are unlimited? Again, we can observe this fact; as an economics professor of mine once explained, even a billionaire would probably not refuse another million dollars. Thus human wants must be unlimited.

Next our instructors inform us that it is the goal of economics to help society determine how best to allocate its scarce resources to meet the most human wants in the most efficient way. Soon they escort us to the concepts of goods and services, supply and demand, production, utility, and so on. We are introduced to models of human behavior—based on the idea of “maximizing utility”and soon we are drawing “production possibility frontiers” and demand and supply curves, and writing sophisticated mathematical equations.

But what if economics courses started differently? What if on the first day of the course we were told that economics is about human action and “the regularity of phenomena with regard to the interconnectedness of means and ends.”1 In other words, economics is about the laws of human behavior, which is associated with pursuing goals.

You might say, “I’ll take the first definition!” Indeed, economics as the study of allocating tangible goods and services to tangible people with quantifiable “utility” functions seems, at first, much more . . . well . . . tangible. Pretty soon we can forget we are talking about actual human beings with unfathomable minds and values. We can begin to quantify everything and presto, our “economics” has become a kind of applied mathematics.2 Certainly the math we use can become very advanced and difficult, but at least we are dealing with quantifiable concepts and actual numbers.

But what does this approach tell us about economics itself? It fosters the notion that economists are training to become either social engineers whose jobs involve finding the “optimum” level of consumption, for instance, or fortune tellers calculating next year’s demand for apples or the future price of coffee.

Economics in the second sense, on the other hand, leads to the view of the economist as someone working to understand unalterable laws of human economic behavior, the knowledge of which helps us achieve our goals. This approach does not start with empirical observations about reality but rather with the incontestable proposition that human beings act purposefully. From there we deduce other incontestable truths about real human behavior.

This deductive approach is the defining characteristic of the Austrian school of economics. It is what separates it from the mainstream neoclassical school, the Keynesian school, monetarism, Marxism, and the others.3

The empirical approach associated with mainstream and other economic schools reflects the reigning positivist tradition in virtually every contemporary science. According to this philosophy, nothing is knowable if not observable and quantifiable. Lord Kelvin spoke for the entire tradition when he explained, “When you can measure what you are speaking about, and express it in numbers, you know something about it; but when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind.”4

But, of course, this very proposition, which claims to make a definite statement about reality and our ability to understand it, cannot itself be expressed in numbers. Therefore by Kelvin’s own standards his contention represents “meagre and unsatisfactory” knowledge at best. And this is the problem with the entire empiricist method.5

Action Axiom

The Austrian approach, by contrast, begins with the simple proposition that human beings behave purposefully. Yet Austrians do not attempt to “prove” this proposition by observation, experimental testing, intuition, or even “common sense”; rather, the proposition is established as incontestably true because it is self-contradictory to deny it. Any attempt to disprove it would itself be a purposeful action.6

How much better economics education would be if, on the first day of Economics 101, students were introduced to this axiom of purposeful action. Then, over the next several days and weeks they could be shown how it implies the economic categories of choice, ends, means, costs, profits, and loss, and further how economic laws are also derived from this starting point, including the law of marginal utility or the law of demand. This would not necessarily make studying economics less difficult than the present highly mathematical approach (because the conceptualization and logical rigor is highly demanding). But it would certainly bring it back in touch with real human behavior and dispel the popular notion that wise economists can reshape the world according to their sophisticated mathematical designs.


Notes

  1. Ludwig von Mises, Human Action, 4th rev. ed. (San Francisco: Fox & Wilkes, 1996 [1949]), p. 885.
  2. This term, “applied mathematics” is often used to describe the methods of mainstream economics. The earliest such use I could find is from Lawrence White, “The Methodology of the Austrian School Economists,” rev. ed., Ludwig von Mises Institute, 2003; www.mises.org/mofase/methfinb.pdf.
  3. Hans-Herman Hoppe, Economic Science and the Aus- trian Method (Ludwig von Mises Institute, Auburn Ala., 1995) pp. 7–9.
  4. Lord William Thomson Kelvin, “Electrical Units of Measurement” in Popular Lectures and Addresses, vol. 1 (New York, Macmillan, 1889), pp. 73–74.
  5. Mises, Ultimate Foundations of Economic Science (Foundation for Economic Education, Irvington-on-Hudson, N.Y., 2002 [1962]), p. 5; Hoppe, pp. 33–34; 51–53.
  6. Hoppe, p. 61.