On the Supply Objection to the Gold Standard

Since the gold standard was abandoned in 1971, many people have sought to return to such a standard in order to combat inflation and rein in central banks. Keynesians and others who support fiat currency and central banking present several criticisms of this approach. One of these criticisms is particularly nonsensical, but occurs with increasing frequency: that there is not enough gold in the world to back the quantity of currency in existence, and thus returning to gold would set off a deflationary spiral while destroying several industries that depend on gold. Let us address this question from a scientific standpoint, return to economic matters, and address the claimed effects.

Physical Limits

Let us begin by finding the absolute limit of what gold can do for a monetary system. As the United States dollar is the world reserve currency at the time of this writing, it makes sense to use it as the currency to peg to gold. The smallest unit of gold is the atom, and the smallest unit of dollars is the penny. The most extreme possible case would be to set one penny equal to one atom of gold. What would this look like in practice? Any basic text on chemistry can lead us to the answer. The only stable isotope of gold is Au-197, and its molar mass is 196.967. This means that in about 197 grams of gold, or 6⅓ troy ounce coins of the type minted by many governments and private mints, there will be Avogadro’s constant of atoms, which is 6.022140857×10^23. Setting one penny equal to one atom of gold, this is $6.022×10^21 or $6.022 sextillion easily fitting in one’s hand.

This amount of money is so large that people cannot truly understand it due to the lack of a frame of reference for it. Few people will handle anything beyond millions of dollars at any point in their lives. Large businesses may deal with billions of dollars. The most powerful governments have budgets in the trillions of dollars. According to a History Channel documentary, the dollar value of the entire planet is in the quadrillions of dollars, checking in at $6,873,951,620,979,800, and subtracting Earth’s gold content leaves $6,862,465,304,321,880. As the limit of one penny per atom allows one to hold the current market value of a million Earths in one’s hand, it is clear that science imposes no physical limit to make a gold standard infeasible.

Another useful exercise is to try setting the value of all available gold equal to the value of the rest of the planet. The total available gold content at present amounts to 186,700 metric tons. Defining this amount of gold to be worth the above figure of $6,862,465,304,321,880 gives a gold price of $36,756.64 per gram or $1,143,259.40 per troy ounce. This is very expensive by current standards, but current standards do not come close to economizing the entire planet. The actual price would therefore be far lower than this, but this exercise is useful for setting an upper bound.

Current Prices

Perhaps critics of restoring sound money mean to say that the gold standard could not be reintroduced at current gold prices. In this, they are correct; at the time of this writing, gold trades at $1,284 per troy ounce. Multiplied by the 186,700 metric tons of gold available, this gives $7.707 trillion of gold-backed currency, which is not enough for the United States economy, let alone the entire world. The solution, then, is to devalue fiat currencies to fit the available gold supply. According to the CIA World Factbook, the gross world product in 2015 was $75.73 trillion. Covering this with the available gold gives a gold price of $12,616.75 per troy ounce, which is an order of magnitude above current prices, but not outlandish.

Possible Effects

Gold has gained several practical applications in recent times, particularly in medicine and technology. Critics claim that returning gold to monetary use would devastate these industries, along with the jewelry industry. In each case, critics are overreacting. Research toward creating substitutes which work nearly as well in electronics is promising. Gold salts in medicine have numerous side effects, monitoring requirements, limited efficacy, and very slow onset of action. Finally, there is no particular reason why we should care about an industry that produces impractical novelties to the extent of protecting it through fiat currency. It would be better to free up jewelers to do something more productive and helpful to others.

The other major criticism is that returning to a gold standard will cause a harmful episode of deflation. Paul Krugman writes,

“[W]hen people expect falling prices, they become less willing to spend, and in particular less willing to borrow. After all, when prices are falling, just sitting on cash becomes an investment with a positive real yield – Japanese bank deposits are a really good deal compared with those in America — and anyone considering borrowing, even for a productive investment, has to take account of the fact that the loan will have to repaid in dollars that are worth more than the dollars you borrowed.”

But those who are less willing to spend or borrow are necessarily more willing to save, which will allow them to spend more later or fund new businesses and investments. There is also the matter that one cannot hold out forever; one must eventually purchase goods and services. That the technology industry thrives despite producing the most deflationary goods shows that there is nothing harmful about this. It turns out that the value of using a current computer over the next year is worth more than holding out for a more powerful computer next year. It is also true that holding out for more food next month does not work if one cannot survive until then without food now. One may object that this would concentrate wealth in the hands of those who can hold out, but this is a feature rather than a bug because it redistributes resources to those who have been good stewards of resources.

Those who have already borrowed face a larger debt burden in a deflationary environment, and though creditors experience an equal gain, creditors are unlikely to increase their spending to offset the reduced spending of debtors. But again, this is a feature rather than a bug because it incentivizes saving over borrowing while pushing some debtors into default, thus punishing unwise lenders with loss of principal and unwise borrowers with bad credit ratings.

With falling prices, profits and wages usually have to fall as well. But profits are a function of prices and costs, which are also prices. This leaves profits largely unaffected on a percentage basis. Wages are prices as well, and the need to cut nominal wages in a deflationary environment could both incentivize firms to release their worst employees and provide pushback against minimum wage laws.

Finally, there is the belief that the sort of deflation that may be caused by returning to gold would cause a recession. But the above rebuttals deprive this problem of any mechanism by which it might occur. In fact, the empirical evidence suggests that deflation is linked to economic expansion, as occurred in the United States during the 19th century. The only period in which a correlation between deflation and depression does appear is the Great Depression (1929-34), and this may be linked to the central bank policies of the 1920s, which fraudulently inflated the money supply beyond the set gold exchange rates of the time.


While a free market in money would be the most desirable condition from a libertarian perspective, returning to a gold standard is a superior option to that of allowing fiat currency and central banking to continue as they are. The concerns about a lack of gold supply for returning to a gold standard are without merit, and the fears of deflation and devastation to industry are unfounded.

25 More Statist Propaganda Phrases

In the discourse of statists, there is a group of phrases of which one or more tend to be present in nearly every argument. The previous listing of twenty-five such phrases was a major hit, so here are twenty-five more of the most common phrases that statists use in their arguments. As propaganda has a tendency to be repetitive, some of these phrases contain the same logical fallacies, and will therefore have similar refutations. As such, the phrases are ordered so that earlier rebuttals also apply to some later phrases.

  1. Give back to the community”

This phrase is used by people who want business owners to support local charities or help the needy directly. There is nothing wrong with this sentiment. In fact, it is more likely to be efficient and effective than a government welfare program, and it is certainly morally superior. Private charity operations must compete for donations, which incentivizes them to be more efficient and effective in their efforts. They also have a better sense of who can be helped out of poverty versus who will only exist parasitically upon the good will of others. But the phrase ‘giving back to the community’ is misguided and dangerous.

That one is giving back something to people implies that one has taken away something from those people. This can lead to a perception of legitimate business owners as thieves who do not rightfully own what they have, when the truth is quite the opposite. To the extent that businesses in a free market thrive, they do so by voluntary trade. They give customers what they want at prices they deem reasonable. The customer wants the business owner’s products more than he wants his money, while the business owner wants the customer’s money more than he wants his products. They trade assets and both are improved from their subjective points of view. As such, a business is always giving to the community, and its profits are evidence of the value that its customers have received from the business.

If the charitable nature of business ended there, it would be good enough, but there is more. A successful business will be able to employ people. This allows people to accept a constant rate of payment for work done without having to take on the capital risks of starting and running a business oneself. Additionally, this gives the poor and the mentally deficient, who cannot start their own businesses, a path to prosperity and a sense of dignity.

The idea that such benevolent activity to improve one’s community is somehow exploitative of that community is nothing short of communist propaganda and should be rejected as such. Businesses that donate to charities are not ‘giving back to the community’; they are giving the community even more.

  1. Pay your fair share”

Phrases 2-7 are used by progressives who want to intervene in the market economy and make the wealthy pay more taxes. This is wrong on two counts. First, taxation would be considered robbery, slavery, trespassing, communicating threats, receipt of stolen money, transport of stolen money, extortion, racketeering, and conspiracy if anyone other than government agents behaved identically. An objective moral theory must be consistent, so it can be no respecter of badges, costumes, or affiliations. What is immoral for you and I to do must also be immoral for government revenuers to do. Second, the rich already pay the vast majority of the tax revenue collected, while many poor people pay nothing. If “pay your fair share” is to be logically consistent, then all of the poor should be taxed at least to some extent.

  1. Income inequality”

The income inequality generated by a free market is a feature, not a bug. People have different degrees of expertise, intelligence, and motivation, which results in different ability to earn income. This results in the people with the most resources being the people who are best at acquiring, defending, and properly investing those resources. This ultimately benefits everyone because it allows innovations to move past the initial stage, at which only the rich can afford them, and become inexpensive enough for mass adoption. To the extent that income inequality is a problem, it is due to state interference in the form of currency debasement and regulatory capture.

  1. Society’s lottery winners”

This is an open insult to the hard work that business owners have put into their firms to make them successful. A lottery winner invests money in a manner which one may expect to be wasteful and happens to get unearned wealth. A business owner invests both money and labor in a manner which one may expect to be productive, and some earn wealth.

  1. You didn’t build that”

The idea behind this phrase is that someone else built the infrastructure upon which a business relies in order to interact with its customers and make profits. But those who use this phrase make an unjustifiable logical leap from there to assert that a business owner should pay taxes to the state in return for that infrastructure. The problem is that the state monopolizes the infrastructure and forces people to pay for it, in many cases without regard for how much they use it, if at all. People should pay for what they use, but it is immoral to force people to pay for what they are forced to use. In a free society, the infrastructure would be privately owned and voluntarily funded. Those who say that the state must provide infrastructure, and in turn that people must pay taxes for it, have an unfulfilled burden of proof that they frequently shift, committing a logical fallacy.

  1. Gender pay gap”

Those who obsess over this issue point to an overall disparity in pay between men and women and conclude that some kind of unjustifiable gender discrimination must be occurring. But to some extent, a gender pay gap results from the natural differences between the genders. Intelligence testing shows that while the average intelligence level is almost the same for both genders, the standard deviation is much higher for males. This means that geniuses and dunces are both disproportionately male, which females are more likely to be of average intelligence. This makes sense from an historical perspective; in traditional societies, some men were planners and inventors, other men were manual laborers, and women were the support staff for both groups. (There were occasional deviations from this, but they were the exception and not the rule. The NAXALT objection is a sign of political autism and should be denounced as such.) As the highest-paying jobs tend to require great intelligence, and people with great intelligence tend to be male, it follows that a gender pay gap would result. Males tend to have more strength and toughness than females, and the nature of human procreation makes males more disposable. This grants males an advantage in taking high-risk jobs which have hazard pay bonuses, resulting in a gender pay gap. Behavioral differences between the genders, which are also partly genetic in origin, produce a difference in the ability to negotiate for higher salaries.

Another problem with the progressive narrative on gender and pay is that they look only at the aggregate and do not compare like cases. When two workers in the same profession who are equal in every measurable way except for their genders are compared, such disparities do not appear. In some cases, women even earn a few percent more than men when this is taken into account. Part of the reason for the aggregate pay gap is that women choose to work in different fields from men, and these fields do not pay as much.

Although baseless misogyny (and misandry) do occur, its elimination would only reduce the gender pay gap; it would not result in equal pay.

  1. Social justice”

The idea of social justice is that the state should ensure fair distribution of wealth and social privileges, equal opportunity, and equality of outcome. The implication is always that the current conditions are socially unjust. This idea has several major problems. Who defines what is fair, and why should they be allowed to define it? If opportunities and outcomes should be equal, who must make them equal? If an injustice is present, who is the subject of the injustice?

Fairness is a subjective concern, and should therefore be determined by those who are closest to an interaction, i.e. those who are directly involved or affected. As long as all parties to a interaction participate voluntarily and no external party is aggressed against, all involved may deem the interaction fair and the matter of its fairness should be considered resolved. But in social justice rhetoric, the idea of fairness is an excuse to stick one’s nose in where it does not belong and interfere in matters which are none of one’s business. Because doing this successfully involves initiating the use of force against peaceful people and all wealth and privilege can be traced back to a series of interactions, social justice perverts the idea of fairness into something intrusive and unfair.

Equal opportunity and equal outcome are advocated by right-wing and left-wing ideologues, respectively, but both of these are erroneous. Neither can exist without not only a redistribution of wealth, but a leveling of cultural norms and a medical erasure of genetic differences between people, for all of these give some people advantages over others. The resulting inequality of opportunity will necessarily cause an inequality of outcome. All of these measures require initiating the use of force against people who do not wish to be made equal in these senses. Thus, social justice twists the idea of equality into something which must be imposed by unequal means, as the state and its agents are legally allowed to do that which is disallowed for other people and organizations to do.

Ultimately, social justice is not a form of justice at all because there is no subject by which an injustice can be committed. Proponents of social justice will say that a collective is the victim, but this is impossible because collectives do not exist. To exist is to have a concrete, particular form in physical reality. To say that collectives exist is beg the question of what physical form they take, as all available physical forms are occupied by the individuals which are said to comprise the collective. Thus there is no collective existence apart from the existence of each individual said to comprise the collective. Those who advocate social justice cannot point to an individual victim of social injustice, but they seek to create a multitude of victims of real injustice.

  1. Level playing field”

This phrase is used by regulatory busybodies who see an innovation and decide to stand athwart history yelling “Stop!” In any sort of activity, some people will always have an advantage over others, whether it is a first mover advantage, a better idea, better marketing, greater intelligence, etc. The truth is that there can be no such thing as a level playing field, and that which cannot be done should not be attempted.

  1. Our Constitution”

Phrases 9-14 are used to foster a sense of collective identity. The idea that a constitution is “ours” assumes that a collective exists and has ownership of the constitution. As explained earlier, collectives do not exist apart from the existence of each individual said to comprise the collective. Additionally, to own something is to have a right of exclusive control over it. Part and parcel of this right is the right to physically destroy that which one owns. As governments would use force to stop anyone from attempting to destroy the constitution either literally or figuratively, the citizens are not the de facto owners of a constitution.

  1. Our shared values”

Although any recognizable social group will come together to further a certain set of shared values, this phrase is frequently abused by statist propagandists to create a sense of nationalism. In modern nation-states, there tend to be few (if any) shared values across the entire population. To the contrary, it is usually the case that large subcultures within the nation hold values which are diametrically opposed to each other, as well as to the values which are espoused by the ruling classes. To make matters worse, whatever constitution or other founding documents may be in use are frequently cited by all sides in the cultural conflict as a means to justify their own views and attack their opponents.

  1. Our fellow (insert national identity)”

Much like the previous phrase, this is used to lump together people who may or may not fit together by constructing a common identity around them which may or may not have any basis in reality. The implication is that even if people within a nation have disagreements, they are still part of the same collective. This is not necessarily the case because disagreements between subcultures within a nation can grow to a point at which they are no longer able to peacefully share a system of governance. This necessitates a peaceful parting of ways, and the unwillingness of political leaders to allow this to happen results in political violence and civil wars.

  1. That is un-(insert national identity)”

As sociologists are so fond of telling us, an in-group will attempt to clarify its boundaries by othering some people, i.e. defining them as part of the out-group. This is done for purposes of ideological purity as much as for any other reason. Politicians and pundits use this phrase in an attempt to define certain ideas as being out of bounds of the allowable range of opinions. But just as a nation has no existence apart from the individuals comprising the nation, a nation has no ideals apart from the ideals of the individuals comprising the nation. Thus, to tell a person of national identity X that they hold un-X ideas is a contradiction of terms.

  1. National interest”

There is no such thing as a national interest apart from each individual person’s interests because there is no such thing as a nation apart from each individual person. Because a nation will invariably contain individuals whose interests contradict each other, the idea of a national interest is false by contradiction unless everyone in a nation can agree upon a certain set of core interests.

  1. Shared sacrifice”

When government and central bankers interfere with the economy and cause a recession, both typically intervene with fiscal and monetary stimulus programs. As Keynesians, they do not understand that they are only sowing the seeds for another boom and bust cycle. When this happens, politicians and their minions will call for “shared sacrifice.” This phrase really means that they wish to pass off the costs for the mistakes of the ruling classes and the politically-connected wealthy onto the entire population rather than let natural selection eliminate the incompetent from the ranks of politicians, central bankers, and speculators. Of course, the people never get a proper return on their forced investment; rather, it is heads they win, tails you lose.

  1. Rights come from the government”

This phrase is used by progressives who wish to justify their view of the role of government, but it is contradictory. If rights are given by the state, then they can also be taken away by the state. But a right is not something which can be taken away by someone else; it can only be forfeited by the right-holder by violating the equivalent right of another person. This contradiction necessitates a different source for rights, such as argumentation ethics.

With the theoretical argument refuted, let us turn to practical concerns. Progressives claim that government is necessary as a defender of our rights, for the most brutish person or gang may rule and violate our rights otherwise. But a government is a group of people who exercise a monopoly on initiatory force within a geographical area. A government is funded through taxation, which violates private property rights. Its laws are enforced by the threat of arrest, fines, imprisonment, and possibly execution, which violates liberty, property, and possibly life rights. A rights-protecting rights-violator is a contradiction of terms, and the state is just such a brutish person or gang that the progressives say we need safeguards against. Note that although they have a burden to prove that this territorial monopoly is required in order to protect rights, they never do so. At best, they will ask for counterexamples, but this reliance upon historical determinism only shows their lack of courage and imagination to think beyond what has been to see what can be.

  1. We get the government we deserve”

This phrase commonly appears in the media immediately following an election, particularly after a result which entrenches the current system and fails to produce the changes which are invariably promised (which is to say, nearly always). The way that this phrase is used by the media is an example of victim blaming, as the people are going to continue to be violently victimized by agents of the state and the media is saying they deserve to be.

However, one could also interpret this as a call for revolution; in the words of Frederick Douglass, “The limits of tyrants are prescribed by the endurance of those whom they oppress.” There is a case to be made that if people are unwilling to abolish the state by force even though they could, then they deserve to suffer the consequences of their inaction.

  1. Pay your debt to society”

This phrase is used by commentators on criminal justice issues as a euphemism for serving time in prison. The problem with this phrase is that society cannot be a victim because it does not really exist; each individual person exists. A crime must have a definite victim; an individual and/or their property must have been aggressed against. Any debt incurred by a criminal should be payable to that victim, not to all people living within a geographical area.

  1. Rule of law”

This phrase is used by people who try to justify the state by fear-mongering about what could happen without it. But the truth is that rule of law is fundamentally incompatible with a state apparatus. Rule of law is the idea that people should be governed by laws rather than by the arbitrary decisions of rulers. A state is a group of people who exercise a monopoly on initiatory force in a certain geographical area. People who have a monopoly on initiatory force necessarily have a monopoly on the enforcement of laws. This means that they can choose the nature of the law and the enforcement thereof. Thus, in the presence of a state, those who wield state power rule the law. The law does not rule them. Therefore, the only possibility for rule of law is to have no state.

  1. Law-abiding citizen”

This phrase is frequently uttered by the common person as a sort of virtue signal that one is a good person. But whether abiding the law makes one a good person is dependent upon the nature of the law. In a statist society, the law is a collection of opinions written down by sociopaths who have managed to either win popularity contests or murder their competitors and enforced at gunpoint by thugs in costumes. When most people commit several felonies every day because the laws criminalize a vast array of activities which do not threaten or victimize anyone and purport to legitimize the victimization of the citizen at the hands of the state, a law abiding citizen is not a goal to which people should aspire.

  1. Common sense regulations”

This phrase is used by people who wish to restrict economic and/or personal freedoms on the grounds of some public good. But their proposed regulations often defy common sense, not that common sense provides an accurate understanding of reality. The purpose of this phrase is to demonize opponents of a proposal as lacking good sense without having to make a logical case for the proposal.

  1. Corporate citizen”

This phrase is used by people who wish to hold businesses accountable to various laws and regulations. It has its roots in the idea of corporate personhood, the idea that a corporation has rights and responsibilities similar to those of a person. This is wrong because a corporation is a legal fiction created by the state to shield business executives from liability. It is not an extant being with moral agency, as a real citizen is. If the object is to hold people fully accountable for their actions, then corporations must be abolished and full liability for one’s crimes must be restored.

  1. Don’t waste your vote”

This phrase is used by supporters of major-party candidates who wish to suppress votes for minor parties. However, the definition of a wasted vote is a vote which does not help elect a candidate. In an indirect election, such as the United States presidential election, only electoral votes matter. Therefore, all popular votes in such a contest are wasted unless there is a law which prevents faithless electors. In elections in which popular votes directly determine the outcome, all votes for losing candidates are wasted, as well as all votes for winning candidates which went above the amount necessary to win. Thus, the percentage of wasted votes in a race may be given as

W = 100% − (Second highest vote percentage)% − 1 vote,

which will be at least 50 percent unless only two candidates receive votes and the winner wins by only one vote.

  1. This is the most important election of our lifetime”

This phrase is used by the establishment media in the hopes of increasing voter turnout. It is a combination of pleading, manipulation, and crying wolf that is completely nonsensical. It assumes that elections matter, requires impossible knowledge, and contradicts physics.

For the ruling class in a democratic state, elections are just tools of social control that provide the populace with meaningless participation in a process in order to convince them that criminal conduct performed under color of law is legitimate because “they voted for it.”

In order for the upcoming election to be the most important of our lifetime, it must be more important than every future election in which current voters will vote. But the future is unknown and unknowable until we arrive at it.

It is known that altering a system at an earlier time gives it more time to develop differently, resulting in greater changes. As such, at least in terms of how different a counter-factual world in which a different candidate took office might be, the most important election of any person’s lifetime should be their first one.

  1. Freedom isn’t free”

This phrase is used by supporters of government militaries and their military-industrial complexes to stir up emotional support for soldiers, defense spending, and the occasional foreign invasion. But the fact that freedom must be defended at a cost does not mean that a government monopoly military is necessary or proper for that task. There is a logical gulf between the two that most people cannot even see because governments have monopolized military defense for millennia, but it is there. To simply jump across it without attempting to explain why a private, voluntarily funded, non-monopolized form of military defense would be insufficient is philosophically invalid.

  1. We need to have an honest conversation”

This phrase is used by politicians and their propagandists when dealing with controversial political issues which tend to go unaddressed for long periods of time due to their third rail nature. But politicians have a tendency to either do nothing about such issues or to uniformly disregard the will of the people. The real purpose of this phrase is to set a trap for both the mainstream opposition and political dissidents. Either can be tricked into believing it acceptable to venture opinions which are outside of the Overton window, for which the establishment can then attack them as unreasonable extremists. In some cases, it is a way for authoritarian regimes to find out who to violently suppress. As such, it is best to rebuke those who make such a claim.

On Market Failure

The idea of market failure is a widely believed misconception which has found widespread use in statist propaganda for the purpose of justifying government intervention in the private sector. Though the term itself has only been in use since 1958, the concept can be traced back to Henry Sidgwick. It is used to describe a situation in which the allocation of goods and services is Pareto inefficient. This occurs when the rational self-interest of individuals is at odds with the optimal outcome for a collective. Such a situation is frequently blamed on conflicts of interest, factor immobility, information asymmetry, monopolies, negative externalities, public goods, and/or time-inconsistent preferences. Among these, monopolies, negative externalities, and public goods receive the most attention from mainstream economists.

But let us pause to consider what a market is. A market is a structure that allows buyers and sellers to exchange goods, services, and information. The participants in the market for a particular commodity consist of everyone who influences the price of that commodity. To say that a market has failed is to say that this process of assembling the information about a commodity which is reflected in its price and its change over time has failed. But the causes listed above are either inconsistent with a free market or unresolvable by interventions which bind the market. Let us explore this in detail.


While monopolies are frequently blamed for market failures, a monopoly in a particular market is typically the result of government intervention which has raised barriers to entry in that market. Through a vicious cycle of regulatory capture, larger businesses can put smaller competitors out of business by bribing politicians and regulators to favor the former and harm the latter. This continues until a market is effectively monopolized. Therefore, this type of monopoly is actually a government failure rather than a market failure.

Another type of monopoly can occur when there are natural barriers to entry, such as the need to build vast amounts of infrastructure in order to provide a good or service. This can give the first entrant into a market an insurmountable advantage. Consumers may then complain that this monopolist is abusing them rather than show gratitude that they are getting a service which was formerly nonexistent. But if the monopolist were really overcharging, then it would become feasible for another provider to either challenge the monopoly directly or provide an alternative service. This type of monopoly is actually a market signal that a particular good or service would be better provided by another means, and entrepreneurs should look for those means.

Third, a monopoly can arise in a free market if one business satisfies all consumers of a good or service to such an extent that no one cares to compete against them. This kind of monopoly is not a market failure, but an astonishing market success.

This leaves only the ‘public goods’ argument, which merits its own section.

Public Goods

Public goods and services are those whose consumption cannot be limited to paying customers. It is frequently argued that this produces waste in the form of unnecessary duplication and excess costs born by those who are not free riders. There is also the matter that non-excludable and rivalrous resources in a commons may be depleted without intervention. The latter can only be fully resolved by eliminating the commons, as restoring exclusive control to the resource is the only method of eliminating the perverse incentives created by a commons. The concerns over free riding and unnecessary duplication ignore incentives, prove too much, and commit the broken window fallacy.

If we wish to have a rational discussion, it is essential to define terms. A problem is an undesirable situation which can be remedied. This is because a situation which is not undesirable presents no problem to solve, and an undesirable situation which has no remedy is just a fact which must be tolerated. The free rider “problem” is a situation of the latter type, as it is impractical to make sure that everyone pays exactly what they should pay for the amount of public goods that they consume. That government monopolies destroy competition, and thus the market price system, makes the free rider “problem” impossible to solve, as the information needed to determine how much each person should pay for the amount of public goods that they consume is destroyed beyond repair.

If taken to its logical conclusion, the idea that no one should be able to consume more than or pay for less than their fair share of a public good means that the state should be eliminated, as the very presence of a state means that some people are consuming more than and paying for less than their fair share of the total wealth in the economy, as states are funded by coercive means which violate private property rights. Those who receive government welfare payments, bailouts, grants, or any other form of government funding are free riding upon the backs of taxpayers and anyone else who uses currency printed by a government’s central bank. The latter group of people are forced riders who are required to pay for public goods from which they receive insufficient benefit. Charity would also be unjustifiable if the concept of the free rider problem is taken to its logical conclusion, as those who receive charity are not paying the full cost for what they are using.

But suppose we ignore this as well. If we accept for the sake of argument that there are public goods and that no one should be able to consume more than or pay for less than their fair share of a public good, then the result will be a massive distortion of the economy, as both the state and private charity must go. While the demise of statism is nothing to lament, the absence of any form of private charity would lead to the very sort of Hobbesian war that statists fear and think that they are preventing. It must also be noted that the money for payments for public goods which are now being made was once being put toward another purpose. Whether that purpose was spending on other goods and services or investment (which is really just another form of spending), the diversion of spending away from these purposes and toward public goods will eliminate some other economic activities that were occurring.

Nearly all competitive production involves supposedly wasteful duplication, in that each provider must have the infrastructure necessary to produce that which is being provided. But if the duplication is truly wasteful, the market signals this by rendering the wasteful duplication unprofitable. Government intervention interferes with such signals, and government control over an industry completely eliminates them, leading to far worse government failures than any failure of the market.


A problem related to public goods is the problem of externalities, in which costs or benefits affect a party who did not choose to incur those costs or benefits. When firms do not pay the full cost of production, each unit costs less to produce than it should, resulting in overproduction.

The most frequent examples given are pollution, traffic congestion, and overuse of natural resources, but all of these contain externalities because the market has been prevented by governments from internalizing the costs. Air and water pollution are externalities because government intervention on behalf of polluters has eliminated the common law system of private property rights with regard to pollution. Before the Industrial Revolution, pollution was correctly viewed as an act of aggression against people and their property. Those victimized could sue for damages and obtain injunctions against further pollution. Polluters and victims can also bargain to reach an optimal level of both production and pollution. Additionally, the victims would be justified in using violence in self-defense against polluters, though this is an historical rarity. But government monopolization of environmental regulation has prevented these market solutions from being implemented. Therefore, pollution is a government failure rather than a market failure.

Traffic congestion is another tragedy of the commons that causes externalities in the form of pollution, wasted fuel, and lost time. But this is another case in which governments have monopolized a good and produced it out of accordance with market demand. Without competing private firms to build different traffic systems in search of more efficient ones and without private property rights determining location and control over the transportation system, we are left with a non-excludable good that is incentivized toward overuse. Attempted solutions of congestion pricing, mass transit, and tolls mitigate some effects, but not to the extent that private service providers might implement such methods. Again, we have government failure at work.

A third example of externalities occurs with overuse of natural resources, such as fish and lumber. But once more, we see government intervention against private property mechanisms creating problems. Because state personnel in modern democracies do not personally benefit from maintaining the value of state-controlled property and work almost solely with the usufruct thereof, they are incentivized to engage in bribery and corruption. When states sell only the resource rights but not the territory itself, they get a renewable source of income. But firms that harvest renewable resources can abuse this system, stripping the resource bare then vanishing when it is time to replenish. These ‘fly-by-night’ lumber companies, fishers, and other such exploiters lead to the fast demise of resources which were harvested and preserved for centuries prior to state intervention. In short, government fails yet again.

Before moving on, a quick word about positive externalities is in order. This is another way of talking about the free rider problem, so the same criticisms discussed above apply. But we should also consider the benefits of free riders. Although some people will argue that free riders are responsible for higher costs, they are actually signaling that a good or service is overpriced. While degenerate freeloaders do exist, most free riders who are aware of their free riding are willing to pay for what they are receiving but believe that said goods or services are overpriced. In the state-enforced absence of another provider, they choose to “pirate” the public goods rather than pay the cost which they believe to be too expensive. If there are rational, knowledgeable people in charge of a public good that has many free riders, then they will respond by lowering the cost to convince more people to contribute, which can actually raise the total contribution.

The above result is rare, of course, as rational, knowledgeable people tend to be productive rather than become part of the state apparatus. The more useful role of free riders is to crash government programs which cannot be ended by normal political means. Most government programs help a few people by a large magnitude while harming a much larger number of people by a much smaller amount. This means that an irate and tireless minority will work to keep their sacred cow from being gored, while the majority is not being harmed enough to take action to end the harm. Thus, there is nothing more permanent than a temporary government program, and it is politically impossible to abolish entitlement and welfare programs. While the strategy of overloading such programs was first proposed by leftists who wished to replace them with far more expansive redistributions of wealth, it could also be used by libertarian-minded people who wish to replace such programs with nothing.

Other Culprits

The less-discussed causes of market failure are conflicts of interest, factor immobility, information asymmetry, and time-inconsistent preferences. This is mostly because government intervention is more widely known to either cause these problems or fail to solve them. Conflicts of interest typically occur when an agent has a self-interest which is at odds with the principal that the agent is supposed to serve. For example, a lawyer may advise his client to enter protracted legal proceedings not because it is best for the client, but because it will generate more income for the lawyer. A politician may vote for a law not because it is in the best interest of the people in her district, but because she was bribed by lobbyists who support the law. The only solution to a conflict of interest is to recuse oneself from the conflict, and government offers no answer, especially since it inherently operates on conflict of interest.

Factor immobility occurs when factors of production, such as land, capital, and labor, cannot easily move between one area of the economy and another. This sometimes occurs due to malinvestment caused by government distortions of the economy; in other cases, it results from technological advancement that puts an industry into obsolescence. In any event, government regulations frequently make it more difficult to change occupations and maneuver capital than it would be in a free market. Interventions to help workers in a declining field typically fall victim to the knowledge problem; it cannot accurately retrain workers or educate future workers because it cannot know what the economy will need by the time the retraining or education is complete.

Information asymmetry occurs when some parties in a transaction has more and/or better information than others. This creates a power disparity which is sometimes called a market failure in the worst cases. Common sub-types of information asymmetry include adverse selection and moral hazard. Adverse selection occurs when one party lacks information while negotiating a contract, while moral hazard involves a lack of information about performance or an inability to obtain appropriate relief for a breach of contract. These cases are made worse by government laws, as laws can lead to both adverse selection and moral hazard. For example, an insurance firm that is legally disallowed from discriminating against high-risk customers is itself put at a higher risk through no fault or will of its own, being unable to turn away those who cost the most to insure or cancel insurance policies for reckless behavior by the insured. Fortunately, there are market methods for resolving informational asymmetries, such as rating agencies.

Time-inconsistent preferences occur when people make decisions which are inconsistent with expected utility. For example, one might choose to have ten ounces of gold today rather than eleven ounces tomorrow. Time preferences are expressed economically through interest rates, in that interest rates are the premium placed upon having something now rather than waiting for it. Governments interfere with interest rates through central bank monetary policies, leading to alterations of time preference that can be inconsistent. This is still another example of government failure rather than market failure.

Resource Failure

Another possibility for market failure which is rarely discussed is that of resource failure. If an economy becomes dependent upon a certain non-renewable resource, that resource becomes scarce, and there is no viable alternative, the result can be devastating not only to markets, but to peoples’ lives as a whole. For example, if peak oil occurs and there is no alternative energy source available to meet the energy demands fulfilled by fossil fuels, a market failure will occur due to resource failure. Another historical example is the destruction of trees on Easter Island. Resource failure is generally not amenable to government policy, and may be exacerbated by it if subsidies alter the market to keep it from finding the best solution to a resource shortage.

Complainer Failure

The last type of failure is not a market failure at all, but a failure by a critic to understand the nature of the market. Consumer demand does not drive the economy; capital investment does. The over-reliance on gross domestic product (GDP) as a measure of economic output has fooled many people into believing otherwise, but GDP neglects intermediate production at the commodity, manufacturing, and wholesale stages of production. As such, consumer demand and spending are an effect of a healthy economy and not the cause.

With this in mind, the idea that the market has somehow failed when it does not produce everything that a particular person might want and deliver it exactly where they want it for a cost that the person finds agreeable is ridiculous. A person levying this criticism should be advised to check their hubris. If a certain good or service is not produced in a free market, it is because such production is not sufficiently worthwhile for anyone to make a living through doing so. The fact that everyone gets by without that good or service indicates that no failure has taken place. Those who desire that good or service so much should make an effort to provide it so that they can have it.


The entire idea of market failures is based on Pareto efficiency. But there is no reason why we must choose Pareto efficiency as the measure of market success. One could just as well define market efficiency as the degree to which it permits its participants to achieve their individual goals. (Note that these are equivalent if the conditions of the first welfare theorem are met.) Another possible standard is that of productive efficiency, which is optimized when no additional production can occur without increasing the amount of resources, time, and/or labor involved in production. An economy with maximum productive efficiency cannot produce more of one good without producing less of another good.


In every case, that which appears to be a market failure is actually a failure of government policy, natural resource management, or economic understanding. We may therefore reject the very idea of market failure as yet another form of statist propaganda.

Cut Puerto Rico Loose

On May 2, the Puerto Rican government missed an interest payment on bonds it has issued to an extent of $422 million. Worries of default on the territory’s general obligation bonds are continually rising, as it appears that a $2 billion payment due on July 1 will also go unpaid.

Of course, the usual suspects are calling for intervention to “save” the island from its financial woes. Some Democrats are openly clinging to Keynesian ideas of bailouts for troubled financial instruments, despite the abject failure of such measures to repair the mainland U.S. economy since 2008. Meanwhile, House Speaker Paul Ryan has made the statement that “[o]ur primary responsibility is to protect the American taxpayer and to help bring order to the chaos that will befall Puerto Rico if the status quo continues going in the direction it’s going,” which is contradictory because attempting to rescue Puerto Rico will require victimizing not only the American taxpayer, but everyone who holds U.S. dollars.

That such a bailout would be funded by money gained by the state through extortion and currency debasement is terrible enough, but rescuing Puerto Ricans from the just consequences of their actions also creates a moral hazard. If Puerto Rico, then why not Detroit? Chicago? California, even? If $72 billion in debt plus $44 billion in unfunded liabilities for a outlying territory, then why not more for the U.S. mainland? Rewarding and subsidizing bad behavior only encourages more of it, not only from some irresponsible actors, but from all of them.

It must also be noted that in the current political climate, Republicans will be demonized by Democrats and the lapdog media regardless of what happens, and the Republican rank-and-file will be given the shaft. If there is no bailout, then Democrats will accuse Republicans of being too stingy to help people in need, especially ethnic minorities. If there is a bailout and trouble continues, which it will under such circumstances, then Democrats will blame Republicans for not using enough stimulus and/or for allocating the funds poorly. If one will face accusations regardless of one’s actions, then one might as well get one’s money’s worth and do the right thing. And what is the right thing?

Do not only abstain from bailouts; cut Puerto Rico loose.

Let us face facts; Puerto Rico has never really been a part of America, not in terms of economics, culture, language, or identity. In fact, it was not a part of America at all until 1898, when the United States gained control of it from Spain (along with Guam and the Philippines) under the Treaty of Paris, which ended the Spanish-American War. For four centuries prior since being claimed by Columbus in 1493, Puerto Rico had been a Spanish colony. The people there used the Spanish language, but developed their own sense of culture and national identity. (This commonly occurs upon islands, as the ocean makes for a clear barrier between in-group and out-group.) That they may call themselves U.S. citizens is only a matter of law.

The economic well-being of Puerto Rico is not on par with the rest of the United States. If it were an independent nation, it would rank between 60th and 62nd in GDP, with a similar economic output to Angola, Morocco, and Slovakia, none of which are exactly paragons of economic development. If it were a U.S. state, it would rank 37th out of 51. The difference is far more pronounced when considering other measurements. In terms of public debt to GDP, Puerto Rico has a debt of 66 percent of GDP, while no U.S. state exceeds 25 percent. The per capita public debt of Puerto Rico is $19,486.60, which exceeds that of every U.S. state but is lower than that of the District of Columbia. The per capita income in Puerto Rico is $11,241, placing it just above half of the worst U.S. state (Mississippi, $21,036) and far below the best (D.C., $45,877; Connecticut, $39,373).

While cutting Puerto Rico loose is a matter of rational self-interest for mainland Americans, it is also a way to end their victimization at the hands of central bankers and the investors who react to their pernicious policies. While a free market would have much higher interest rates and no currency debasement, central banks like the Federal Reserve have kept interest rates artificially low and have greatly expanded the monetary supply. Savers who are used to getting a reasonable rate of return in a savings account thus have to seek riskier alternatives. Those who have enough capital to access hedge funds, high-risk sovereign debt becomes an attractive option. Those who are poorer either sit on fiat currency as it loses value or venture into precious metals and cryptocurrencies, which can pose even more risk and volatility. While Puerto Rico would likely form a central bank and issue its own fiat currency if it were cut loose, this would keep the Federal Reserve from imposing an economic system which encourages booms that favor foreign investors at the cost of busts that burden Puerto Ricans. A problem of this sort has already been seen in Greece, and the mistakes made by the European Central Bank should not be repeated.

Real libertarians say: immigration is a government program

On July 8, Libertarian Party Chair Nicholas Sarwark released a statement called “Libertarians say: Let the immigrant children in,” which says that the Central American children currently crossing the Mexican border into the United States should be allowed into the United States. While the statement makes several valid points, let us examine what is wrong with it from a philosophically consistent libertarian perspective.

“Should the U.S. government forbid foreign children from entering the United States? The Libertarian Party says no.

It would be unjust and inhumane for the U.S. government to prohibit these children from entering the United States.”

The U.S. government cannot forbid anything, because it does not exist. Likewise, the Libertarian Party does not say anything, nor can it, because it does not exist. Each individual person exists, and it follows that only an individual person has the ability to say something or forbid something. But putting this strange collectivist utterance aside, the answer to the question of whether agents of the state should use force to deny freedom of movement into a particular geographical area is no. However, this is not to say that because agents of the state should not do it, that it should not be done at all. A case for restricted immigration on the basis of private property rights is consistent with libertarian theory.

“A great irony is that U.S. government policies have caused the conditions that some of these Central American children are fleeing. The War on Drugs has created a huge black market in Latin America, causing increases in gang activity and violent crime. Some of the affected children naturally try to flee this violence. It is wrong to jeer at them, call them ‘illegals,’ and tell them to get out.”

The culpability of those who set U.S. government policy is quite clear, with the predictable repetition of the history of 1920s Chicago. But the solution is to reverse those policies, not to admit people to the United States against the wishes of private property owners therein.

“Many of these children are hoping to reach friends and relatives in the United States. A freer, simpler legal immigration process might result in a safer journey with more adult supervision along the way. In any case, Libertarians support maximizing freedom knowing that risks, including risks to children, are always involved. In some cases, children may be better off migrating, even without adult supervision, than staying trapped in dangerous environments — just ask the Jewish children who escaped from Hitler, or Tutsi children who escaped genocide in Rwanda.”

This is true.

“Libertarians do not support forcing people to pay for other children’s welfare, and there are obviously costs associated with helping children who arrive in the United States. However, there are many charitable organizations that have already mobilized to provide that help. A nation of 320 million people can provide sufficient charitable help to the number of children involved (around 50,000 over the last nine months).”

The problem is that people will be forced to pay for other children’s welfare, to the tune of $1,000 per day per child. Charitable deeds which are funded with stolen money (in the form of taxation and currency debasement) are not virtuous.

There is also the fact that compassion (which is normally a virtue) can be taken too far and turned into a tragic flaw worthy of the finest works of Euripides. To an external enemy wishing to bankrupt Americans, sending helpless children to the border to drain resources and divert the attention of border patrols is an excellent diversionary tactic for inserting terrorists. To the state (the internal enemy), allowing a large number of children to enter is beneficial because unproductive people give politicians an excuse to expand state power to give benefits to them, and there are few types of people who are less productive on average than children. The gang members who are also entering serve the interests of politicians as well, as they provide justification for expanding the police state.

“And if we’d just end the War on Drugs, the number of refugee children would be much lower.”

This is necessary, but not sufficient. Military interventionism, protectionist trade policies, economic sanctions, and foreign aid also create more refugee children in the countries targeted by them.

“Ultimately, the fact that many of these children are fleeing dangerous situations isn’t the issue. Even if they were coming to the United States for fun, we should still allow them to enter. All foreigners should be allowed entry into the United States unless the government can produce positive evidence that they pose a threat to security, health, or property.”

This statement is quite anti-libertarian, as it implies that the state should have authority over who gets to enter which geographical areas and what constitutes a threat to security, health, or property rather than private property owners. Only individuals are legitimately capable of owning land, as only individuals are capable of mixing labor with unowned natural resources, which is the correct way to create property based upon self-ownership and the resulting responsibility for one’s actions. Therefore, individuals should have the right to admit to or exclude from their private property any person for any reason.

“Our bad immigration laws affect a lot more people than just these children. Many foreigners want to come work in the United States, which benefits them as well as Americans. However, our government makes it impossible for almost all of them to work here legally.”

This is not necessarily true. It should be clear to a student of Austrian School economics that benefit is subjective. A person may value a lower population density more than the rise in real incomes that results from immigration, in which case foreign workers are not a welcome sight.

“The Libertarian Party believes that the U.S. government should not prohibit Americans from hiring foreign workers. There are about 60 million legal foreign entries into the United States each year (mostly tourists). Those foreigners should be free to work in the United States as well. There’s no question of border security — it’s just a question of the government’s unjust and foolish protectionist labor laws.

(By comparison, there are only about 500,000 “illegal” entries into the United States each year. Most of those are foreigners who want to work in the United States, and who would be denied visas because of that intention.)”

Again, the Libertarian Party cannot believe anything; only an individual person can do that. That being said, the belief is true as long as private property owners who control the area in which foreigners will be working have no problems with it. There is also the matter of child labor laws and compulsory schooling laws, which would prevent the children currently crossing the border from being free to work even if foreign worker restrictions were lifted.

“Some observers have noted that generous benefit and subsidy programs in the United States, including free education and health care, may be attracting lazy foreigners. …It’s worth pointing out that foreigners use these programs at a lower rate than natives, according to a recent report by the Cato Institute.”

This is true.

“The Libertarian Party supports the abolition of government benefits and subsidies, for both natives and foreigners.”

This is good, but the moral order in which to do this is to end the government benefits and subsidies, then open the borders because this subjects people living in America to less taxation and currency debasement.

“It’s a shame that many in the media are trying to make Americans feel fear and suspicion toward immigrants. It’s particularly disgusting that protesters would yell at children to make their political point.”

This is true.

“Immigration is good for foreigners and good for Americans, and we need to change our laws to make immigration much easier.

The Libertarian Party Platform says the following about the freedom of trade and migration:

3.4 Free Trade and Migration

We support the removal of governmental impediments to free trade. Political freedom and escape from tyranny demand that individuals not be unreasonably constrained by government in the crossing of political boundaries. Economic freedom demands the unrestricted movement of human as well as financial capital across national borders. However, we support control over the entry into our country of foreign nationals who pose a credible threat to security, health or property.”

These points have been addressed above.

To summarize, real libertarians say: immigration is a government program. The correct solution to the current border crisis is to respect private property rights, eliminate the various government programs which have made so many refugees, otherwise let people move where they wish and either associate with or dissociate from whom they wish, and do all of this without involving the state.

Book Review: Freedom!

Freedom! is a book about libertarian theory written by activist Adam Kokesh. The book discusses the philosophy of libertarianism, applies it to various socioeconomic issues, and discusses its potential.

Mr. Kokesh begins by discussing the nature of freedom from a self-ownership perspective, and shows how government is philosophically incompatible with this perspective. He then shows how the non-aggression principle and the right to claim property derives from self-ownership. The validity of the self-ownership perspective has been argued with more robustness elsewhere, but we can assume that Kokesh omits a deeper discussion of argumentation ethics for the sake of brevity. Strangely, Kokesh does not include the precise definition of government that he has used repeatedly elsewhere (a group of individuals who exercise a monopoly on the initiation of force within a geographical area). He finishes the first chapter by proposing a society in which people only engage in voluntary relationships.

The second chapter is about the history of the state and how we might evolve past it, with an emphasis on the role of technology in helping people see through the lies of government propaganda and become productive enough to oppose the state in meaningful ways. The overall tone is rather Pollyanna-ish, as governments have become far more dangerous with recent advances in technology, and technology alone is not guaranteed to lead to the end of the state. There is also an alternative interpretation of the available data which is not directly discussed; namely, that the evolution from more crude forms of government to democracy did not occur because common people wanted more influence in government, but because rulers found that human livestock are more productive when given the illusion of freedom.

The third and fourth chapters briefly discuss the nature of self-defense and justice in a free society, with much more space devoted to the ways in which governments have corrupted these concepts with their monopolies on legal systems and military defense. Such corruptions include military interventionism, foreign aid, conscription, the military-industrial complex, wars against abstract ideas and tactics rather than physical foes who may be defeated, laws that criminalize victimless behaviors, laws that restrict access to weapons, courts that give agents of the state cover to assault peaceful people, the prison-industrial complex, and a legal system of punishment rather than a justice system of restitution.

The fifth chapter discusses taxation and explains why it is immoral, in both direct forms and indirect forms such as central banking. Kokesh shows that attempting to use the state to rein in the excesses of the rich will fail because the rich control the state by funding politicians. He then demonstrates that taxes discourage production because removing incentive to work in the form of income taxation will lead to less work being done (at least officially). After explaining how fiat currencies are imposed and how they are used to make it easier to tax a population, he argues that eminent domain and property taxes violate private property rights and are yet another form of theft. Kokesh finishes the chapter with a glimmer of hope; that a generation of people will come who will disown national debts because such debts legitimately have nothing to do with them. There are two problematic arguments in this chapter. First, there is the idea that taxation can be voluntary if one believes that governments serve people, one’s tax money is used properly, and one willingly pays taxes. This is false on two counts. Truth is independent of belief and morality is objective, so taxation is immoral even if one does not believe that it is. Also, consent under duress is not valid consent. As it is impossible to distinguish consent given only because of duress from consent given despite duress, it is impossible to consent when duress is present. Second, Kokesh claims that the only options for fighting taxation are to fight tax collectors in court and to conduct economic activities out of the view of tax collectors. This is false because the use of defensive force against agents of the state is also an option, even if there are not yet enough potential practitioners to make it likely to succeed.

In the sixth chapter, Kokesh begins by explaining the ideal of trade without force, fraud, or coercion, then examines how destructive government interference in trade is to the economy. He then goes into more detail about how central banks and fiat currencies distort the economy, and suggests cryptocurrencies as a possible way to solve this problem. Next, there is the problem of corporations, which led to the formation of unions. Kokesh explains that corporations are legal fictions created by the state to protect the wealthy who bribe politicians, and that this led to strong unions as a reaction by workers to the formation of powerful corporate interests. After this, he discusses the effect of government monopolization on infrastructure and utilities, which has hampered advancement beyond current technology and raised the cost of all goods and services by eliminating the increased efficiency that results from competition among service providers. The fifth section of the chapter is devoted to the method of ostracism and boycotting to bring about change in a peaceful manner. Unfortunately, the shortfalls of ostracism are not fully explored. Kokesh ends the sixth chapter by making the case that everything should be viewed through the lens of economics.

In the seventh chapter, Kokesh demonstrates how government interference in schooling, medicine, assistance for the poor, drug use, environmental protection, and the free flow of ideas has harmed everyone. Free market solutions to these problems are discussed perhaps too briefly, but discussing them at full length would make the book several times longer, and this has been done elsewhere by other authors.

The eighth chapter discusses government involvement in personal and family relationships. Here, Kokesh makes the case against laws forbidding consensual relationships as well as the case for peaceful parenting and treating children more like people and less like property vis-à-vis their current standing in society. This perspective is then applied to the problem of bullying in government schools. The chapter ends with a discussion of racism that examines its nature, its uses from a libertarian perspective, and how it is used by power elites to divide and conquer.

The last two chapters present Kokesh’s advice for living free in an unfree world, as well as his prediction for where the human species is going. His advice includes learning to master one’s emotions, becoming knowledgeable about taking care of one’s body and using that knowledge, living as debt-free as possible, doing work that one can be proud of, and choosing to have a positive state of mind. The last chapter returns to the theme of the second chapter; namely, that of technological advancement reaching an asymptote beyond which the state cannot function. Fortunately, the Pollyanna-ish tone does not return here, as Kokesh warns about the destructive potential of states with technology at a nearly asymptotic level. The next three sections discuss the methods by which people may transition to a voluntary society, which include education, civil disobedience, conducting business out of view of the state, and abolishing states gradually from the top level down rather than all at once. The use of force to topple governments is perhaps unfairly downplayed, however. Kokesh ends the book by explaining that the transition to a free society is not a revolution in the historical sense, but an evolution to something entirely new.

Overall, the book could explain some concepts in more detail and could avoid a few specious arguments, but it is what it was meant to be: a strong but concise treatise on the philosophy and potential of libertarianism.

Rating: 4/5

The Federal Reserve Turns 100: A Timeline Of Economic Mismanagement

On Dec. 23, 1913, Congress passed the Federal Reserve Act, which created a central banking system in the United States, of which all nationally chartered banks were forced to become members. (State banks had a choice, but nonmember banks had to keep deposit accounts with member banks, and so were under control of the Federal Reserve as well.) The Federal Reserve Note, the current legal tender, was also created at this time. It has now been a full century since this institution was created, so let us reflect upon its various (mis)deeds. This a timeline of some of the major events involving the Federal Reserve over the past century:

1913: The Federal Reserve is created.

1914: Benjamin Strong becomes the first Governor of the Federal Reserve Bank of New York, which was the most powerful position in the Federal Reserve until the Banking Acts of 1933 and 1935. Charles S. Hamlin becomes the first Chairman of the Federal Reserve.

1916: Prices have increased over 10 percent since 1913. William P. G. Harding becomes Chairman of the Federal Reserve.

1918: World War I drives prices higher. Prices have increased over 50 percent since 1913.

c. 1919: The money supply has doubled since 1913. This is an inflation rate of 100 percent in a six-year period by the correct definition of inflation.

1920: Prices have doubled since 1913. This is an inflation rate of 100 percent in a seven-year period by the commonly used (but incorrect) definition of inflation. This, along with the realignment to a peacetime economy following World War I, helps to cause the Depression of 1920-21.

1921: Following the Depression of 1920-21, the Fed continues inflationary policies to pay off war debts and help the Bank of England maintain a phony gold standard. This consequences of this were partly to blame for the Great Depression.

1922: Prices fall, but have still increased 70 percent since 1913. Prices remain near this level for the rest of the decade. Daniel Crissinger becomes Chairman of the Federal Reserve.

1927: Roy A. Young becomes Chairman of the Federal Reserve.

1928: Benjamin Strong dies in office. George L. Harrison becomes President of the Federal Reserve Bank of New York.

c. 1929: The money supply has tripled since 1913.

1930: Eugene Meyer becomes Chairman of the Federal Reserve.

1930-33: Prices fall again, and continue falling until reaching a low of 31 percent above 1913 levels in 1933. Prices remain near this level for the rest of the decade.

1933: Eugene R. Black becomes Chairman of the Federal Reserve. President Franklin Roosevelt orders that gold owned by American citizens be confiscated and replaced with Federal Reserve Notes.

1933-35: The Banking Acts create the Federal Deposit Insurance Commission, insuring individual deposits and thereby creating a moral hazard for banks, which no longer needed to be as careful with their assets.

1934: Marriner S. Eccles becomes Chairman of the Federal Reserve.

1938: The Federal Reserve panics at the potential for inflation, and doubles the minimum reserve requirements. This sends the economy into a tailspin of credit liquidation.

c. 1941: The money supply has quadrupled since 1913.

1941-45: World War II drives prices higher, from 41.4 percent above 1913 levels in 1941 to 81.8 percent above 1913 levels in 1945.

c. 1943: The money supply has quintupled since 1913.

1947: Prices are again more than double those of 1913.

1948: Thomas B. McCabe becomes Chairman of the Federal Reserve.

1951: William McChesney Martin becomes Chairman of the Federal Reserve.

c. 1952: The money supply has increased ten-fold since 1913.

1960: The money supply has increased twenty-fold since 1913.

1961: Prices have tripled since 1913.

1966: The money supply has increased thirty-fold since 1913.

1970: Arthur F. Burns becomes Chairman of the Federal Reserve. The money supply has increased forty-fold since 1913.

1971: Prices have quadrupled since 1913. President Nixon ends the Bretton Woods system, closing the gold window. From this point onward, the Federal Reserve is able to create currency at a much greater pace, leading to much faster inflation and price increases.

1972: The money supply has increased fifty-fold since 1913.

1975: Prices have quintupled since 1913.

1978: G. William Miller becomes Chairman of the Federal Reserve.

1979: Paul Volcker becomes Chairman of the Federal Reserve.

1980: The Depository Institutions Deregulation and Monetary Control Act gives the Federal Reserve more control over non-member banks. The money supply has increased one hundred-fold since 1913.

1983: Prices have increased ten-fold since 1913.

1987: Alan Greenspan becomes Chairman of the Federal Reserve.

1990: The money supply has increased two hundred-fold since 1913.

1995: Prices have increased fifteen-fold since 1913.

2000: The money supply has increased three hundred-fold since 1913.

2004: The Federal Reserve lowers its interest rate target, leading to malinvestments in housing that create a bubble. The money supply has increased four hundred-fold since 1913.

2006: Ben Bernanke becomes Chairman of the Federal Reserve. Prices have increased twenty-fold since 1913. The housing bubble peaks.

2008: The money supply has increased five hundred-fold since 1913. The housing bubble bursts. The Federal Reserve begins quantitative easing in an attempt to mitigate the financial crisis of 2007-08.

2009-2011: Bloomberg L.P. sues the Board of Governors of the Federal Reserve System for disclosure of information about banks and other financial institutions that had borrowed from the Federal Reserve discount window during the United States housing bubble and ensuing financial crisis. The Fed was forced to release the information, which showed that the Fed had made as much as $1.2 trillion available to banks and other companies in the form of emergency loans between 2007 and 2010.

2013: Over the past century, the US dollar has lost 95.6 percent of its purchasing power. On average, an item that cost $100 in 1913 costs $2,354.23 at present. Also, while there were approximately $16 billion in circulation in 1913, this has expanded to $10.9718 trillion, an increase of over 68,000 percent.

Interview with Gov. Gary Johnson

On Saturday, July 21, 2012, Libertarian presidential nominee and former New Mexico governor Gary Johnson held campaign events in North Carolina. There was a 5K Liberty Fun Run at The Park in Huntersville, NC at 9:00 a.m., followed by a fundraiser lunch at Fox and Hound in Charlotte, NC at 12:00 p.m., a speech at the Conservatives Against Unconstitutional Wars rally at 2:00 p.m., and a fundraiser dinner at Raintree Country Club at 7:00 p.m. I attended the first three events, and caught up with Gov. Johnson for an interview at 4:00 p.m. The interview videos can be found here and here.

MATTHEW REECE: My name is Matthew Reece, and I am here in Charlotte, North Carolina with the 2012 Libertarian nominee for President of the United States, former New Mexico governor Gary Johnson. Gov. Johnson, thank you for joining me.

GARY JOHNSON: Hi Matthew, you bet. Thank you.

MR: When you were governor of New Mexico, 750 vetoes, thousands of line-item vetoes, but two of those were overturned. Tell me about the two that got away.

GJ: One was…I can’t even tell you what it was, it had to do with establishing bed quotas for Medicaid facilities, delivering Medicaid services. Really, it was a Republican bill and I think more than anything it was just to show me that they could override a veto. Well, I didn’t learn anything from that lesson. And then the last veto was actually the budget of my final year where Republicans came to me and said, “Look, you’re gonna be out of office, you’re not gonna have to deal with these problems, we are. So, we’re gonna override your veto because you’re not gonna have to deal with it.” Well, I don’t ascribe to that philosophy, but that’s what happened.

MR: OK. Speaking of the line-item veto, the President does not have that power. Would you seek that power, and if so, how do you go about getting it?

GJ: Well, I would, but I wouldn’t count on getting it. I don’t think there is any reason that Congress is gonna give me that power, given my propensity to veto. So I would just be vetoing whole pieces of legislation. If legislation does have earmarks in it, I’ll just veto the legislation and I’ll let Congress override.

MR: To follow that, if you are elected President, do you foresee a potential problem in that Democrats and Republicans in Congress may choose not to work with you on anything because you are not one of them?

GJ: You know, I view it the other way around. I view it as a real opportunity to challenge Democrats to get better on civil liberties. Repeal the PATRIOT Act. I mean, they should have never sent the National Defense Authorization Act in the first place with the provision that you and I can be detained without being charged. Let’s get out of Afghanistan. Let’s bring about marriage equality. Let’s end the drug wars. That’s to Democrats. Challenge Democrats. Republicans…I’m going to challenge Republicans on spending. They all spend too much. Out of our national debt, $8.5 [trillion] of our national debt is caused by Democrat administrations; $7.5 trillion of it is caused by Republican administrations. Who is worse on spending? Democrats, but not by much!

MR: Your budget calls for the elimination of 43% of federal spending. Why that specific amount, instead of less or more?

GJ: Well, 43% represents the $1.4 trillion deficits that we currently have. So that’s the amount of money that we are currently printing and borrowing to cover our needs. So, $1.4 trillion reduction in federal spending balances the federal budget.

MR: Without a tax increase.

GJ: Without a tax increase.

MR: Mitt Romney has said that cutting the federal budget by $1 trillion would cause a recession or depression. This is an example of the broken window fallacy that Frédéric Bastiat described. Could you point out some other economic fallacies that you believe Obama and Romney are committing?

GJ: Well, Obama gets on television the other day and he gives us a little bit of a lecture about Europe, and the fact that European countries that spend more money than what they take in are in trouble, but European countries that live within their means are doing pretty well. So, Europe is a mixed bag. But the United States, he goes on to say, we have some real difficulties in the municipalities and in the states because federal money has dried up, and so they have had to lay off firefighters, teachers, and policemen. Well, the municipalities and the states don’t have the tools at their availability that we do, and so we need to help them. Well, that’s code for borrowing and printing money. That’s code for spending more money than what you’re taking in, exactly opposite of what he had said just minutes earlier regarding Europe. Romney…Romney says its important to balance the federal budget, but that we should increase spending on military and that we should hold Medicare in check. Well, I graduated from the second grade and the mathematics that went along with the second grade education. It doesn’t add up. It just doesn’t add up. So, I want to point out that what we need to have is mutual sacrifice here by all of us, and if we don’t do it, we’re gonna find ourselves with nothing. And I’m afraid that we’re gonna find ourselves with nothing because of not dealing with these issues now, and it will never be easier to deal with these issues than now. Is it going to be difficult? Is it going to have mutual sacrifice? Yes. But never easier than tomorrow, never easier than tomorrow.

MR: President Obama recently said in a speech, “If you’ve been successful, you didn’t get there on your own,” and, “If you’ve got a business, you didn’t build that. Somebody else made that happen.” As someone who has built a business from the ground up, how do you respond to that?

GJ: Well, this is just somebody speaking who has no concept of what it is to start and grow a business. I, having started and grown my one-man handyman business to 1000 employees…I was the glue. I was the glue, just plain and simple. And it involved a lot of really wonderful, hardworking, dedicated people. So, back to Obama’s statement. In that context, no, I could have never made it without those hardworking, dedicated, committed people, but I was the glue. They wouldn’t have been in the unit if it wasn’t for me. So really overall its just a statement that’s just a complete disconnect from reality.

MR: You are on record as a supporter of a Balanced Budget Amendment to the U.S. Constitution. But every state except Vermont has such a provision in their state constitutions, and many of them just ignore it. So might that be a waste of time?

GJ: Well, the trouble with a Balanced Budget Amendment…and, so, I’m not espousing a Balanced Budget Amendment because what I see with a Balanced Budget Amendment is just kicking the can down the road. “We’ll pass a Balanced Budget Amendment for 12 years from now. And here’s what has to happen.” Well, nobody wants to pass a balanced budget that’s gonna happen two years from now. And I want to be on record as saying I support a balanced budget next year, that that’s what we should be embracing. So really, kick the can down the road, don’t ever deal with it…we’re gonna find ourselves in the midst of a bond market collapse. And by the way, it will be a bond market collapse that causes all of this, and that’s not gonna be anything that the government is going to announce. “Two weeks from Thursday there will be a monetary collapse, so go take all the money that you have and spend it all, because two weeks from Thursday it won’t be worth a thing.” They don’t do that. It just happens and our money isn’t worth anything.

MR: Do you see that arising out of some of the towns and cities, like in California that are now declaring they are bankrupt?

GJ: Well, their inability…they’re gonna have to deal with these issues because of balanced budgets. And I will just say that states have balanced budget amendments, but what happens with states is they always under-appropriate, they always underestimate for Medicaid, and then they end up with problems that they pushed down the road. In New Mexico, that was something that I recognized very early on, after my first year in office, and so all those vetoes, more than anything, had to do with freeing up money that was gonna have to go to pay for Medicaid, an entitlement with no cap, that wasn’t gonna have to come back in and raise taxes or wasn’t gonna have to come back in some sort of an emergency kind of situation. I took the emergency out of funding.

MR: Your have said that we should audit the Federal Reserve and curtail many of its activities. Do you think it would be bad to end the Fed immediately?

GJ: No, I would sign on to abolishing the Federal Reserve. If Congress passed a bill saying, “Abolish the Federal Reserve,” Gary Johnson signature, President of the United States. Abolish the Federal Reserve.

MR: Part of your platform is rejecting the idea of bailouts. Do you come at this more from an Austrian School anti-Keynesian perspective, or a cost-benefit analysis?

GJ: Well, really just from a free market perspective, that there is an unintended consequence to everything that government does. I think everybody right now is pointing at GM as a successful bailout. I would argue that we have a mechanism for failure and that’s bankruptcy, and that if General Motors would have entered into bankruptcy, that maybe it would have emerged as nine different car companies. Maybe it would have emerged as one car company; who is to say? But I dare say that today the company would be run drastically different. It was the equity holders and the debt holders were wiped out with General Motors, and now they’re back as Government Motors, and I just think its a re-inflated dinosaur that’s gonna…we’re gonna see this played out again.

MR: On education, your platform includes reducing or eliminating federal involvement in education. To clarify, reduce or eliminate?

GJ: Eliminate. Every state receives about 11 cents…

At this point, my camera stopped recording unexpectedly. Fortunately, Tim Doran, Gary Johnson’s state campaign coordinator for North Carolina, recorded a few more questions and answers for me.

MR: Let’s go to foreign policy. You are a vocal opponent of foreign aid, but you have also said that you would hate to say “never.” Give me a case in which you would consider the payment of foreign aid to be justified.

GJ: (Part of his answer was not recorded.) …but if we’re borrowing and printing money to the tune of 43 cents out of every dollar , then we’re turning it around and giving it away? I have a hard time understanding how we can do that in the first place, and that it is going to have consequences down the road. And the consequences are gonna be a monetary collapse; we are nothing to any country.

MR: You have said that you want to reduce our nuclear arsenal to 500 weapons. Why do you choose that specific amount, instead of less or more?

GJ: This was a conference call with the Cato Institute, with a bunch of guys who do this for a living. And that was their number that they came up with to assure us that we would have nuclear strike capabilities and retaliatory strike capabilities. But its obviously a very significant reduction from 2300 to 500.

MR: Many libertarians consider NATO to be the sort of entangling alliance that Thomas Jefferson advised us against. Would you be in favor of leaving or disbanding NATO?

GJ: As I sit here right now, I am thinking…or, I am going to submit a budget to Congress that will have a 43% reduction in NATO spending, perhaps getting it back to its roots, which doesn’t have us in the back seat of the bus; it has us driving the bus, that diplomacy does have its role in the world, and that diplomacy, our dollars better spent than Tomahawk missiles.

MR: You have said that marque and reprisal is the way to deal with someone like Joseph Kony. While this is better than involving the U.S. military in another undeclared war, why get involved at all?

GJ: Well, my understanding of Joseph Kony is that this is the worst, this is the Lord’s Resistance Army, Sudan, Uganda, three African countries (Note: There are four countries in which the LRA operates; he couldn’t remember the Congo or Central African Republic), anyway, it is my understanding that this is the worst terrorist group that has walked the planet over the last 20 years; that they may be responsible for 400,000 deaths, murders, maimings, rapes; and that these three African countries, they’re not in one country, they’re in three countries, so I don’t know if you could declare this as a civil war, but that three countries asked us to intervene to stop this guy. This legislation, the President signed it. I think I would have signed it, but perhaps I would have used letters of marque and reprisal to deal with it, or I would have asked for volunteers to go in. And maybe that was the case, but that’s the way I would have publicized this.

MR: We are currently imposing sanctions on Iran, and have them surrounded by our military bases. Do you believe this explains the motivation for their actions? Are they seeking a nuclear weapon for self-defense?

GJ: If we were in that position, would we not be seeking a nuclear weapon, looking at our own self-defense? I think, just reverse the roles and I think you begin to understand why they’re doing what they’re doing. And, if the United States were to embark on loosening trade, free trade with Iran, what would the consequence of that be? Would that not be a safer planet? I think that it would be.

MR: Sanctions have been in place against Cuba since October 1960. But 52 years and 10 U.S. presidents later, the Castros are still in power. Is it time to end the embargo?

GJ: I would say that it is time to end the embargo. I would say that it is time that you and I ought to be able to get on an airplane and fly into Cuba and visit.

Tim Doran: Last question, we have to wrap up. (Gov. Johnson had to get ready for a fundraiser dinner.)

MR: What would you say to supporters of other third party candidates, such as Green Party nominee Jill Stein or Constitution Party nominee Virgil Goode?

GJ: Well, I would say to supporters, vote your conscience, that’s how you change the world. I would say to the people of the United States that although there are other third party candidates, there is only going to be one third party on the ballot in all 50 states, and that is going to be the Libertarian Party. So, that actually ends up being a choice that you can conceivably achieve victory, if you will. And with the Green Party, with the Constitution Party, I think they’re only going to be on the ballot in a handful of states. And I mean handful. Ten states. Less. We’ll see what it turns out. (Fact check: The Green Party is currently on the ballot in 21 states, and the Constitution Party is currently on the ballot in 17 states.)

MR: Gov. Johnson, it has been a pleasure.

GJ: My pleasure. Thank you very much.