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Month: August 2015

The War on Air Conditioning Heats Up – Is Climate Control Immoral? – Article by Sarah Skwire

The War on Air Conditioning Heats Up – Is Climate Control Immoral? – Article by Sarah Skwire

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The New Renaissance HatSarah Skwire
August 13, 2015
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It started with the Pope. In his recent encyclical, Laudato Si’, he singled out air conditioning as a particularly good example of wasteful habits and excessive consumption that overcome our better natures:

People may well have a growing ecological sensitivity but it has not succeeded in changing their harmful habits of consumption which, rather than decreasing, appear to be growing all the more. A simple example is the increasing use and power of air-conditioning.

Now, it seems to be open season on air conditioning. From a raging Facebook debate over an article that claims that air conditioning is an oppressive tool of the patriarchy to an article in the Washington Post that calls the American use of air conditioning an “addiction” and compares it unfavorably to the European willingness to sweat through the heat of summer, air conditioning is under attack. So I want to defend it.

Understand that when I defend air conditioning, I do so as something of a reluctant proponent. I grew up in the Midwest, and I have always loved sitting on the screened-in porch, rocking on the porch swing, drinking a glass of something cold. I worked in Key West during the summer after my sophomore year of college, lived in an apartment with no air conditioning, and discovered the enormous value of ceiling fans. A lazy, hot summer day can be a real pleasure.

However, let’s not kid ourselves. There were frequent nights in my childhood when it was just too hot to sleep, and the entire family would hunker down in the one air-conditioned room of the house — my father’s attic study — to cool off at night. When we moved from that house to a place that had central air, none of us complained.

And after my recent article on home canning, my friend Kathryn wrote to say,

When I was growing up in the Deep South, everybody I knew had a garden, shelled beans and peas, and canned. It could have been an Olympic event. What I remember most — besides how good the food was — is how hot it was, all those hours spent over huge pots of boiling something or other on the stove in a house with no air conditioning.

There’s a lot to be said for being able to cook in comfort and to enjoy the screened-in porch by choice rather than necessity. Making your family more comfortable is one of the great advantages of an increasingly wealthy society, after all.

So when I read that the US Department of Energy says that you can save about 11 percent on your electric bill by raising the thermostat from 72 to 77 degrees, mostly I want to invite the Department of Energy to come over to my 1929 bungalow and see if they can get any sleep in my refinished attic bedroom when the thermostat is set to 77 degrees, but the room temperature is a cozy 80-something.

And when I read Petula Dvorak arguing that air conditioning is a tool of sexism because “all these women [are freezing] who actually dress for the season — linens, sundresses, flowy silk shirts, short-sleeve tops — changing their wardrobes to fit the sweltering temperatures around them. … And then there are the men, stalwart in their business armor, manipulating their environment for their own comfort, heaven forbid they make any adjustments in what they wear,” mostly I want to ask her if she’s read the dress codes for most professional offices. In my office, women can wear sleeveless tops and open-toed shoes in the summer. Men have to wear a jacket and tie. Air conditioning isn’t sexist. Modern dress codes very well might be.

But arguments based on nostalgia or gender are mostly easily dismissed. Moral arguments, like those made by Pope Francis or by those who are concerned about the environmental and energy impact of air conditioning, are more serious and require real attention.

Is it immoral to use air conditioning?

Pope Francis certainly suggests it is. And the article in the Washington Post that compares US and European air conditioning use agrees, suggesting that the United States prefers the short-term benefits of air conditioning over the long-term dangers of potential global warming — and that our air conditioning use “will make it harder for the US to ask other countries to continue to abstain from using it to save energy.” We are meant to be deeply concerned about the global environmental impact as countries like India, Indonesia, and Brazil become wealthy enough to afford widespread air conditioning. We are meant to set a good example.

But two months before the Washington Post worried that the United States has made it difficult to persuade India not to use air conditioning, 2,500 Indians died in one of the worst heat waves in the country’s history. This June, 780 people died in a four-day heat wave in Karachi, Pakistan. And in 2003, a heat wave that spanned Europe killed 70,000. Meanwhile, in the United States, heat causes an average of only 618 deaths per year, and the more than 5,000 North American deaths in the un-air-conditioned days of 1936 remain a grim outlier.

Air conditioning is not immoral. Possessing a technology that can prevent mortality numbers like these and not using it? That’s immoral.

Air conditioning is, for most of us, a small summertime luxury. For others, it is a life-saving necessity. I am sure that it has environmental effects. Benefits always have costs, and there’s no such thing as a free climate-controlled lunch. But rather than addressing those costs by trying to limit the use of air conditioning and by insisting that developing nations not use the technologies that rocketed the developed world to success, perhaps we should be focusing on innovating new kinds of air conditioning that can keep us cool at a lesser cost.

I bet the kids who will invent that technology have already been born. I pray that they do not die in a heat wave before they can share it with us.

Sarah Skwire is a senior fellow at Liberty Fund, Inc. She is a poet and author of the writing textbook Writing with a Thesis.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

Asset-Price Inflation Enters Its Dangerous Late Phase – Article by Brendan Brown

Asset-Price Inflation Enters Its Dangerous Late Phase – Article by Brendan Brown

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The New Renaissance HatBrendan Brown
August 12, 2015
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Asset price inflation, a disease whose source always lies in monetary disorder, is not a new affliction. It was virtually inevitable that the present wild experimentation by the Federal Reserve — joined by the Bank of Japan and ECB — would produce a severe outbreak. And indications from the markets are that the disease is in a late phase, though still short of the final deadly stage characterized by pervasive falls in asset markets, sometimes financial panic, and the onset of recession.

Global Signs of Danger

A key sign of danger, recognizable from historical patterns of how the disease progresses, is the combination of steep speculative temperature falls in some markets, with still-high — and in some cases, soaring — temperatures in other markets. Another sign is some pull-back in the carry trade, featuring, in particular, the uncovered arbitrage between a low (or zero) interest rate, and higher rate currencies. For now, however, this is still booming in some areas of the global market-place. Specifically, we now observe steep falls in commodity markets (also in commodity currencies and mining equities) which were the original area of the global market-place where the QE-asset price inflation disease attacked (back in 2009–11). Previously hot real estate markets in emerging market economies (especially China and Brazil) have cooled at least to a moderate extent. Most emerging market currencies — with the key exception of the Chinese yuan — once the darling of the carry traders, are in ugly bear markets. The Shanghai equity market bubble has burst.Yet in large areas of the high-yield credit markets (including in particular the so-called covenant-lite paper issued by highly leveraged corporations) speculative temperatures remain at scorching levels. Meanwhile, Silicon Valley equities (both in the public and private markets), and private equity funds enjoy fantasy valuations. Ten-year Spanish and Italian government bond yields are hovering below 2 percent, and hot spots in global advanced-economy real estate — whether San Francisco, Sydney, or Vancouver — just seem to get hotter, even though we should qualify these last two observations by noting the slump in the Canadian and Australian dollars. Also, there is tentative evidence that London high-end real estate is weakening somewhat.

How to Identify Late Stages of Asset Inflation

We can identify similar late phases of asset price inflation characterized by highly divergent speculative temperatures across markets in past episodes of the disease. In 1927–28, steep drops of speculative temperature in Florida real estate, the Berlin stock market, and then more generally in US real estate, occurred at the same time as speculative temperatures continued to soar in the US equity market. In the late 1980s, a crash in Wall Street equities (October 1987) did not mark the end-stage of asset price inflation but a late phase of the disease which featured still-rising speculation in real estate and high-yield credits.In the next episode of asset price inflation (the mid-late 1990s), the Asian currency and debt crisis in 1997, and the bursting of the Russian debt bubble the following year, accompanied still rising speculation in equities culminating in the Nasdaq bubble. In the episode of the mid-2000s, the first quakes in the credit markets during summer 2007 did not prevent a further build-up of speculation in equity markets and a soaring of speculative temperatures in winter 2007–08 and spring 2008 in commodity markets, especially oil.What insights can we gain from the identification of the QE-asset price inflation disease as being in a late phase?The skeptics would say not much. Each episode is highly distinct and the disease can “progress” in very different ways. Any prediction as to the next stage and its severity has much more to do with intuition than scientific observation. Indeed some critics go as far as to suggest that diagnosis and prognosis of this disease is so difficult that we should not even list it as such. Historically, such critics have ranged from Milton Friedman and Anna Schwartz (who do not even mention the disease in their epic monetary history of the US), to Alan Greenspan and Ben Bernanke who claimed throughout their years in power — and these included three virulent attacks of asset price inflation originating in the Federal Reserve — that it was futile to try to diagnose bubbles.

We Can’t Ignore the Problem Just Because It’s Hard to Measure

Difficulties in diagnosis though do not mean that the disease is phantom or safely ignored as just a minor nuisance. That observation holds as much in the field of economics as medicine. And indeed there may be a reliable way in which to prevent the disease from emerging in the first place. The critics do not engage with those who argue that the free society’s best defense against the asset price inflation disease is to follow John Stuart Mill’s prescription of making sure that “the monkey wrench does not get into the machinery of money.”Instead, the practitioners of “positive economics” demonstrate an aversion to analyzing a disease which cannot be readily identified by scientific measurement. Yes, the disease corrupts market signals, but by how much, where, and in what time sequence? Some empiricists might acknowledge the defining characteristic of the disease as “where monetary disequilibrium empowers forces of irrationality in global markets.” They might agree that flawed mental processes as described by the behavioral finance theorists become apparent at such times. But they despair at the lack of testable propositions.

Mis-Measuring Increases in Asset Prices

The critics who reject the usefulness of studying asset price inflation have no such qualms with respect to its twin disease — goods and services inflation. After all, we can depend on the official statisticians! In the present monetary inflation, a cumulative large decline in equilibrium real wages across much of the labor market, together with state of the art “hedonic accounting” (adjusting prices downward to take account of quality improvements) has meant that the official CPI has climbed by “only” 11 percent since the peak of the last business cycle (December 2007). The severity of the asset price inflation disease makes it implausible that the official statisticians are measuring correctly the force of monetary inflation in goods and services markets.

What Is the Final Stage?

A progression of the asset price inflation disease into its final stage (general speculative bust and recession) would mean the end of monetary inflation and also inflation in goods and services markets. What could bring about this transition? Most plausibly it will be a splintering of rose-colored spectacles worn by investors in the still hot speculative markets rather than Janet Yellen’s much heralded “lift-off” (raising official short-term rates from zero). What could cause the splinter? Perhaps it will be a sudden rush for the exit in the high-yield credit markets, provoked by alarm at losses on energy-related and emerging market paper. Or financial system stress could jump in consequence of the steep falls of speculative temperature already occurring (including China and commodities). Perhaps there will be a run from those European banks and credit funds which are up to their neck in Spanish and Italian government bonds. Or the Chinese currency could tumble as Beijing pulls back its support and the one trillion US dollar carry trade into the People’s Republic implodes. Perhaps scandal and shock, accompanied by economic disappointment will break the fantasy spell regarding US corporate earnings, especially in Silicon Valley. As the late French President Mitterrand used to say, “give time to Time!”

Brendan Brown is an associated scholar of the Mises Institute and is author of Euro Crash: How Asset Price Inflation Destroys the Wealth of Nations and The Global Curse of the Federal Reserve: Manifesto for a Second Monetarist Revolution. See Brendan Brown’s article archives.

This article was published on Mises.org and may be freely distributed, subject to a Creative Commons Attribution United States License, which requires that credit be given to the author.

The Unseen Consequences of Zero-Interest-Rate Policy – Article by Ronald-Peter Stöferle

The Unseen Consequences of Zero-Interest-Rate Policy – Article by Ronald-Peter Stöferle

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The New Renaissance HatRonald-Peter Stöferle
August 10, 2015
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In a dynamic economy, an action not only triggers just one effect, but always an entire series of different consequences. While the cause of the first effect is easily recognizable, the other effects often occur only later and no such recognition occurs. Frédéric Bastiat described this phenomenon in 1850 in his ground-breaking essay “What Is Seen and What is Not Seen”:

In the economic sphere, an act, a habit, an institution, a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them …

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen. Yet this difference is tremendous; for it is almost always the case that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa. Hence it follows that the bad economist pursues a small present good that will be followed by a great evil, while the good economist pursues a great good to come, at the risk of a small present evil.

A similar phenomenon can be seen with the consequences of artificially suppressed interest rates and monetary stimulus: in the short term, they appear to have positive effects, the long term effects are, however, disastrous. If one studies these processes closely, it becomes clear that the underlying problems cannot be solved by global zero-interest-rate policy (ZIRP), but that this instead undermines the natural selection process of the market.

With artificial stimulus like ZIRP, we only end up with a situation in which governments, financial institutions, entrepreneurs, and consumers who should actually be declared insolvent all remain on artificial life support.

In line with Bastiat’s thoughts, numerous fatal long-term consequences of zero-interest-rate policies can be identified, but are generally ignored:

  • Conservative investors by nature come under increasing pressure with respect to their investments and take on excessive risks in light of the prospect that interest rates will remain low in the long term. This leads to capital misallocation and the emergence of bubbles.
  • The sweet poison of low interest rates leads to massive asset price inflation (stocks, bonds, works of art, real estate).
  • Structurally too low interest rates in industrialized nations due to carry trades lead to the emergence of asset price bubbles and contagion effects in emerging markets.
  • Changes in human behavior patterns occur, due to continually declining purchasing power. While thrift is increasingly mutating into a relic of the past, taking on debt comes to be seen as rational.
  • As a result of the structurally too low level of interest rates, a “culture of instant gratification” is created, which is among other things characterized by the fact that consumption is financed with credit instead of savings. The formation of wealth becomes steadily more difficult.
  • The medium of exchange and unit of account function of money increases in importance, while its role as a store of value declines.
  • Incentives for fiscal discipline decline.
  • Zombie banks are created: Low interest rates prevent the healthy process of creative destruction. Banks are enabled to roll over potentially non-performing loans practically indefinitely and can thus lower their write-off requirements.
  • Newly created money is neither uniformly nor simultaneously distributed amongst the population. This results in a permanent transfer of wealth from later receivers to earlier receivers of newly created money.

Conventional monetary policy — that is, the promotion of credit creation by lowering interest rates — reaches its limits once the “zero-bound” is reached. In order to continue the spiral of stimulus, “unconventional monetary policy” becomes ever more important. The multitude of “newfangled” monetary policy measures is seemingly only limited by the imagination of central bankers, whereby recent years have shown that central bankers can be extraordinarily creative. That this phenomenon is nothing new, is inter alia shown by this observation by Ludwig von Mises in 1922:

But an increase in the quantity of money and fiduciary media will not enrich the world. … Expansion of circulation credit does lead to a boom at first, it is true, but sooner or later this boom is bound to crash and bring about a new depression. Only apparent and temporary relief can be won by tricks of banking and currency. In the long run they must lead to an all the more profound catastrophe.

Ronald-Peter Stöferle is a Chartered Market Technician (CMT) and a Certified Financial Technician (CFTe). During his studies in business administration and finance at the Vienna University of Economics and the University of Illinois at Urbana-Champaign, he worked for Raiffeisen Zentralbank (RZB) in the field of Fixed Income/Credit Investments. In 2006 he began writing reports on gold. His six benchmark reports called “In GOLD we TRUST” drew international coverage on CNBC, Bloomberg, the Wall Street Journal, The Economist and the Financial Times. He was awarded “2nd most accurate gold analyst” by Bloomberg in 2011.

This article was originally published by the Ludwig von Mises Institute. Permission to reprint in whole or in part is hereby granted, provided full credit is given.

Artisanopolis – Seasteading City Concept by Gabriel Scheare, Luke Crowley, Lourdes Crowley, and Patrick White

Artisanopolis – Seasteading City Concept by Gabriel Scheare, Luke Crowley, Lourdes Crowley, and Patrick White

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The New Renaissance HatGabriel Scheare, Luke Crowley, Lourdes Crowley, and Patrick White
August 8, 2015
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Artisanopolis, created by Gabriel Scheare, Luke & Lourdes Crowley, and Patrick White of Roark 3D and Fortgalt as a gift to The Seasteading Institute, in conjunction with the Institute’s Architectural Design Contest.

Description by The Seasteading Institute: Based on the foundational vision of The Seasteading Institute and DeltaSync, these works of art constitute an attempt at communicating the essence of what the infrastructure of sea-based civilization might look like in the near future. In this age of limited governance options, we intend to suggest an alternative model that allows new communities to form beyond the limiting jurisdictions of existing nation states in order to promote freedom and competition in the marketplace.

Each floating platform can be towed via tugboat from location to location and they can interlock to form sprawling formations over the water’s surface. Ballasts are used to adjust the depth at which the platforms sit in the water and coupling latches lock them together to form larger, cohesive footprints for convenience and stability. Modeled after those found at the seaport of Brighton, England, a large modular wavebreaker surrounds the city to shelter it from rough waters and wind while energy is supplied by renewable means like photovoltaic panel arrays and wave-driven turbines. Aquaponics greenhouse domes provide locally grown food, seawater is desalinated on site to provide drinking water, organic waste is removed via tankers to an off-site composting location, and inorganic waste is recycled. With so much focus on efficiency and sustainability, The Floating City Project promises to serve as a viable template upon which other seasteading projects can be modeled in the future.

All design contest images on this page are under the Creative Commons Attribution License. It means that you are allowed to redistribute and modify images but that you must attribute the original designer when doing so.

Note: Left-click on the images to see them in higher resolution.

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Why the Candidates Keep Giving Us Reasons to Use the “F” Word – The Electoral Clown Car Is Full of Nationalistic Socialists – Article by Steven Horwitz

Why the Candidates Keep Giving Us Reasons to Use the “F” Word – The Electoral Clown Car Is Full of Nationalistic Socialists – Article by Steven Horwitz

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The New Renaissance HatSteven Horwitz
August 6, 2015
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“There are far too many candidates,” writes Dana Milbank at the Washington Post. “And to gain attention they are juggling, tooting horns and blowing slide whistles like so many painted performers emerging from a clown car.” The two clowns making the most noise in recent weeks are Bernie Sanders and Donald Trump.

At first glance, it would seem they couldn’t be more different: a Democrat and a Republican, a friend of the unions and a CEO, a man of relatively modest means by congressional standards and one of the wealthiest men in the United States. But a closer look reveals some interesting similarities and teaches us an important lesson about the history of ideas. What Sanders and Trump have in common is no laughing matter.

Recent articles by libertarians on both candidates have suggested that they are both strongly nationalist. Dan Bier tore apart Sanders for his views on immigration, and both Jeff Tucker and Jason Kuznicki have associated Trump with nationalism and perhaps even a variant of fascism. I think they are all on to something: Sanders and Trump have a lot more in common than many think. But before I get there, we need to take a detour into the history of socialism and fascism.

In its original conception, Marxian socialism was strongly internationalist. Marx’s theory was based on the idea of class struggle and the disparity in power between those who owned the means of production (the capitalists) and those who did not (the proletariat).

Marxism has nothing to do with nationality. It’s all about class, defined as whether or not one owns capital. For true Marxists, a German worker has much more in common with a Russian worker or an Italian worker than he or she does with a German capitalist. Marxism did not give any importance to national borders.

For many in the early 20th century, this was a problem with Marxism, especially in the aftermath of World War I. Much like today, people were looking for a “third way” between capitalism and socialism. For many of those people, that third way was fascism.

Today we use the word fascism as an epithet, especially for bossy people. We associate it with dictatorships, and especially with Nazism. It turns out that fascism was a fairly well-worked-out theory of how to organize a society, and in its original form was not about racism or anti-Semitism directly. Fascism was an attempt to combine what people saw as the best parts of capitalism and socialism, and then to do so in the context of putting nationality before class.

The most extensive writing about how fascism would work came from the Italians in the 1920s and 1930s, and interested readers should find a copy of Luigi Villari’s The Economics of Fascism to see the details. (You can find a nice summary of those ideas in Sheldon Richman’s entry on fascism in the online Concise Encyclopedia of Economics.)

The fascists argued that the whole notion of class conflict was the problem. Instead of pitting class against class and tearing nations apart, why not bring all the parties together and give them the chance to cooperate with each other rather than struggle their way to socialism? The fascist economy was built around a series of cartels where the state, the nominal owners of the means of production, and the workers (represented by labor unions) would get together and figure out what to produce, how to produce it, what to charge, and how much profit would be “allowed.”

The fascists agreed with socialism’s desire not to leave markets to spontaneous ordering forces, but they thought the nation-state should direct the economy, not the workers. Both capitalism and socialism involved conflict, not cooperation. The same third-way thinking, and some of the same structures, were present in the first two years of the New Deal in the United States. The cartels of the National Recovery Administration were modeled after Italian fascism, and FDR and Mussolini were mutual admirers.

You can see how fascism took elements of both capitalism and socialism, then added nationalism. The idea was to look out for the welfare of the nation-state first. The Italian capitalist and the Italian worker were both Italians first and foremost, and that should be the first call on their allegiance. Lashing socialism to the glorification of the nation-state gives us fascism, and you can see why anyone who represented a threat to national identity would quickly become a problem.

This is one reason why the German version of fascism so easily linked up with a long history of German anti-Semitism. The Nazis were undoubtedly socialist (recall that Nazi is short for National Socialist German Workers Party), as even a quick glance at their 1920 platform will tell you. They were also, even at that date, fiercely nationalist. In Hitler’s hands, that national pride quickly became a desire to glorify the Aryan race.

Plus, recall that Jews were disproportionately both capitalists and supporters of the Marxist revolution in Russia — not to mention the symbol of the cosmopolitan, rootless nomad for centuries. Many of those who wanted to reject both capitalism and Marxian socialism saw the Jews as the symbol of both.

So what does this have to do with Bernie Sanders and Donald Trump?

I would argue that they are both “nationalist socialists.” That is, they both embody key elements of fascism. They both think the nation comes first, and they both think the United States is an organization (not a spontaneous order) that should be under someone’s control.

The difference is that Sanders sees both the problems and the solutions from the workers’ perspective, so he’s focusing on both the exploitation by capitalists and keeping immigrants out to protect the wages of US workers. The losses to US workers matter more than the large gains to foreign-born workers coming here.

Trump sees all of this from the CEO/owner/capitalist perspective. He thinks the United States is, or should be, like a big firm where we all work together for a common goal. He envisions himself as the CEO, negotiating deals with other countries as if they, too, were just big corporate firms. But nations are not firms — they are spontaneous orders.

As I argued in an earlier column, “Socialism Is War and War Is Socialism,” this desire to turn spontaneous orders into hierarchies is characteristic of both war and socialism. It is also deeply embedded in fascism, and Sanders and Trump exemplify that tendency among the presidential candidates, though they do so with different emphases and rhetoric.

Their commonalities are also why our conventional binary left-right political spectrum makes no sense. That one candidate is perceived as far to the left and the other as (to some degree) a right-wing capitalist shows the depth of our failure to understand history. They have both rejected the spontaneous order of the market as well as the cosmopolitanism of liberalism and socialism. They are fascist brothers under the skin.

That both are getting the attention and support of so many Americans should be a matter of grave concern. After all, some clowns are far more scary than funny.

Steven Horwitz is the Charles A. Dana Professor of Economics at St. Lawrence University and the author of Microfoundations and Macroeconomics: An Austrian Perspective, now in paperback.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

The Gig Economy Makes Karl Marx’s Dreams Come True – And It’s All Capitalism’s Doing – Article by Max Borders

The Gig Economy Makes Karl Marx’s Dreams Come True – And It’s All Capitalism’s Doing – Article by Max Borders

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The New Renaissance HatMax Borders
August 4, 2015
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When Joe Average steps out of his car after completing his shift for Lyft, he does so on his own terms. Nobody tells him when to start. Nobody tells him when to stop. The siren song that is prime time pricing might have coaxed him off the couch, but ultimately it was his call. And with the rest of his day, he’s going to go fishing. You see, Joe loves to fish — even more than he loves making money. After dinner, he might take some time to criticize the second season of True Detective.

Would ole Karl Marx have been happy with this result?

In The German Ideology, Marx wrote,

For as soon as the distribution of labour comes into being, each man has a particular, exclusive sphere of activity, which is forced upon him and from which he cannot escape. He is a hunter, a fisherman, a herdsman, or a critical critic, and must remain so if he does not want to lose his means of livelihood; while in communist society, where nobody has one exclusive sphere of activity but each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner, just as I have a mind, without ever becoming hunter, fisherman, herdsman or critic.

Marx should be delighted — oh, except that it’s capitalism, not communism, that’s allowing Joe to be a fisherman and a critic on his own terms.

The sharing or “gig” economy is not only disrupting the way people live and work; it’s dividing the left considerably.

On the one hand, you have the nostalgic leftists who want Joe to work a nine-to-five job and skip the fishing. You know, like people did in the 1950s. As Freeman columnist Steve Horwitz writes, presidential candidate Hillary Clinton

longs for a time like the 1950s when workers had the structure of the corporate world and unions through which to lobby and negotiate for pay and benefits, rather than the so-called “gig” economy of so many modern freelance employees, such as Uber drivers. “This on-demand or so-called gig economy is creating exciting opportunities and unleashing innovation,” Clinton said, “but it’s also raising hard questions about workplace protection and what a good job will look like in the future.”

Joe already told us what a good job looks like. It’s one that lets him spend time fishing and criticizing.

More confusing (or confused, perhaps) is Paul Mason’s writing in the Guardian. He lauds “postcapitalism,” which has all the hallmarks of a society Clinton is worried about:

Postcapitalism is possible because of three major changes information technology has brought about in the past 25 years. First, it has reduced the need for work, blurred the edges between work and free time and loosened the relationship between work and wages.

Bingo. The gig economy. But does it make sense to give capitalism a different name? I suppose one could. After all, Marx coined the term. But Marx’s definition of capitalism is a system based on private ownership of the means of production. Has that dynamic fundamentally changed?

Far from it. The sharing economy is simply decentralizing power by allowing ordinary people to use their own small-scale means of production. By solving coordination problems and lowering transaction costs, technology is augmenting capitalism.

When Joe drives for Lyft, for example, his car is still his car. And now more of his time is his, too. Capitalism, even as Marx defined it, hasn’t fundamentally changed. But the use of technology to awaken sleeping private capital is allowing the system to evolve — and rather nicely if you’re Joe Average, or one of thousands of other workers like him.

Now, I’m not saying that there is nothing interesting going on in the electronic commons. Ideas are being configured and reconfigured in the networked economy. Many of those ideas are being taken out of the intellectual-property regime, thanks to open sourcing, and this can be a good thing. There are fierce debates about whether intellectual property (claims to property in ideas and in nonscarce goods) is justifiable. But passing over those debates, more and more open-source technologies are coming online for exploitation by everyone.

Do open sourcing and the creative commons take us to postcapitalism?

I don’t know. But fundamentally, as long as the process is voluntary and carried out peacefully by a community of cooperators, who cares what you call it? Should we be upset that the guy who founded Lyft is getting rich from the tech? Some people are, because they see the accumulation of wealth as taboo. But Joe’s life is better than it would have been in the absence of Lyft. The company allows him to live more of the life he wants to live.

As long as Joe Average is happier, who cares what Hillary Clinton thinks?

Max Borders is editor of The Freeman magazine and director of content for The Foundation for Economic Education (FEE). He is also author of Superwealth: Why we should stop worrying about the gap between rich and poor. A writer and innovator with a decade of experience in the non-profit world, Max works daily towards a condition of peace, freedom and abundance for all people.

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

Does America Ban Immigration? – The Land of the Free Isn’t, For Most People – Article by David Bier

Does America Ban Immigration? – The Land of the Free Isn’t, For Most People – Article by David Bier

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The New Renaissance Hat
David Bier
August 3, 2015
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The United States has a de facto ban on immigration. We can debate about whether this prohibition is necessary, but its existence is undeniable. Other than a few exceptions for family members, refugees, and the highly-educated, it is virtually impossible to come to the United States to live and work legally.

Historically, America held its doors open to all. But in the 1920s, a coalition of unions, progressives, and eugenicists combined to slam them shut. Within a year of passing Alcohol Prohibition, America also banned almost all forms of immigration, cutting immigration by nearly 80 percent.

Alcohol regained its legal status, but immigration never quite recovered.

Today, the government lets in almost a million immigrants each year, but this impressive-sounding number misses the entire legal, historical, and global context of our immigration system. We must compare it to the number who would come if only they could do so legally — and the reality is that most types of immigration are entirely prohibited. To deny the ban on immigration because it has exceptions is like denying Alcohol Prohibition because it allowed communion wine.

The half million people apprehended at the border each year and the 11 million unauthorized immigrants in the country are the clear evidence of this prohibition. The massive immigration underground points to an obvious yet largely ignored fact: If there was a legal way for them to come, they would have taken it. But, trouble is, one doesn’t exist.

The drastic shortage of visas is evident in the unbelievably long wait times for permanent residency. For certain categories, the wait is decades. For employment-based visas, certain Indian and Chinese workers will wait more than a decade. For Mexico, three different family-based categories have wait times over 18 years. There’s northward of 4.3 million people in these lines alone.

Yet these impossible lines hide a deeper problem: most would-be immigrants have no line to stand in at all.

The reality is this: 92 percent of legal immigrants are either 1) immediate family members of US citizens or permanent residents, 2) refugees or asylees, or 3) college graduates — and over 80 percent those needed an advanced degree or at least $500,000 to invest in projects in the United States.

This leaves less than 65,000 visas for everyone else. More two-thirds of these come through a lottery system for which 11 million people applied last year. People in most of the largest countries in the world, including India, China, and Mexico, aren’t even eligible to apply.

This legal flow amounts to barely 7 percent of the average number of immigrants apprehended at the border each year since 2004 (and, of course, that doesn’t count those who crossed successfully, or those who entered and overstayed their visas, or those who would come if there was a legal opportunity). For people without a college degree or a close American relative, the Statue of Liberty’s “Golden Door” is almost completely shut.

Meanwhile, PhDs, scientists, movie stars, pro-athletes, and other elites have a number of different work visas available to them. These allow them to live and work year-round in the United States.

By contrast, there is no work visa that allows lesser-skilled laborers to live and work year-round in this country. Unsurprisingly, this lesser-skilled demographic is disproportionately represented in the illegal population, 85 percent of whom lack a college degree.

Another reason we know that illegal immigration is being driven by the lack of a legal alternative is because of what happened when the government allowed foreign workers to come and go legally.

Thanks to a fluke of history, America had a brief period when it experimented with freer migration between the United States and Mexico. In the 1950s and ‘60s, the Bracero guest worker program let in about 5 million Mexican farmworkers. From 1956 to 1965, when the program was at its height, the number of unauthorized immigrants at the border averaged just 41,000, compared to over 436,000 a year in the prior decade.

After it was terminated in 1966 by another union-led coalition, illegal immigration never again fell to such low levels — not even for a single year, let alone an entire decade. By the 1980s, a million or more immigrants were routinely being caught by Border Patrol every year.

Supporters of the ban on immigration will say that America is at its breaking point, that we’re overwhelmed, that we can’t “handle” any more immigrants. But this fear is groundless: As a share of its population, America admitted four times as many immigrants each year in the early 1900s as it did in 2014. For a century from 1830-1929, immigration was twice as high as a share of the population as it was in the last two decades.

In absolute terms, America admits more immigrants than any other country, but relative to its size, US immigration levels are far lower than many Western countries. Controlling for population, Canada, Australia, and New Zealand all have higher levels of immigration than America today — even as high as the United States in the early 20th century — and they have not collapsed into chaos or poverty.

Immigration prohibition is real. Millions of people cross the border illegally (and thousands of businesses hire them illegally) for the same reason bootleggers had to brew booze in bathtubs. And, for the same reasons we repealed Alcohol Prohibition, we should also finally end America’s ban on immigration.

David Bier is an immigration policy analyst at the Niskanen Center. He is an expert on visa reform, border security, and interior enforcement. From 2013 to 2015, he drafted immigration legislation as senior policy advisor for Congressman Raúl Labrador, a member of the House Judiciary Committee’s Subcommittee on Immigration and Border Security. Previously, Mr. Bier was an immigration policy analyst at the Competitive Enterprise Institute.  

This article was published by The Foundation for Economic Education and may be freely distributed, subject to a Creative Commons Attribution 4.0 International License, which requires that credit be given to the author.

Ayn Rand and Friedrich A. Hayek: A Side-by-Side Comparison – Article by Edward W. Younkins

Ayn Rand and Friedrich A. Hayek: A Side-by-Side Comparison – Article by Edward W. Younkins

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The New Renaissance HatEdward W. Younkins
August 1, 2015
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Ayn Rand and Friedrich A. Hayek did more than any other writers in the Twentieth Century to turn intellectual opinion away from statism and toward a free society. Although they are opposed on many philosophical and social issues, they generally agree on the superiority of a free market. Rand’s defense of capitalism differs dramatically from Hayek’s explanation of the extended order. In addition, Hayek approves of state activity that violates Rand’s ideas of rights and freedom. The purpose of this brief essay is to describe, explain, and compare the ideas of these two influential thinkers. To do this, I present and explain an exhibit that provides a side-by-side summary of the differences between Rand and Hayek on a number of issues.

In their early years of writing, both Hayek and Rand were dismissed by intellectuals, but they were heralded by businessmen. Hayek began to gain some respect from intellectuals when he published The Road to Serfdom in 1944. He wrote a number of scholarly books, attained formal academic positions, and earned the Nobel Prize for economics in 1974. Rand never did write scholarly works or hold a formal academic position. Her philosophy must be extracted from her essays and her fiction.

Hayek was read in college classes sooner, and to a much greater extent, than was Rand. He was viewed by intellectuals as a responsible and respected scholar, and Rand was not. His vision of anti-statism was more acceptable to intellectuals because he called for some exceptions to laissez-faire capitalism. In his writings he permitted concessions for some state interventions. In his immense and varied body of work, he touched upon a great many fields, including anthropology, evolutionary biology, cognitive science, philosophy, economics, linguistics, political science, and intellectual history. During the last 25 years or so, Rand’s works have been increasingly studied by scholars. There is now an Ayn Rand Society affiliated with the American Philosophical Association and a scholarly publication devoted to the study of her ideas—The Journal of Ayn Rand Studies. In addition, her writings are now being covered in college classes.

A Summary Comparison

Exhibit I provides a summary comparison of Rand and Hayek based on a variety of factors and dimensions. With respect to metaphysics and epistemology, Rand holds that “A is A” and that reality is knowable. Contrariwise, Hayek argues that reality is unknowable and that what men see are distorted representations or reproductions of objects existing in the world. The skeptic Hayek goes so far as to state that the notion of things in themselves (i.e., the noumenal world) can be dismissed. Whereas Rand’s foundation is reality, the best that Hayek can offer as a foundation is words and language.

Hayek supports the view that the human mind must have a priori categories that are prior to, and responsible for the ability to perceive and interpret the external world. He adds to this Kantian view by making the case that each individual mind’s categories are restructured according to the distinct experiences of each particular person.   Each person’s neural connections can therefore be seen as semi-permanent and affected by his or her environment and experiences. The mind’s categories evolve as each specific person experiences the world. According to Hayek, there is pre-sensory knowledge embedded in the structure of the mind and the nervous system’s synaptic connections which can be further created and modified over time. For the neo-Kantian Hayek, knowledge always has a subjective quality.

Reason for Rand is active, volitional, and efficacious. It follows that she sees rationality as man’s primary virtue. She sees progress through science and technology as the result of the human ability to think conceptually and to analyze logically through induction and deduction. Rand also contends that people can develop objective concepts that correspond with reality.

In his philosophy, Hayek relegates reason to a minor role. He argues for a modest perspective of people’s reasoning capabilities. He contends that reason is passive and that it is a social product. Hayek’s message of intellectual humility is primarily aimed at constructivist rationalism rather than critical rationalism. As an “anti-rationalist,” he explained that the world is too complex for any government planner to intentionally design and construct society’s institutions. However, he is a proponent of the limited potential of critical rationalism through which individuals use local and tacit knowledge in their everyday decisions. Hayek views progress as a product of an ongoing dynamic evolutionary process. He said that we cannot know reality but we can analyze evolving words and language. Linguistic analysis and some limited empirical verification provide Hayek with somewhat of an analytical foundation. His coherence theory of concepts is based on agreement among minds. For Hayek, concepts happen to the mind. Of course, his overall theory of knowledge is that individuals know much more than can be expressed in words.

Rand makes a positive case for freedom based on the nature of man and the world. She explains that man’s distinctive nature is exhibited in his rational thinking and free will. Each person has the ability to think his own thoughts and control his own energies in his efforts to act according to those thoughts. People are rational beings with free wills who have the ability to fulfill their own life purposes, aims, and intentions. Rand holds that each individual person has moral significance. He or she exists, perceives, experiences, thinks and acts in and through his or her own body and therefore from unique points in time and space. It follows that the distinct individual person is the subject of value and the unit of social analysis. Each individual is responsible for thinking for himself, for acting on his own thoughts, and for achieving his own happiness.

Hayek denies the existence of free will. However, he explains that people act as if they have free will because they are never able to know how they are determined to act by various biological, cultural, and environmental factors. His negative case for freedom is based on the idea that no one person or government agency is able to master the complex multiplicity of elements needed to do so. Such relevant knowledge is never totally possessed by any one individual. There are too many circumstances and variables affecting a situation to take them all into account. His solution to this major problem is to permit people the “freedom” to pursue and employ the information they judge to be the most relevant to their chosen goals. For Hayek, freedom is good because it best promotes the growth of knowledge in society. Hayek explains that in ordering society we should depend as much as possible on spontaneous forces such as market prices and as little as possible on force. Acknowledging man’s socially-constructed nature, he does not view individuals as independent agents but rather as creatures of society.

According to Rand, the principle of man’s rights can be logically derived from man’s nature and needs. Rights are a moral concept. For Rand, the one fundamental right is a person’s right to his own life. She explains that rights are objective conceptual identifications of the factual requirements of a person’s life in a social context. A right is a moral principle that defines and sanctions one’s freedom of action in a social context. Discussion of individual rights are largely absent from Hayek’s writings. At most he says that rights are created by society through the mechanism of law.

Whereas Rand speaks of Objective Law, Hayek speaks of the Rule of Law. Objective laws must be clearly expressed in terms of essential principles. They must be objectively justifiable, impartial, consistent, and intelligible. Rand explains that objective law is derived from the rational principle of individual rights. Objective Law deals with the specific requirements of a man’s life. Individuals must know in advance what the law forbids them from doing, what constitutes a violation, and what penalty would be incurred if they break the law. Hayek says that the Rule of Law is the opposite of arbitrary government. The Rule of Law holds that government coercion must be limited by known, general, and abstract rules. According to Hayek certain abstract rules of conduct came into being because groups who adopted them became better able to survive and prosper. These rules are universally applicable to everyone and maintain a sphere of responsibility.

Rand espouses a rational objective morality based on reason and egoism. In her biocentric ethics, moral behavior is judged in relation to achieving specific ends with the final end being an individual’s life, flourishing, and happiness. For Hayek, ethics is based on evolution and emotions. Ethics for Hayek are functions of biology and socialization. They are formed through habits and imitation.

Rand advocates a social system of laissez-faire capitalism in which the sole function of the state is the protection of individual rights. Hayek, or the other hand, allows for certain exceptions and interventions to make things work. He holds that it is acceptable for the government to supply public goods and a safety net.

For Rand, the consciousness of the individual human person is the highest level of mental functioning. For Hayek, it is a supra-conscious framework of neural connections through which conscious mental activity gains meaning. He states that this meta-conscious mechanism is taken for granted by human beings. The set of a person’s physiological impulses forms what Hayek calls the sensory order. Perception and pattern recognition follow one’s sensory order which is altered by a person’s own perception and history of experiences

Aristotle is Rand’s only acknowledged philosophical influence. They both contend that to make life fully human (i.e., to flourish), an individual must acquire virtues and make use of his reason as fully as he is capable. Hayek was influenced by Kant and Popper in epistemology, Ferguson and Smith in evolutionary theory, Hume in ethics, and Wittgenstein in linguistics.

Although Rand and Hayek are opposed on many philosophical questions, they generally agree on the desirability of a free market and are among the most well-known defenders of capitalism in the twentieth century. The works of both of these intellectual giants are highly recommended for any student of liberty.

 Exhibit I

A Summary Comparison

 

Rand

  

Hayek
Foundation Reality Words and Language
Knowledge Reality is knowable. Skepticism – The idea of things in themselves can be dismissed.
Reason Reason is active, volitional, and efficacious. Reason is passive and a social product.
Progress Based on power of human reason and conscious thought Evolution and social selection
Analytic Method Logical analysis, including induction and deduction Linguistic analysis and empiricism
Theory of Concepts Objective concepts that correspond with reality Coherence or agreement among minds
Freedom Positive case for freedom Negative case for “freedom”
Free Will Man has free will. Man is determined but acts as if he has free will.
Subject of value and unit of social analysis Individual happiness Perpetuation of society (i.e., the group)
The Individual Independent Dependent—man is socially constituted
Rights Based on the nature of the human person Created by society through law
Law Objective Law Rule of Law
Ethics and Morality Rational objective morality based on reason and egoism Evolutionary and emotive ethics based on altruism which is noble but cannot be implemented because of ignorance. Established through habits and imitation
Desired Social System Laissez-faire capitalism Minimal welfare state that supplies public goods and safety net
Highest level of understanding and mental functioning Consciousness of the Individual Meta-conscious framework—neural connections
Philosophical influences Aristotle Ferguson, Smith, Kant, Hume, Popper, Wittgenstein