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.

Conclusion

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.

The Economic Fallacies of Black Friday: 2016 Edition

Today, shoppers across America will participate in the largest shopping day of the year: Black Friday. The National Retail Federation is estimating that 137.4 million customers will be shopping on Black Friday weekend, down from the 2015 estimate of 135.8 million customers. The actual result from 2015 was 151.4 million shoppers. A similar adjustment to the predicted value for 2016 would mean an actual number of shoppers close to 153.1 million.

The NRF estimates that total sales for the holiday season will be $655.8 billion, up from $633.0 billion in 2015. This would be an annual increase of 3.6 percent. The estimate for 2015 was $630.5 billion, suggesting that the total sales for 2016 may be around $658.4 billion. This year, the NRF estimates that retailers will hire between 640,000 and 690,000 seasonal employees, compared with the actual 675,300 they hired during the 2015 holiday season versus an estimate of 700,000 to 750,000. We may therefore expect that retailers will actually hire about 619,400 seasonal employees. On the surface, this may appear to be a marvelous celebration of free market capitalism. But let us look deeper through the lenses of the broken window fallacy and the idea of malinvestment.

To view holiday shopping as a boost to the economy ignores the fact that people could either be spending that money in other ways or saving it. In other words, such an approach is an example of the broken window fallacy because it focuses only on what is seen and ignores opportunity costs. If people would save their money rather than spending it on various holiday gifts, then this money would be invested in one thing or another. As Henry Hazlitt explains in Chapter 23 of Economics in One Lesson, saving is really just another form of spending, and one that has a greater tendency to allocate resources where they are most needed.

Per capita spending is predicted to be $935.58 in 2016, up from the 2015 estimate of $805.65. The actual result from 2015 was $952.58. A similar adjustment to the predicted value for 2016 would mean an actual per capita spending close to $1,106.21. The above problems get even worse if people use credit cards to spend money that they do not currently have. With a current credit card interest rate of 16.28 percent and a minimum payment of 4.0 percent, a debt of $1,106.21 would take almost six years to pay off and would cost $1,567.57. This is $461.36 wasted on interest payments that could have been kept in one’s accounts or put toward a productive purpose. Multiply this by the 153.1 million shoppers predicted earlier, and the result is that as much as $70.6 billion could be spent on interest payments.

When people purchase unwanted gifts and/or buy gifts with money they do not currently have, their choices encourage malinvestments. A malinvestment is an investment in a line of production that is mistaken in terms of the real demands of the economy, which leads to wasted capital and economic losses. The holiday shopping season contains a subset of shopping which creates systematic and widespread mistakes in investment and production. Although the effect is not as severe as what occurs during an Austrian business cycle bust and is both caused and resolved in fundamentally different ways, there is a noticeable hangover effect on the economy. A look at the average monthly returns on the Standard and Poor’s 500 shows that while the worst month for investments is September, the next three worst months for investing are February, May, and March. (April would likely be bad as well if not for income tax returns providing an artificial economic boost.) An economic downturn occurs in the historical average following the holiday season, but as this has become an expected annual occurrence, many analysts simply do not look for an explanation of these results, as they are perceived to be natural. Even so, this appears to be a small-scale business cycle that repeats annually.

With these arguments in mind, would we all be better off if we just canceled the holiday shopping season? It is an open question, but the Austrian School of economics suggests that we could have a better economy if the burst of economic activity in late November and December were spread throughout the year and people did not spend money they do not have on items they do not need.

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.

Monopolies

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.

Externalities

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.

Standards

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.

Conclusion

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.

The Strategic Libertarian Case For Supporting Hillary Clinton

The 2016 election season has been a contentious and divisive time for libertarians. Some have decided to side with Republican candidate Donald Trump as the lesser of two evils. Others are supporting Libertarian candidate Gary Johnson despite his long odds and shortcomings as a candidate. A few are turning to Constitution Party candidate Darrell Castle, despite his lack of sufficient ballot access to obtain victory. Some who do not understand or care about economic liberty have even suggested Green Party candidate Jill Stein as an option for libertarians. A significant number are disgusted with all of their options and plan to stay home on Election Day. What no one seems to have contemplated is the case for a libertarian to support Democratic candidate Hillary Clinton, so let us explore that case.

Clearly, there is no straightforward, face-value libertarian case for supporting someone with the track record of warmongering, corruption, thievery, and deception that Clinton has in their quest to preside over the most powerful and dangerous state apparatus in human history. But almost all libertarians have decided to stop there in their consideration of Clinton and look to the other candidates. What can be argued that has not been argued thus far is a bootlegger’s case for Clinton, in which she is supported not for the ostensible purposes of granting her the Presidency, but because her administration will cause effects that libertarians can exploit for their purposes. The overarching theme is that the leftward drive of statism in general and democracy in particular cannot be forestalled by the means at hand, so the alternative is to push leftism even faster and farther than leftists had planned in order to hasten its collapse. It is this sort of case which will be made here.

The Goal of Libertarians

It may seem odd at first glance to speak of a unifying goal for all libertarians, as libertarians have all sorts of goals, some of which are at cross purposes with each other. However, the root of the word ‘libertarian’ is ‘liberty’, so it is reasonable to conclude that a libertarian has the practical goal of maximizing the amount of liberty present in one’s environment. Liberty is generally defined as the freedom to do as one wishes as long as one respects the right of other people to do likewise and commits no aggression against them. But liberty is meaningless without private property in which to enjoy it, insecure without rule of law to defend it, precarious without peace and justice to preserve it, and absent without freedom of association. If a state is present, it will fund its activities through taxation and civil asset forfeiture, take private property through eminent domain, and restrict the use of property through intellectual monopoly, zoning, and environmental regulations. Its officials and agents will choose the nature of the law and the enforcement thereof, meaning that they rule the law and not vice versa. Its enforcers will initiate the use of violence against people who are known to disagree with government statutes and acts upon their disagreements, thus presenting a constant threat to peace. Its agents are allowed to do that which is considered criminal for anyone else to do, and the system is set up to keep them from being held to account. It will force people to associate with it regardless of whether they want to use or pay for its services. For these reasons (and many others), the maximization of liberty requires abolition of the state.

Abolition Requires Revolution

Unfortunately, the state will not abolish itself; the control and maintenance of the state apparatus is too valuable to give up for those who benefit from it. Those who bankroll political campaigns receive a far better return on investment than they would receive from any free market use of capital, and if they did not make such donations, their business rivals would. Wielding political power causes the same biochemical responses as drug abuse. There are people who carry weapons in the name of the state for the purpose of enforcing the edicts of politicians because they lack the skills and temperament to be productive members of society. There is a dependent class of people who have become accustomed to existing parasitically upon the productive members of society. All of these people are used to their way of life, and they will not give it up without a fight. Any strategy that does not deal with this fact, as well as the fact that an institution based upon initiatory force will resort to force to counter attempts to remove and/or dismantle it is doomed to failure. There are many other methods that libertarians have proposed and tried to increase the amount of liberty in society, and some have achieved some limited success. But electoral methods, agorism, cryptography, seasteading, civil disobedience, education, and peaceful parenting all fail to address the fundamental problem. Thus, they will fail to defeat the state by themselves at best. At worst, they will ease some of the pain of oppression, which allows people to tolerate more evil before they must take action to end it. Their usefulness, if any, is to push the state toward collapse while growing the population and resources of libertarians to such an extent that revolution becomes feasible.

A Successful Revolution

A revolution to end the state can only be successful if enough people participate. Moving too soon plays into the state’s hands, as it will only give the state more cause to grow and sour the reputation of libertarianism. The personnel and resources necessary to carry out a revolution are not yet assembled, so the task of the libertarian is to figure out how to assemble them. Let us begin by noting what the Declaration of Independence says about the matter:

“Prudence, indeed, will dictate that Governments long established should not be changed for light and transient causes; and accordingly all experience hath shewn, that mankind are more disposed to suffer, while evils are sufferable, than to right themselves by abolishing the forms to which they are accustomed.”

This is indeed what history shows us; people tend to overthrow governments only if they believe themselves to lack better options. Regardless of whether war, famine, or pestilence visits a population because of their government or in spite of it, a failure of a state to meet the needs of its people in a crisis has precipitated more revolutions than anything else. Although the tyrannies inflicted upon the American people by the federal government are far greater than those which inspired our forefathers to take up arms, the comforts of modernity and the civic religion of democratic statism have made evils more easily sufferable. That which would once have led people to revolt is now merely a minor inconvenience, to be brushed aside and endured because the next sports game is on. Clearly, conditions must get worse in order to make enough people believe that they must rise up against the system rather than keep trying to play the fool’s game of working within it.

Use It to Destroy It

Given that liberty requires anarchy, anarchy requires abolition of the state, abolition of the state requires revolution, revolution requires a sufficient number of participants, the number of potential participants is lacking, people revolt when they believe themselves to be out of other options, and more people will believe themselves to be out of other options if conditions get worse, the next order of business is to see what can be done to make conditions get worse. In a democratic state, the ballot box is the primary means by which decisions are made. Conditions sometimes change slowly in a nation with a deep state of unelected bureaucrats that is largely impervious to the winds of politics, but conditions do deteriorate when bad rulers are elected. While this is always the case, some candidates for office are clearly worse than others. The obvious strategy, then, is to intentionally vote for the worst candidates in an effort to push the current system toward ruin.

Who Is Worst?

With a strategy discovered, the next question concerns application. Which candidate in the 2016 presidential election would do the most to push the current system toward ruin? In other words, who has no intention or motive to make any significant changes to current policy? Who would amplify and accelerate the current course of the federal government?

We may begin by considering only the candidates who have a chance of winning, as a candidate who cannot get into office in the first place will fail a fortiori at making conditions worse while in office. This reduces our options to Clinton, Johnson, Stein, and Trump. All of the other minor-party candidates lack the ballot access to gain the Presidency, even if everyone voted for a particular one of them. Stein may also be dismissed, as polling has shown her to be in fourth place in nearly every national and state poll that has been conducted. (Though if Stein had a chance, this would be a case for supporting her instead of Clinton, as the implementation of her platform would accelerate the national debt, grow the size and scope of government, and push the nation toward economic ruin faster than the platforms of the other candidates.)

Johnson and Trump offer respites from many of the failed policies of recent administrations, though to varying degrees and for different reasons. While both focus on economic matters, Johnson takes a more libertarian approach while Trump is more nationalist. The practical upshot is that a Johnson presidency would be likely to offer much more relief over the short-term but ignore important demographic concerns, while a Trump presidency would offer much less immediate relief but address concerns over demographic shifts which are hostile to liberty. But the strategy being discussed is to vote for the worst, not the best.

A look at Clinton’s platform reveals that she favors higher taxes, more programs for minorities, more taxpayer funding for college tuition, strengthening of entitlement programs, stricter gun control measures, universal healthcare, ending the sequester for both defense and non-defense spending, amnesty for illegal immigrants, more funding for clean energy, a continuation of unproductive anti-terrorism policies, curtailment of civil liberties, and more government intervention in the workplace. She is also far more likely to start new wars than the other candidates, and this would speed along the decline more than any other policy. In other words, she will amplify and accelerate the current course of the federal government much more than Johnson and somewhat more than Trump.

Resolution in Defeat

It is also necessary to consider the impact that the election is likely to have on the supporters of the losing candidates. If Johnson loses, his supporters will likely get the result that they expect, as third-party candidates have almost no chance in a system rigged to produce a two-party system. Although a Johnson victory is technically possible if everything plays out just right, the more realistic question is whether he can get 5 percent of the vote, which would make the Libertarian Party a more significant election machine going forward. As such, voting for Johnson is more of a punt on 2016 with hopes set on 2020. That said, a disastrous result for Johnson will affirm the need for the LP to stop running the milquetoast candidates they have fielded since 2008 and put forward openly radical, even anarchist, voices.

A Clinton loss will have the effect of opening a pressure valve on populist and nationalist resentment, just as the Brexit victory did in the United Kingdom. If liberty is the goal, then a pressure valve to release steam that is needed for a revolutionary explosion is counterproductive. For as long as Trump remains in office, the right would rally behind him, turn a blind eye to many of his negative tendencies, and forget their anti-state sentiments because their man is in charge. While Trump could cause some disillusionment when many of his lofty campaign promises do not come true, many on the right have some understanding that this will be the case and that he must speak bombastically to keep his base energized and motivated. Trump could also do some good in the form of neutralizing the tactics of social justice warriors, but he has already done this and could likely not do much more in this regard. Of course, the political pendulum will swing again, for Trump is not Pinochet and never will be. Trump has given no indication that he would do anything meaningful to abolish democracy or eliminate the programs which create left-wing moral degeneracy. The left would return to its excesses as soon as it regains the Presidency, using state power to press its thumb on the scale even harder to try to ensure that nothing of the sort can happen again.

With the exception of cuckservative neocons who would count Clinton as one of their own, a Trump loss would further inflame the right and grow the reactionary movement. The right would increasingly come to realize that the democratic process as it currently operates is no longer in their interests, just as many Southerners did after the election of 1860. Due to demographic shifts, a Trumpian candidate will likely never have an easier path than in 2016, and the path is quite difficult now. While a Clinton victory is unlikely to result in a revolt before the 2020 election, it could produce other interesting results, such as renewed interest in the idea of nullification, an Article V convention, or even a serious effort by a state to secede.

Objections

Naturally, a plan to deliberately worsen conditions in one’s own nation will invite sharp criticism. Let us consider some of the most likely objections to such a plan. First, there is the objection that this will harm innocent people. This is not necessarily the case, depending upon how one defines innocence. To return to the Declaration of Independence,

“But when a long train of abuses and usurpations, pursuing invariably the same Object evinces a design to reduce them under absolute Despotism, it is their right, it is their duty, to throw off such Government, and to provide new Guards for their future security.”

In this sense, the American people are in dereliction of their duty to throw off oppressors. While those who say that we get the government we deserve are victim blaming to some extent, they have a point in the sense that revolution is far more practical than most people think, yet the American people have not revolted against the state in a meaningful way since 1794. (The Civil War was a meaningful revolt, but it was not anti-state in nature; the Confederates sought to replace one government with another.) But even if we grant that this will harm innocents, it is not as though innocents will go unharmed otherwise. The state violently victimizes the innocent by its very nature, and other plans for ending the state will not prevent such victimization before the state is abolished. It is thus a question of degree and duration, much like that of ripping off a bandage rather than pulling at it slowly.

Second, there is the possibility that this plan will backfire. We may make conditions worse, but perhaps a sufficient number of people will never decide that they have had enough. This may occur because they blame those who voted us into a crisis and do not wish to fight alongside them, or because they simply lack the fortitude to revolt. This is a legitimate concern, but the possibility that people no longer have the fortitude to forcefully resist the state will be a concern regardless of the method used by libertarians.

Third, Clinton may also make leftists look for more radical methods, as she is likely to further upset the people who supported Bernie Sanders in the Democratic primary. This is actually a feature in a plan to overload and collapse the system, as it pushes the establishment toward ruin even faster. And if the far-left and the far-right come to blows in America, the rightists have a clear advantage in manpower, firepower, and the concern to target one’s enemies without harming bystanders (although neither side is perfect in the latter regard).

Fourth, there is no guarantee that Clinton will be worse than Trump. But there is no guarantee of anything promised by politicians to voters; this is the very design of democratic statism, and one of its intractable problems. Both major-party candidates are known to be serial liars, but based on their track records both inside and outside of politics, it is reasonable to conclude that they will at least attempt to advance the agendas in their platforms.

Conclusion

If one understands that the problems with which the democratic state presents us are intractable in its presence, and that the best use of the ballot box is to vote for the worst candidate in order to hasten the demise of this broken system, then supporting Hillary Clinton for liberty makes a great deal of sense. The common objections to such a plan do not withstand scrutiny, as other methods of action or inaction have the same or worse potential shortcomings. The effects of her defeat would only slow the decline rather than reverse it, and the effects of her victory would galvanize the anti-state movement like no other result that can be achieved in 2016.

Disasters and the Pax Romana Problem

Whenever disasters impact an area in modern times, governments play a large role in the cleanup and recovery efforts. People file claims with the state to recover their losses while simultaneously inflicting those losses upon taxpayers elsewhere in the nation. Building codes are enhanced, and because resources spent on one expense cannot be spent on another, the result is less resources available for communication, medical care, and transportation to warn people of disasters, get them away from danger, and treat any injuries or diseases that result. The usual pork barrel spending and high-profile boondoggles will rear their ugly heads among the disaster relief spending.

But there is an even more insidious problem at work here, which we may term the Pax Romana Problem. Students of history will be familiar with the time of relative peace and stability from the time of Augustus (r. 27 BCE-14 CE) until the time of Commodus (r. 177-192 CE). During this time, the economy, the arts, and agriculture flourished because the tribal battles that predated Roman conquests as well as the rebellions and riots that predated the Pax Romana were largely suppressed. But there was a dark side to this, particularly in parts of the empire which were much closer to the border than to Rome. With Roman forces in charge of law, order, and security, many peoples suffered losses in the ability to provide these services themselves. After all, societal organs tend to decay from disuse just as individual people do. When the Pax Romana ended, these peoples were without the stabilizing forces which they had come to rely upon and were out of practice in providing these services for themselves. The end result was that several of these peoples were raided and conquered by various barbarians and empires.

At first glance, this may not appear to have much to do with disaster relief. But there is a similarity between what happens when governments step in during disasters and what happens when a large empire takes over security for formerly independent smaller tribes. Before there was massive government intervention to help disaster victims, people had more of an incentive to plan ahead and be ready for potential disasters because they knew that if something were to happen, they would have to rely upon themselves and the people in their communities to survive and recover. Without the potential for government agents to step in, people were less likely to view disaster relief as someone else’s problem and thus more likely to donate to relief efforts. When one relies upon people one knows for support during hard times, defrauding people is disincentivized due to both the loss of reputation in the community as well as the potential for reprisals. Looting is also less of a problem when security is handled directly by private property owners without involving the state because they and their hired help are both more competent at and more concerned with solving local crime problems than distant bureaucrats and their minions. Of course, these conditions meant a stronger social fabric and less dependence on the state, so governments found it all too tempting to interfere.

Before there was significant government involvement in the insurance industry, insurers would either refuse to insure or charge exorbitant rates to cover properties which were at a continually high risk for being destroyed by floods, earthquakes, volcanoes, and other such periodic catastrophes. This was an important market signal that certain areas are not good places for humans to build permanent residences. Of course, some people ignored those signals and suffered the consequences of their stupidity, but this has better outcomes for everyone else than rewarding such stupidity with government handouts which incentivize people to stay in places where they are likely to suffer disasters.

Now that governments play an active role in disaster relief, all of the problems that one might reasonably expect are present. When politicians have a choice between doing what is best for the people and doing what helps their public image, they will almost invariably choose the latter. Because the state has a coercive monopoly, it cannot be fired or have its funding suspended by normal means, regardless of how terrible its performance is or how much it interferes with private efforts which are trying to help people. To the contrary, failure means that statists can claim that insufficient funding is the reason for failure. There is also the matter of vote-buying, in that the people have an incentive to elect politicians who will deliver them the most funds from the government treasury. Disaster relief is not as reliable a payout method as welfare programs, but it is still a means of legal plunder available to those who live in disaster-prone areas.

We can also see the typical one-size-fits-all policies rather than the more targeted solutions that a private effort would attempt. For example, following Hurricane Katrina in New Orleans, the Federal Emergency Management Agency announced a program to give away $2000 to every household that claimed to be affected by Katrina, regardless of size or need. Of course, this was subject to much waste, fraud, and abuse. Unlike private organizations who must rely upon voluntary donations, the state has no incentive to actually figure out how much help each household needs, so it overpays some and underpays others.

With government infrastructure management, people are encouraged to live in places which are at higher risk for disasters than would otherwise be economical to inhabit. To use the example of Katrina again, levees held back water from areas which have an elevation below sea level. Investigations into their failure showed cost-cutting during construction as well as poor maintenance. While there is no guarantee that a privately built and maintained system would have been successful, that which may or may not work is better than that which is known to fail. Then again, leaving infrastructure up to the private market could have meant that low-lying areas would have always been underwater and thus uninhabited, meaning that structures and lives would not have been at risk there because they would have been absent in the first place.

Government flood insurance programs also encourage people to take risks which would not make economic sense in a free market. What is incorrectly perceived as a market failure is actually a market success; the process of voluntary exchange and decentralized calculation produces the result that flood plains are inferior places to build a house or business. Rather than people rebuilding communities in unstable locations for the umpteenth time, a free market in flood insurance would cause low-lying areas to be abandoned and returned to a state of nature, as is proper. Perhaps in time, such places which are near coastlines and below sea level could fill in with sediment and become livable lands which do not require levees to keep water out of them.

Finally, government police and National Guard forces have largely displaced private security measures to prevent looting during disasters. Worse than that, they have actively engaged in attacks upon disaster victims who were trying to provide such defense for themselves, causing the very problem they should be trying to solve.

Fortunately, this perverse state of affairs will not last forever. Someday, the United States government will decline and fall, just like Rome and so many other empires throughout history. Just like the outer peoples of the Roman Empire after the Pax Romana ended, the American people will be left to fend for themselves in the absence of the federal government. The degree of government involvement in their lives will leave them weakened in the face of disasters which will not cease to afflict them when the state does. But a return to proper incentive structures will mean that in the long run, behaviors will be positively modified, the attitudes of the people will change to match those behaviors, and the community bonds which support a truly healthy society can be rebuilt.

Black Lives Matter Versus Libertarian Revolution

Since the beginning of the Black Lives Matter movement, libertarians have had strong differences concerning how to engage with it. On one hand, libertarians would agree that many laws whose enforcement results in deaths of black people at the hands of government agents should be eliminated, such as those forbidding drug possession. On the other hand, many people who protest under the BLM banner engage in activities which are at odds with libertarian philosophy, such as blocking roads, disrupting businesses, and rioting.

As time marches on, as tends to happen in most activist organizations with street presence, the more radical elements within the BLM movement are gaining more attention. The sister of a man who was killed by police on August 13 urged protesters,

“Don’t bring that violence here. Burning down shit ain’t going to help nothing. Y’all burning down shit we need in our community. Take that shit to the suburbs. Burn that shit down.”

At the beginning of the riots in Milwaukee, a rioter could be heard yelling to police officers,

“We do not want justice or peace anymore. We done with that shit. We want blood. We want blood. We want the same shit y’all want. Eye for an eye. No more peace. Fuck all that. Ain’t no more peace. Ain’t no more peace. We done. We cannot co-habitate with white people, one of us have to go, black or white. All y’all have to go!”

And at a protest in Portland, Ore. on July 12, BLM leaders told protesters concerning police officers,

“Whatever you do, you pull your pistol out and fucking bust them… Trust me when you see me move, I’m moving in violence. We need action. I don’t give a fuck if you knock them over, whether you run up on them, whatever you do, you better fucking take action.”

The urgings of some misguided libertarians notwithstanding, these sentiments should make it clear that there is not an alliance to be made between BLM radicals and libertarians. Although there are segments of the libertarian community who understand that violent revolution is necessary to abolish the state, and both would physically remove government police officers from their communities, this impulse for libertarians is radically different from what is illustrated above. The libertarian revolution proceeds from the realization that a libertarian social order is superior to that of either a democratic or authoritarian state, and that such a state stands in the way and cannot be expelled from a territory or completely eliminated by peaceful means. Anti-police violence advocated by BLM leaders proceeds from the realization that police are an obstacle to degenerate and criminal behavior which they would like to see removed, and that this will not happen by peaceful means.

While the libertarian revolutionary seeks to end a system which violently victimizes the innocent, the BLM radical seeks to impose such a system upon white people. While the libertarian revolutionary seeks to protect individual rights and private property, the BLM radical seeks to take private property from its rightful owners in order to fund government programs and give reparations to people who were never personally wronged. While the libertarian revolutionary seeks to free minds and markets, the BLM radical seeks to perpetuate government indoctrination and communize resources. While the libertarian revolutionary seeks to replace government monopoly police which are coercively funded with private competing security forces which are voluntarily funded, the BLM radical seeks to abolish police with no clear alternative in mind. It should be clear to all but the most cucked and autistic libertarians that these two groups cannot work together toward a common goal because they are aimed at cross purposes.

That being said, it is possible that this could change. BLM radicals could think things over and come to the realization that the real enemy is not society, white people, racism, capitalism, patriarchy, privatization, or any other false target that various leaders within their movement have pursued thus far. They could figure out that burning down their own communities (or other communities) grants the police that they claim to oppose the appearance of legitimacy and necessity that they need to continue and escalate the activities for which they claim to oppose them. They could figure out that making this about black versus white rather than blue versus you creates a sense among white people that they should enter this conflict on the side of the state against the black community rather than on the side of the black community against the state. They could figure out that calling for huge government programs and expanded government control of the economy will require far more of the enforcement agents that they claim to oppose while further ruining their communities by creating perverse incentives. They could figure out that the root problem is aggression by government agents, and that the only solution to this problem is self-defense against government without deliberately targeting anyone else.

But unless and until that happens, BLM is an enemy of libertarianism which happens to be in conflict with another enemy of libertarianism, namely agents of the state. It is important to recognize that the enemy of one’s enemy is not necessarily one’s friend, or even an ally of convenience. Though the United States government is the most powerful and dangerous criminal organization in human history, its power could fall into worse hands and be used for worse purposes. Its abolition by people with the wrong ideas could create the need for a counter-revolution against them in order to establish a better social order rather than a worse one (or the complete lack of one). As for how libertarians should deal with BLM as it is now, when government agents and common criminals fight, it is generally best to pull for no one and hope for heavy casualties on both sides.

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.

The economic fallacies of Black Friday: 2015 Edition

Today, shoppers across America will participate in the largest shopping day of the year: Black Friday. The National Retail Federation is estimating that 135.8 million customers will be shopping on Black Friday weekend, down from the 2014 estimate of 140.1 million customers. The actual result from 2014 was 133.7 million shoppers. A similar adjustment to the predicted value for 2015 would mean an actual number of shoppers close to 129.6 million.

The NRF estimates that total sales for the holiday season will be $630.5 billion, up from $608.0 billion in 2014. This would be an annual increase of 3.7 percent. This year, the NRF also estimates that retailers will hire between 700,000 and 750,000 seasonal employees, compared with the actual 714,000 they hired during the 2014 holiday season. On the surface, this may appear to be a marvelous celebration of free market capitalism. But let us look deeper through the lenses of the broken window fallacy and the idea of malinvestment.

To view holiday shopping as a boost to the economy ignores the fact that people could either be spending that money in other ways or saving it. In other words, such an approach is an example of the broken window fallacy because it focuses only on what is seen and ignores opportunity costs. If people would save their money rather than spending it on various holiday gifts, then this money would be invested in one thing or another. As Henry Hazlitt explains in Chapter 23 of Economics in One Lesson, saving is really just another form of spending, and one that has a greater tendency to allocate resources where they are most needed.

Per capita spending is predicted to be $805.65 in 2015, marginally higher than the actual $802.45 in 2014. The above problems get even worse if people use credit cards to spend money that they do not currently have. With a current credit card interest rate of 15.71 percent and a minimum payment of 4.0 percent, a debt of $805.65 would take almost five years to pay off and would cost $1,097.40. This is almost $300 wasted on interest payments that could have been kept in one’s accounts or put toward a productive purpose. Multiply this by the number of shoppers predicted, and the result is that as much as $39.6 billion could be spent on interest payments.

When people purchase unwanted gifts and/or buy gifts with money they do not currently have, their choices encourage malinvestments. A malinvestment is an investment in a line of production that is mistaken in terms of the real demands of the economy, which leads to wasted capital and economic losses. The holiday shopping season contains a subset of shopping which creates systematic and widespread mistakes in investment and production. Although the effect is not as severe as what occurs during an Austrian business cycle bust and is both caused and resolved in fundamentally different ways, there is a noticeable hangover effect on the economy. A look at the average monthly returns on the Standard and Poor’s 500 shows that while the worst month for investments is September, the next three worst months for investing are February, May, and March. (April would likely be bad as well if not for income tax returns providing an artificial economic boost.) An economic downturn occurs in the historical average following the holiday season, but as this has become an expected annual occurrence, many analysts simply do not look for an explanation of these results, as they are perceived to be natural. Even so, this appears to be a small-scale business cycle that repeats annually.

With these arguments in mind, would we all be better off if we just canceled the holiday shopping season? It is an open question, but the Austrian School of economics suggests that we could have a better economy if the burst of economic activity in late November and December were spread throughout the year and people did not spend money they do not have on items they do not need.

Against Libertarian Hedonism

There has long been a debate in libertarian circles between thin libertarianism and thick libertarianism. Thin libertarianism is a philosophical position on what constitutes the acceptable use of force, saying that initiating the use of force is never acceptable and using force to defend against a force initiator is always acceptable. Thick libertarianism says that this is insufficient and views conservative or reactionary views on social issues as threats to liberty. This is not news to anyone who is well acquainted with libertarian discourse, but there is a particular manifestation of thick libertarianism which is both quickly growing and extremely troubling.

There are people who enter into libertarianism not because they seek to advance peaceful societal organization, voluntary provision of necessary services, or the protection of rights against infringement, although they may do this to the extent that it benefits them personally. Nor do they enter because they seek to form homogeneous communities, dissociate from people they dislike, or put their prejudices into practice on a larger scale, although they may do this to some extent with those who share their particular behaviors. These people come into libertarian circles simply because they seek a safe space for the practice of their vices, whatever they may be. Leftist elements within libertarianism provide them with this safe space because doing so is an easier way to grow the movement than authentic proselytization, then attack those who criticize this practice as bigots, reactionaries, and generally ignorant people.

While the toleration of vices is required by the non-aggression principle as long as said vices do not lead to assaults upon people or destruction of their property, there is a difference between tolerance and encouragement. A successful libertarian civilization must have a well-functioning market economy and be capable of both stopping common criminality and repelling external invasions. Those who abuse drugs, engage in sexual promiscuity, gamble excessively, and so forth may not be directly harming anyone other than themselves, but these behaviors practiced frequently on a large scale not only fail to make a successful libertarian civilization, but endanger its continued existence and flourishing by weakening its members and attracting people who will fake being a libertarian for their own selfish ends while undermining the community.

People who are addicted to substances are less likely to make good decisions, be productive in a trade other than manufacturing or selling drugs, or perceive reality as it is. This would be bad enough, but the impairment that drug use causes can lead people to commit acts of aggression against people and property that they would not commit if sober. While the decriminalization of drugs that a free society requires would lower the price of a drug habit, such a habit would still divert resources to finance destructive rather than productive behavior and could still lead people to steal property to finance a habit.

Sexual promiscuity has the consequences of spreading diseases and causing unwanted pregnancies, even with modern birth control, abortion, and prophylactic methods. When the costs of such behavior are not paid for by the people involved, they will be pushed onto the rest of the community regardless of whether there is a welfare state, private charity, or neither, as most people are too compassionate to allow natural selection to work against people who have brought misfortune upon themselves, let alone the children they produce. Single motherhood is strongly correlated with negative outcomes for children, so it is in the best interests of a community to discourage behaviors which produce it.

While a certain amount of gambling is necessary for the most efficient allocation of capital and speculators perform several necessary market functions, an excess of gambling diverts resources from other purposes and encourages the acquisition of wealth by chance rather than by labor. The poor decision-making habits that problem gamblers develop can spill over into other areas of one’s life. The end result is a general deterioration of work ethic and quality of service throughout the community.

When Hans-Hermann Hoppe wrote that people need to physically remove advocates and practitioners of individual hedonism (among others) from a community in order to maintain a libertarian order, he was predictably condemned by left-libertarians. They argue that this restricts the liberty of hedonists for no legitimate reason and may even constitute aggression, but this is not true as long as those performing the removal are rightful owners of private property who consider hedonists to be unwelcome inside their lands. While people should be free to pursue their own destruction if they so choose, they have neither the right to do so where their presence is unwanted by private property owners nor the right to bring non-hedonists to ruin with them. A stance against libertarian hedonism that stays within the confines of the non-aggression principle is not only acceptable, but in need of promotion.