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Price Fixers of the World, Unite! – Article by Bradley Doucet

Price Fixers of the World, Unite! – Article by Bradley Doucet

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The New Renaissance Hat
Bradley Doucet
December 4, 2013
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Venezuela’s President Nicolas Maduro has never met a price control he didn’t like. The latest news is that he will regulate the price of new and used cars in order to fight inflation, which hit 54% in October. This is a lot like using leeches to balance the four humours: It’s discredited nonsense that does more harm than good (and shame on Bloomberg.com for its uncritical report on the matter, though I’m sure many other news outlets are just as bad).

As Matt McCaffrey and Carmen Dorobat pointed out in the International Business Times last month, inflation in Venezuela (and elsewhere) is quite simply the result of monetary expansion. The government prints money like a lunatic, which makes each single unit of currency worth less (and eventually worthless). More units of the debased currency are therefore needed to purchase goods and services, which is just another way of saying that prices go up.

Imposing controls to stop nominal prices from rising therefore actually lowers real prices below market rates. This leads to shortages, something long-suffering Venezuelans know a thing or two about. Their country is tragically being gutted of its accumulated capital by disastrously wrongheaded economic policies.

Equally mistaken, though not quite as harmful, is the Quebec government’s plan to control the price of books in order to keep sellers from selling them too cheaply. Pauline Marois’s Parti Québécois wants to cap discounts on new books at 10% to protect small booksellers from competition from online and big-box retailers. Whereas Maduro imposes price ceilings, Marois wants to impose a price floor, which will keep books above their market rate. As my Québécois Libre colleague Larry Deck quipped, “Surely nobody would buy fewer books just because they cost more, right?”

Ceilings or floors, fixing prices by diktat distorts market signals and makes most everyone worse off. Depending on their pervasiveness, price controls can lead to a little—or a lot—of hardship. Quebec’s politicians would do well to think twice before emulating an economic basket case like Venezuela.

Bradley Doucet is Le Québécois Libre‘s English Editor and the author of the blog Spark This: Musings on Reason, Liberty, and Joy. A writer living in Montreal, he has studied philosophy and economics, and is currently completing a novel on the pursuit of happiness. He also writes for The New Individualist, an Objectivist magazine published by The Atlas Society, and sings.

Meaningful and Vacuous “Privilege” – Article by G. Stolyarov II

Meaningful and Vacuous “Privilege” – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
December 3, 2013
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Sanford Ikeda’s concise and insightful lists of 14 common fallacies about the free market (available in two installments from The Freeman here and here) motivate careful thought about the commonly used and misused term “privilege” and the conflations in which it can result. In discussing the second fallacy regarding the free market, that it is identical to a system where the government grants special privileges to businesses, Dr. Ikeda writes that “People sometimes define ‘privilege’ as any advantage a person or group may have over others. Certainly such advantages exist today and would exist in a free market—you may be born into a wealthy family or have superior drive and resourcefulness—but these advantages are consistent with the absence of privilege in the libertarian sense, as long as you acquired such advantages without fraud or the initiation of physical violence against the person or property of others.”

Indeed, the increasingly common usage of the term “privilege” to mean any advantage whatsoever eviscerates it of any genuine meaning it once had. This problem in today’s discourse spreads far beyond discussions of connections between businesses and governments.

Certainly, the very fact that one individual is different from another – with a different set of experiences, different physique, different knowledge, and even different standing room at any particular time – provides that individual with opportunities that the other lacks, while rendering him or her limited in ways that the other is not. Unfortunately, this trivial fact is increasingly being misconstrued in some circles to suggest vile inequities arising out of innocuous human differences. People who have not aggressed against, or even demeaned or ridiculed, anyone are increasingly being identified as “privileged” simply for belonging to broadly and crudely defined groups – be it all people of European descent, all males, or even all non-overweight people (witness the pseudo-concept of “thin privilege”) or people who are not disabled. (“Ableism” is apparently an emerging sin in the vocabulary of the increasingly militant and vitriolic collectivistic “social justice” movement – which is about neither true individual-oriented justice nor the preservation of a civilized and tolerant society.)  Such a vacuously expansive view of privilege is a tremendous insult to the true victims of coercive privilege throughout history – from slaves in all eras, to women who in prior eras were denied suffrage and property rights, to the freethinkers and forbears of liberty and reason, whose voices were too often snuffed out by the arbitrary power of absolute monarchs and theocrats in the pre-Enlightenment world.

Thomas Jefferson, an opponent of privilege in its meaningful sense, put it best when he expressed in his 1826 letter to Roger C. Weightman “the palpable truth, that the mass of mankind has not been born with saddles on their backs, nor a favored few booted and spurred, ready to ride legitimately, by the grace of god.” Jefferson was a staunch opponent of the coercive privilege that enabled some to gain artificial advantages by restricting others from pursuing life-improving courses of action. Accidents of birth, or special lobbying skills, should not, in a just system, enable a person to acquire prerogatives which could not be earned through the free, peaceful exercise of that person’s abilities. Jefferson saw the future and strength of the American republic in the hoped-for emergence of a “natural aristocracy of talent and virtue” – people who, when allowed the liberty to flourish through honest work and competition, would become role models for others solely through their examples. This natural aristocracy would not need force to maintain its prominence, because the traits of the most knowledgeable, most industrious, and most virtuous people will be emulated by any who earnestly seek to improve their own lives and who have the freedom to acquire knowledge and make their own decisions.

Yet Jefferson’s natural aristocracy would be denounced as an example of horrid “privilege” by the “social justice” types – simply due to the necessarily unequal distribution of outcomes on a free market of open and honest production, competition, and cooperation. After all, not everyone can originate the same ideas at the same time. Not everyone can take advantage of the same opportunity for entrepreneurial profit, whose attainment, as economist Israel Kirzner demonstrated in Competition and Entrepreneurship, arises out of alertness to opportunities that others have missed. Kirzner writes that “Because the participants in [a] market are less than omniscient, there are likely to exist, at any given time, a multitude of opportunities that have not yet been taken advantage of. Sellers may have sold for prices lower than the prices which were in fact obtainable… Buyers may have bought for prices higher than the lowest prices needed to secure what they are buying…” (43). Would it be an example of unacceptable “privilege” for an alert entrepreneur to remedy such an arbitrage opportunity and thereby bring otherwise-unrealized value to consumers?

Yes, the free exercise of human abilities will produce outcomes where some people will have some advantages over some others (while, of course, leaving fully open the possibility that those very others will have their own distinct advantages, obtained through hard work, knowledge, or sheer luck). But, as long as coercion is not involved in securing and maintaining those advantages, the people endowed with them are not “booted and spurred” to ride the rest of us. As Dr. Ikeda points out, the differences among people are a source of strength harnessed by the free market: “The free market gives you an incentive to profit from associating with and learning from others who might be very different from you, who operate outside your normal social networks.” By incentivizing and facilitating these interactions, the free market encourages greater tolerance, understanding, and visible societal heterogeneity of the sort that constitutes the best safeguard against truly heinous oppressions based on collectivistic stereotypes. Instead of condemning others as being too “privileged” simply on account of innocuous differences, it is far more productive to think about how those differences can help one achieve one’s own values through honest, peaceful, and productive interaction, cooperation, and exchange.

Putting Randomness in Its Place – Video by G. Stolyarov II

Putting Randomness in Its Place – Video by G. Stolyarov II

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A widespread misunderstanding of the meaning of the term “randomness” often results in false generalizations made regarding reality. In particular, the view of randomness as metaphysical, rather than epistemological, is responsible for numerous commonplace fallacies.

Reference
– “Putting Randomness in Its Place” – Essay by G. Stolyarov II

Dead Models vs. Living Economics – Article by Sanford Ikeda

Dead Models vs. Living Economics – Article by Sanford Ikeda

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The New Renaissance Hat
Sanford Ikeda
November 23, 2013
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Since 2008, straw-man versions of free-market economics have popped up whenever someone needs an easy villain. Keynes roared back to prominence, and it looks like this reaction might be gaining steam.

According to an article in The Guardian, students at a few British universities, prompted by “a leading academic,” are demanding that economics professors stop teaching what they refer to as “neoclassical free-market theories.”

Michael Joffe, an economics professor at Imperial College, said, “The aim should be to provide students with analysis based on the way the world works, not the way theories argue it ought to work.”

Joffe is right on that point. But his target is wrong: It’s not free-market economics that’s the problem, it’s the model of perfect competition that often gets conflated with free-market economics. A commenter on my recent columns addressing falsehoods about the free market (here and here) suggested I discuss this conflation.

I was thinking of putting it into a third “falsehoods” column. But the Guardian story makes me think the issue deserves more attention. Here’s the key passage:

The profession has been criticised for its adherence to models of a free market that claim to show demand and supply continually rebalancing over relatively short periods of time—in contrast to the decade-long mismatches that came ahead of the banking crash in key markets such as housing and exotic derivatives, where asset bubbles ballooned [emphasis added].

Why Do You Support the Free Market?

“Free-market economists,” on the other hand, typically have confidence in free markets owing to our understanding of economics, although we often (notoriously) disagree on exactly what the correct economics is. A number of free-market economists base their confidence on what is known as the model of “perfect competition.” Briefly, that model shows how in the long run the price of a good in a competitive market will equal the additional cost of producing a unit of that good (i.e., its marginal cost), and it shows that no one has the power to set prices on her own. How do you get those results? By making something like the following assumptions:

  1. Free entry: While buyers and sellers may incur costs to consume and to produce, there are no additional costs to enter or leave a market.
  2. Product homogeneity: From the point of view of any buyer in the market, the output of one seller is a perfect substitute for the output of any other seller.
  3. Many buyers and sellers: No single buyer or seller is large enough to independently raise or lower the market price.
  4. Perfect knowledge: All buyers and sellers have so much information that they will never regret any action they take.

From these assumptions you can derive not only marginal-cost pricing but also nice efficiency properties as well: There is no waste and costs are minimized. Which is why people like the model.

Moreover, for some important questions the analysis of supply and demand under perfect competition is quite useful. Push the legal minimum wage too high and you’ll generate unemployment; push the maximum rent-control rate too low and you’ll get housing shortages. Also, financial markets sometimes—though as we have seen, not always—conform to the predictions of perfect competition. It’s a robust theory in many ways, but if you base your support for the free market on the model of perfect competition, you’re on shaky ground. The evidence against it is pretty devastating.

Free Entry, Not Perfect Knowledge

In fact, it doesn’t even take the Panic of 2008 to shake up the model; any comparison of the model with everyday reality would do the job. Assumptions two and three about product homogeneity and many buyers and sellers are pretty unrealistic, but it’s the last assumption about perfect knowledge that’s the killer. (I’m aware of Milton Friedman’s “twist” (PDF), which argues that this is irrelevant and only predictions matter, but it’s a methodology I don’t agree with.) Markets are rarely if ever at or near equilibrium, and people with imperfect knowledge make disequilibrating mistakes, even without the kind of government intervention that caused the Panic of 2008.

When the institutions are right, however, people learn from the mistakes that they or others make, and there’s a theory of markets—certainly neither Keynesian nor Marxist—that fits the bill better than perfect competition.

It’s Austrian theory. Its practitioners argue competition is an entrepreneurial-competitive process (PDF). This theory not only says that competition exists in the presence of ignorance, error, and disequilibrium, it explains how profit-seeking entrepreneurs in a free market positively thrive in this environment. The principal assumption that the theory rests on, besides the existence of private property, is No. 1: free entry.

As long as there are no legal barriers to entry, if Jack wants to sell an apple for $1 and Jill is asking $2 for that same quality apple—that is, there is a disequilibrium here in which either Jack or Jill (or both) is making an error—you can profit by buying low from Jack and selling high to Jill’s customer, Lucy. If another entrepreneur, Linus, spots what you’re doing, he can bid up the price you’re giving Jack and bid down the price at which you’re selling to Lucy. Bottom line: A process of entrepreneurial competition tends to remove errors. There is no need to assume perfect knowledge to get a competitive outcome; instead, competition itself improves the level of knowledge.

So Joffe and the critics are wrong about the theory. You don’t knock out the theoretical legs from under the free market by “debunking” the model of perfect competition. He is also wrong about the history. As I’ve referenced many times, economists Steve Horwitz and Pete Boettke have documented how a government-led, interventionist dynamic, and not the free market, led to the Panic of 2008.

Joffe, the Imperial College professor, “called for economics courses to embrace the teachings of Marx and Keynes to undermine the dominance of neoclassical free-market theories.” He also complains that “there is a lot that is taught on [sic] economics courses that bears little relation to the way things work in the real world.” I agree. But that complaint would apply at least as much to the Keynesian and Marxian economics he hypes as to the static, equilibrium-based models of competition he slams.

Sanford Ikeda is an associate professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism.
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This article was originally published by The Foundation for Economic Education.
Janet Yellen, the “Pink Dream,” and a Coming Economic Nightmare – Article by Joseph T. Salerno

Janet Yellen, the “Pink Dream,” and a Coming Economic Nightmare – Article by Joseph T. Salerno

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The New Renaissance Hat
Joseph T. Salerno
November 19, 2013
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On Monday, former Fed official Andrew Huszar publicly apologized to the American public for his seminal role in executing the Quantitative Easing (QE) program, a program he characterizes as “the greatest backdoor Wall Street bailout of all time,” and “the largest financial-markets intervention by any government in world history.” While this is a momentous admission from an insider (Mr. Huszar is also a former Wall Street banker), perhaps Mr. Huszar’s most revealing statement concerned the results of QE’s “relentlessly pumping money into the financial markets during the past five years.” He referred to the spectacular rally in financial markets and expressed agreement with the growing belief among expert observers that market conditions had become “bubble-like.”

In a paper just released by the American Enterprise Institute, another former policymaker, resident fellow Desmond Lachman, formerly deputy director of the International Monetary Fund’s Policy Development and Review Department, warns that QE and other “unorthodox monetary policies” are having “unintended consequences.” Among other consequences, Lachman sees signs of incipient bubbles forming throughout the world:

An important aim of the QE policies pursued in the United States, the United Kingdom, and Japan has been to encourage risk taking and to raise asset prices as the means to stimulate aggregate demand. The question that now needs to be asked is whether these policies may have given rise to excessive risk taking, overleveraging, and bubbles in asset and credit markets. In this context, one has to wonder whether historically low yields on junk bonds in the industrialized countries now understate the risk of owning those bonds. . . . One also has to wonder whether yields on sovereign bonds in the European periphery have become disassociated from those countries’ underlying economic fundamentals and whether global equity valuations have not become excessively rich.

The markets for gems and for collectibles have also become very frothy of late. Yesterday, new records were set for a gemstone and for an Andy Warhol piece of art sold at auction. The “Pink Dream,” is a 59.60 carat vivid pink diamond, which is the highest color grade for diamonds, and the purity of its crystals is ranked among the top 2 percent in the world. The record setting price was $83 million. Not coincidentally, the DJIA set an intraday record shortly before the auction. The new record price for the Andy Warhol piece was $105.4 million. The auction’s combined $199.5 million in revenues was also a record for Sotheby’s. During Sotheby’s Geneva fall auction season, records were also set for the prices of an orange diamond and a Rolex Daytona watch.

While the Austrian insight that super-accommodative Fed monetary policy may be causing a recurrence of asset bubbles is making headway in policy circles, it has not yet dawned on Janet Yellen. Nor is such an epiphany likely. Ms. Yellen wears the intellectual blinders of the mainstream macroeconomist which force her to focus narrowly on arbitrary and increasingly irrelevant statistical averages and aggregates like the CPI, the unemployment rate, and GDP and to ignore what is going on around her in real markets.

This was clearly revealed in remarks prepared for her confirmation hearing released yesterday. Ms. Yellen noted that the rate of increase in the CPI index was less than the Fed target of 2.00 percent and that the labor market and the economy were performing far short of their potential (based on the meaningless concept of “potential GDP”). She thus reiterated her commitment to continuing monetary accommodation and “unconventional policy tools such as asset purchases.” It is true that in her testimony before the Senate committee on Thursday she did concede that it is “important for the Fed to attempt to detect asset bubbles when they are forming.” However, she blithely dismissed concerns that recent record highs in asset markets reflected “bubble-like conditions.” With Ms. Yellen’s confirmation highly likely, we can look forward to the Fed blindly fueling asset bubbles to a fare-thee-well. With the financial system still on shaky ground, this will lead to another financial meltdown and a U.S. government takeover of the financial system, the likes of which will make the last Wall Street bailout appear to be a minor intervention.

Joseph Salerno is academic vice president of the Mises Institute, professor of economics at Pace University, and editor of the Quarterly Journal of Austrian Economics. He has been interviewed in the Austrian Economics Newsletter and on Mises.org. Send him mail. See Joseph T. Salerno’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.

Federal Reserve Steals From the Poor and Gives to the Rich – Article by Ron Paul

Federal Reserve Steals From the Poor and Gives to the Rich – Article by Ron Paul

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The New Renaissance Hat
Ron Paul
November 19, 2013
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Last Thursday the Senate Banking Committee held hearings on Janet Yellen’s nomination as Federal Reserve Board Chairman. As expected, Ms. Yellen indicated that she would continue the Fed’s “quantitative easing” (QE) polices, despite QE’s failure to improve the economy. Coincidentally, two days before the Yellen hearings, Andrew Huszar, an ex-Fed official, publicly apologized to the American people for his role in QE. Mr. Huszar called QE “the greatest backdoor Wall Street bailout of all time.”

As recently as five years ago, it would have been unheard of for a Wall Street insider and former Fed official to speak so bluntly about how the Fed acts as a reverse Robin Hood. But a quick glance at the latest unemployment numbers shows that QE is not benefiting the average American. It is increasingly obvious that the Fed’s post-2008 policies of bailouts, money printing, and bond buying benefited the big banks and the politically-connected investment firms. QE is such a blatant example of crony capitalism that it makes Solyndra look like a shining example of a pure free market!

It would be a mistake to think that QE is the first time the Fed’s policies have benefited the well-to-do at the expense of the average American. The Fed’s polices have always benefited crony capitalists and big spending politicians at the expense of the average American.

By manipulating the money supply and the interest rate, Federal Reserve polices create inflation and thereby erode the value of the currency. Since the Federal Reserve opened its doors one hundred years ago, the dollar has lost over 95 percent of its purchasing power —that’s right, today you need $23.70 to buy what one dollar bought in 1913!

As pointed out by the economists of the Austrian School, the creation of new money does not impact everyone equally. The well-connected benefit from inflation, as they receive the newly-created money first, before general price increases have spread through the economy. It is obvious, then, that middle- and working-class Americans are hardest hit by the rising level of prices.

Congress also benefits from the devaluation of the currency, as it allows them to increase welfare- and warfare-spending without directly taxing the people. Instead, the increase is only felt via the hidden “inflation tax.” I have often said that the inflation tax is one of the worst taxes because it is hidden and because it is regressive. Of course, there is a limit to how long the Fed can facilitate big federal spending without causing an economic crisis.

Far from promoting a sound economy for all, the Federal Reserve is the main cause of the boom-and-bust economy, as well as the leading facilitator of big government and crony capitalism. Fortunately, in recent years more Americans have become aware of how the Fed is impacting their lives. These Americans have joined efforts to educate their fellow citizens on the dangers of the Federal Reserve and have joined efforts to bring transparency to the Federal Reserve by passing the Audit the Fed bill.

Auditing the Fed is an excellent first step toward restoring a monetary policy that works for the benefit of the American people, not the special interests. Another important step is to repeal legal tender laws that restrict the ability of the people to use the currency of their choice. This would allow Americans to protect themselves from the effects of the Fed’s polices. Auditing and ending the Fed, and allowing Americans to use the currency of their choice, must be a priority for anyone serious about restoring peace, prosperity, and liberty.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.

Pursuing the Outcomes of a Free Market – Video by G. Stolyarov II

Pursuing the Outcomes of a Free Market – Video by G. Stolyarov II

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What hope is there to actually achieve the ideals of liberty in our lifetimes? There is a promising approach, encapsulated in the following method. Ask yourself: What results would a fully free market, functioning in accordance with the principles of liberty and individual rights, bring about? Now go pursue those results directly, through your individual actions, without waiting for the system to change.

References:
– The Musical Compositions of G. Stolyarov II
– “Occupy Wall Street activists buy $15m of Americans’ personal debt” – Adam Gabbatt – The Guardian – November 12, 2013

Pursuing the Outcomes of a Free Market – Article by G. Stolyarov II

Pursuing the Outcomes of a Free Market – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
November 13, 2013
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            Those of us who love liberty wish to see a free-market society in our lifetimes. But, as a near-term prospect, a society even approximating a thorough respect of individual rights and free exchange is not on the horizon. The best liberty-oriented activism, culminating in the passionate, motivated support for Ron Paul during his 2012 Presidential campaign, has only gained the ideas of liberty the sympathy of perhaps 15% of the United States population, with the ability to attract perhaps a few more percentage points in tactical alliances on specific issues. This is not enough to catalyze system-wide change and turn around the steadily deteriorating political situation. Probably the best near-term hope for the system is some semblance of the 1990s – a glorious time for liberty by comparison to today! This could be achieved if enough people are galvanized to oppose and overturn NSA surveillance, meaningless foreign wars, and the never-ending domestic “wars” on drugs and terror, which have always ultimately turned into wars on innocent, law-abiding Americans. Such an outcome would produce a sigh of relief from the liberty-minded, but it still would not be close to a free market; it would just be somewhat sane and non-totalitarian.

            But if persuasion has not succeeded in convincing even a plurality of the population (at least for now) and if political change in the near term would mostly consist of reversing the most blatant, egregious travesties of justice, then what hope is there to actually achieve the ideals of liberty in our lifetimes? There is a promising approach, encapsulated in the following method. Ask yourself: What results would a fully free market, functioning in accordance with the principles of liberty and individual rights, bring about? Now go pursue those results directly, through your individual actions, without waiting for the system to change.

            Yes, there are limits to this approach. One limit is the law, whose prohibitions and mandates today will certainly constrain certain beneficial courses of action that would have been possible on the free market, while requiring people to spend their time on other courses of action that the free market would have rendered unnecessary. Yet the approach I propose can still do considerable good within the bounds of current laws in any political system less oppressive than that of Oceania in George Orwell’s 1984. Another limit is that the outcomes of a fully free market are not entirely foreseeable. Future discoveries and innovations by free individuals are the currently unseen benefits of voluntary action and exchange, and we cannot always anticipate them in advance. Even with this recognition, though, it is possible to reasonably anticipate that a free market would uplift human beings materially, intellectually, morally, and culturally. People in a free society would be more prosperous, more knowledgeable (and better able to distinguish good ideas from bad), less inclined to aggression against their fellow men, and more inclined to refined tastes (as a result of increased prosperity, leisure time, and sense that life is generally good).

            Direct, peaceful, lawful action by individuals today can bring about many of the results of a free market even without a free market being legally in place or supported by the majority of people. Furthermore, such results can be brought about by actions that are themselves fully consistent with free-market principles, since they would be entirely voluntary and respectful of the rights of others. There is one catch: the activities that would be profitable on a free market would not necessarily be so today. Their cost would need to be absorbed using one’s own resources, and one would need to consider the outcome not a loss, or even a sub-optimal profit, but rather a moral profit that outweighs the material cost, including the opportunity cost, in time and money.

            To give an example, I compose classically inspired music and give recordings away for free online using a Creative Commons license. In a free market, which over time would uplift the tastes of the general public, the production of high music (which would be simultaneously sophisticated and appealing to the human ear) would be much more remunerative than it is today, and the likes of Justin Bieber and Miley Cyrus would be relegated to the ever-thinning ranks of the dregs of society. This hypothesis is supported by history: in prior, far less prosperous but economically freer eras, composers of high music were often seen as celebrities, with Wolfgang Amadeus Mozart, Felix Mendelssohn, Giuseppe Verdi, and Johann Strauss II being just a few examples. Today, creators of good music have to content themselves with far less remuneration than the dubious pop idols, manufactured by politically connected and protected record labels. However, no one inhibits the freedom to compose, and the available tools for doing so are more impressive than ever before. Voluntary private action can increase the abundance of newly produced high culture in music, art, and literature. Similarly, voluntary private research initiatives, ranging from the humanities to mathematics to DIY biology, can hasten the rate of meaningful discoveries in order to more closely approximate the pace of intellectual and technological progress that would occur in a free market. With the hyper-empowerment made  possible through recent electronic technologies, the opportunities for any individual to make a difference in a field today exceed those available to large laboratories, academic departments, workshops, and orchestras in the mid-20th century. Thus, one person with free-market sympathies, acting on his own time with his own resources, can often achieve more than teams of people working through established institutions using old patterns of production, whose obsolescence is becoming glaringly obvious to anyone who pays attention.

            As an added bonus, creating free-market outcomes in accordance with free-market principles will, in any system, highlight the benefits and possibilities of voluntary, private action to those who might otherwise be unconvinced. It appears to me, from observation and experience, that theoretical and abstract arguments for the benefits of liberty are not sufficient to persuade anyone who is not already extremely theoretically inclined – a tiny minority of the human population. For everyone else, practical demonstrations of how freedom would work are far more powerful than the most finely honed theory of liberty. Probably, the majority of people would only come to support free markets once liberty-minded people have, de facto, built an entire free market around them by informally approximating its outcomes and workings. At that time, achieving a formal free market would just be a matter of “flipping the switch” on the entire system and amending the laws (with popular consent) to recognize the kind of societal order that would have already formed in practice.

            Interestingly enough, Rolling Jubilee, a more recent initiative by the Occupy movement, has valuable lessons to teach free-market advocates regarding the approach of pursuing desired outcomes directly. No, I am not referring to physical occupations of public places, but rather the efforts to purchase consumer debt on the secondary market (at deep discounts) and subsequently to abolish such debt, freeing consumers of its burden.  While the economic ideas of members of the Occupy movement often differ from free-market views, this initiative has achieved an objective that free-market advocates should find salutary: the reduction of the total outstanding amount of consumer debt, much of which was the result of a credit bubble fueled by the reckless inflationary monetary policy of the Federal Reserve. Furthermore, much today’s outstanding consumer debt is an outcome of cultural malaise brought about by generations of unfreedom, as a result of which a condition of financial dependency has come to predominate instead of self-reliance and the robustness to contingencies that can only come about due to a buffer of present owned resources. Freer-market cultures tend to be more contemptuous of reliance on personal debt, and it is thus reasonable to expect the total amount of debt on a free market to be less than exists today. The Occupy movement did not wait for authoritative permission, or for majority agreement, or for system-wide change. Rather, members pooled their resources and, by paying $400,000, managed to annul $14 million of consumer debt. It is a drop in the bucket of the entire problem, to be sure, but it is also an invaluable proof of concept for the project of massive societal transformation through voluntary, private action.

            Direct, peaceful, law-abiding action to bring about the outcomes of a free market would also help in another crucial respect by rehabilitating the image of free markets in the eyes of skeptics. The outcome of the course of action I propose would not be profit maximization in the present day; indeed, it would often require working for free on one’s own time and engaging in acts that would be considered charitable or philanthropic by professed opponents of the market. Even businesses that espouse free-market ideas could join in on this project and pursue practices that, while they may not capture every morsel of profit out there for the taking, are more in accord with how a free market would behave. Such businesses could, for instance, voluntarily renounce lobbying for special privileges and barriers to entry that would keep competitors out of the market.  They could also spend resources to improve workplace conditions and surrounding neighborhoods in order to better approximate how workplaces and neighborhoods would look under a prosperous free market. Furthermore, internal salary schedules in such businesses could be based on an approximation of meritocracy as it would emerge on a free market, which would often mean higher compensation for innovative and talented employees (irrespective of age, origin, past socioeconomic circumstances, or connections), resulting in greater retention, improved morale, better products, and long-term competitive advantages for the business that undertakes such a step. To certain onlookers, these behaviors might seem consistent with what is today called “corporate social responsibility” – and perhaps they would be. But by engaging in these practices in the name of striving toward a free-market ideal, liberty-minded businessmen could perhaps for the first time break through to capture the hearts and minds of many present-day detractors.

            What outcomes do you think would be achieved by a free market but are deficient today? Now go work to make them happen.

Remembrance Day 2038 – Short Story by Bradley Doucet

Remembrance Day 2038 – Short Story by Bradley Doucet

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The New Renaissance Hat
Bradley Doucet
November 11, 2013
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One hundred years ago, humanity was on the verge of global war. Hitler’s Germany had already annexed Austria, and Hirohito’s Japan had invaded China, Mongolia, and the USSR. Tens of millions of people would die in the ensuing Second World War, the deadliest conflict in human history. Today, we remember the fallen, both military and civilian, in this and other wars. We remember, and we give thanks for the current peace, which we have good grounds for believing will be an enduring one.

As recently as 25 years ago, such optimism would have seemed naïve. Though the world was already becoming much less violent in general, the terrorist attacks of September 11, 2001 were still an open psychic wound for many Americans, and isolated wars raged on in many regions. Fears of nuclear proliferation threatened to spark further conflicts in the already volatile Middle East.

But parallel to these political events and tensions, the global economy kept growing, spreading the benefits of industrialization and trade to more and more people in more and more countries. The more obvious the connection became between basic economic freedom and rising standards of living, the harder it became for even the most authoritarian regimes to resist the push for freer markets. Dire poverty has now been all but eradicated and real economic security is commonplace. And as people have more to live for, they are less willing to die for their countries. Pragmatic negotiations have become more attractive, and violent conflict less so.

The change that humanity has undergone can be summed up by a simple but profound slogan: Make trade, not war. As we have become more accustomed to seeing our neighbours as potential trading partners in positive-sum exchanges, killing them no longer seems to make a lot of sense. We remember today the wars of the past, that we might better appreciate our present peace and extend it indefinitely into the future.

Bradley Doucet is Le Québécois Libre‘s English Editor and the author of the blog Spark This: Musings on Reason, Liberty, and Joy. A writer living in Montreal, he has studied philosophy and economics, and is currently completing a novel on the pursuit of happiness. He also writes for The New Individualist, an Objectivist magazine published by The Atlas Society, and sings.

Chained CPI Chains Taxpayers – Article by Ron Paul

Chained CPI Chains Taxpayers – Article by Ron Paul

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The New Renaissance Hat
Ron Paul
November 11, 2013
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One of the least discussed, but potentially most significant, provisions in President Obama’s budget is the use of the “chained consumer price index” (chained CPI), to measure the effect of inflation on people’s standard of living. Chained CPI is an effort to alter the perceived impact of inflation via the gimmick of “full substitution.” This is the assumption that when the price of one consumer product increases, consumers will simply substitute a similar, lower-cost product with no adverse effect. Thus, the federal government decides your standard of living is not affected if you can no longer afford to eat steak, as long as you can afford to eat hamburger.

The problem with “full substitution” should be obvious to anyone not on the federal payroll. Since consumers did not choose to buy lower-priced beef before inflation raised the price of steak, they obviously preferred steak. So if the Federal Reserve’s policies create inflation that forces you to purchase hamburger instead of steak, your standard of living is lowered. CPI already uses this sort of substitution to mask the costs of inflation, but chained CPI uses those substitutions more frequently, thereby lowering the reported rate of inflation.

Supporters of chained CPI also argue that the federal government should take into account technology and other advances that enhance the quality of the products we buy. By this theory, increasing prices signal an increase in our standard of living! While it is certainly true that advances in technology improve our standard of living, it is also true that, left undisturbed, market processes tend to lowerthe prices of goods. Remember the mobile phones from the 1980s? They had limited service, constantly needed charging, and were extremely expensive. Today, almost all Americans can easily afford a mobile device to make and receive calls, texts, and e-mails, as well as use the Internet, watch movies, read books, and more.

The same process occurred with personal computers, cars, and numerous other products. If left alone, the operations of the market place will deliver higher quality and lower prices. It is only when the federal government interferes with the operation of the market, especially via fiat money, that consumers must contend with constant price increases.

The goal of chained CPI is to decrease the federal government’s obligation to meet its promise to keep up with the cost of living in programs like Social Security. But it does not prevent individuals who have a nominal increase in income from being pushed into a higher income bracket. Both are achieved without a vote of Congress.

Noted financial analyst Peter Schiff correctly calls chained CPI a measurement of the cost of survival. Instead of using inflation statistics as a political ploy to raise taxes and artificially cut spending, the President and Congress should use a measurement that actually captures the eroding standard of living caused by the Federal Reserve’s inflationary policies. Changing federal statistics to exploit the decline in the American way of life and benefit big-spending politicians and their cronies in the big banks does nothing but harm the American people.

Ron Paul, MD, is a former three-time Republican candidate for U. S. President and Congressman from Texas.

This article is reprinted with permission from the Ron Paul Institute for Peace and Prosperity.