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Michel Chevalier’s Case Against the Patent System – Article by Louis Rouanet

Michel Chevalier’s Case Against the Patent System – Article by Louis Rouanet

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The New Renaissance Hat
Louis Rouanet
April 17, 2015
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Michel Chevalier (1806–1879) was a very influential French economist during the second half of the nineteenth century. He is still widely known in France for being the architect of the Cobden-Chevalier Treaty of 1860 which was the free-trade agreement between France and Great Britain. Michel Chevalier is, however, less known for his major contribution to the intellectual property debate. [1] Contrary to Jean Baptiste Say, Gustave de Molinari, and many other French economists, Chevalier fiercely opposed the patent system. As Fritz Machlup remarked: “Among French economists, Michel Chevalier was probably the most emphatic in the joint antagonism to tariffs and patents, declaring that both ‘stem from the same doctrine and result in the same abuses.’”

Taking a fresh look at Michel Chevalier’s major work, Les Brevets d’invention (1878), we find it to be not only a well-written and powerful book, but also has remained impressively relevant. The arguments advanced by Chevalier anticipate the current arguments of the present opponents of intellectual property.

Patents as Contrary to Freedom and Economic Progress

Michel Chevalier argues that patents cannot be justified if they are contrary to freedom, even if beneficial to technological change. For him “From the moment we can make effective the patent only through inquisitorial expedients, violence, and subversion of liberty of labor, it is proof that we must renounce patents.” Chevalier rejects utilitarianism as a sufficient method to justify or refute the patent system. Chevalier’s opposition to patents, however, is not just based on moral arguments but shows the disastrous effects of this system for both foreign trade and the economy in general.

According to Chevalier, patents are of the same nature as privileges and monopolies which were prevalent during the Ancien Régime. They are also comparable in their effects to protectionist policies:

In absolute terms, patents diminish the productive power of nations that recognize them: evident proposition for those who believe that freedom, free competition, is the great lever of industrial progress.

Chevalier goes on to note the conservative and anti-innovation nature of monopolies and gives many examples of monopolies during the Ancien Régime. According to him, the innovators during the Ancien Régime weren’t rewarded, not because of the absence of patents, but because of the corporation guild system which was destroying competition and freedom to entry into markets. Thus, the innovators were constantly sued by guilds and consumers rarely benefited from their inventions. This argument is still relevant today. Indeed, companies protected from competition and government-owned corporations are often less innovative and more subject to conservative measures. Sectors typically run by government such as schools experience very little technological progress. On the other hand, the competitive process of the market gives incentives for the actors to differentiate from the other producers. As Pascal Salin stated, the company which makes the highest profits on a free market is the company which is the best positioned to “invent the future.” The essential virtue of competition is that it encourages producers to innovate in order to better serve the needs of consumers.

As one of his more striking examples, Chevalier examines the case of aniline — a dye and major innovation in the chemical industry — and shows how monopoly, resulting from patents, leads to hampered innovation. His interpretation of the problems caused by patents in the chemical industry at the time is consistent with more recent studies done by Boldrin and Levine in Against Intellectual Monopoly, now the seminal work on the topic.

Innovation as a Process

Chevalier understood that innovation is, above all, a process and that giving privileges to the innovator will destroy this process, leading to less and not more inventions. He wrote:

Every industrial discovery is the product of the general ferment of ideas, the result of an internal work which was accomplished with the support of a large number of successive or simultaneous collaborators in society, often for centuries.

This argument regarding the cumulative nature of innovation is still the most powerful argument against intellectual monopoly today and has also been the theme of several recent studies.2 Similar to Chevalier, Hayek saw innovation as a process and stated that “it is not obvious that such forced scarcity [intellectual property] is the most effective way to stimulate the human creative process.”

In an 1862 debate in the Académe des Sciences Morales et Politiques, Chevalier gave the example of Louis Daguerre, one of the inventors of photography, who didn’t seek a patent for his system of photography. According to Chevalier, the absence of a patent led to necessary improvements of the daguerreotype and fostered its widespread use. His conclusion is the following:

The spirit of man proceeds only by successive trials and repeated attempts. Discoveries do not arrive with a single bound to the degree of perfection or completion, which is reserved for them; there must be renewed, persevering efforts, cut by breaks that allow, so to speak, to breath. … If it is true that the invention must pass through the hands of twenty people before reaching its final state, it follows that the exclusive privilege granted to the first patented, and to each of his followers, prevents this practical result rather than facilitate it.

The Increasing Number of Patents and Negative Consequences

Already during the nineteenth century, legal instability and uncertainty challenged the actual efficiency of the patent system and the economists were very much aware of this problem. Chevalier warned that the patent system would lead to legal uncertainty for the companies and would lead the industry back to a guild system where no entrepreneur would dare to enter a market for fear of being sued by patent holders. Chevalier was ahead of his time by denouncing what can be considered the ancestors of today’s patent trolls.

Chevalier concluded his 1862 article by stating: “I think I have said enough to show that the patent legislation has been an eccentricity of the legislator.” He went further in 1863 and added that “[a]ll friends of industrial and social progress must work together to rescue the industry of obstacles, obsolete remains of the past. Patents must disappear first.” [3]

1. Fritz Machlup and Edith Penrose briefly discussed Michel Chevalier in “The Patent Controversy in the Nineteenth Century,” Journal of Economic History, 1950.

2. See Alberto Galasso et Mark Schankerman, “Patents and Cumulative Innovation: Causal Evidence from the Courts”, NBER working paper, 21 June 2014 ; and also, Alessandro Nuvolari, “Collective Invention during the British Industrial Revolution: The Case of the Cornish Pumping Engine,” Cambridge Journal of Economics 28, No. 3 (2004).

3. Quoted in Eugène Pouillet, “Traité théorique et pratique des brevets d’invention et de la contrefaçon,” 1909, pp. x–xi.

Louis Rouanet is a student at Sciences Po Paris (Institute of Political Studies) where he studies economics and political science.

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.

A Portrait of the Classical Gold Standard – Article by Marcia Christoff-Kurapovna

A Portrait of the Classical Gold Standard – Article by Marcia Christoff-Kurapovna

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The New Renaissance Hat
Marcia Christoff-Kurapovna
April 15, 2015
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“The world that disappeared in 1914 appeared, in retrospect, something like our picture of Paradise,” wrote the economist Cecil Hirsch in his June 1934 review of R.W. Hawtrey’s classic, The Art of Central Banking (1933). Hirsch bemoaned the loss of the far-sighted restraint that had once prevailed among the “bankers’ banks” of the West, concluding that modern times “had failed to attain the standard of wisdom and foresight that prevailed in the 19th century.”That wisdom and foresight was once upon a time institutionalized throughout an international monetary culture — gold-based, wary of credit, and contemptuous of debt, public or private. This world included central banks including the Bank of England, the Bank of France, the Swiss National Bank, the early Federal Reserve, the Imperial Bank of Austria-Hungary, and the German Reichsbank. But the entrenched hard-money ideology of the time restrained all of them. The Bank of Russia, for example, which once required 50 percent to 100 percent gold backing of all notes issued, possessed the second largest gold reserves on the planet at the turn of the twentieth century.

“The countries that were tied together in the gold standard system represented to a not inconsiderable degree a community of interest in and responsibility for the maintenance of economic and financial stability throughout the world,” recounted Aldoph C. Miller, member of the Federal Reserve Board from 1914 to 1936, in The Proceedings of the Academy of Political Science, in May 1936. “The gold standard was the one outstanding symbol of unity and economic solidarity which the nineteenth century world had developed.”

It was a time when “automatic market forces,” as economists of the day referred to them, prevailed over monetary management. Redeemability of money in (fine) gold ensured, within limits, stability in foreign exchange rates. Credit was extended only as far as reserve ratios would allow, and central banks were required to keep fixed reserves of gold against notes-in-circulation and against demand deposits.

When Markets Dominated Monetary “Policy”

Gold flows regulated international price relationships through markets, which adjusted themselves accordingly: prices rose when there was an influx of gold — for example, when one country received a debt payment from another country (always in gold), or during such times as the California or Australian gold rushes of the 1870s. These inflows meant credit expansion and a rise in prices. An outflow of gold meant credit was contracted and price deflation followed.

The efficiency of that standard was not impeded by the major central banks in such a way that “any disturbance of economic or financial character originating at any point in the world which might threaten the continued maintenance of economic equilibrium was quickly detected by foreign exchanges,” Miller, the Federal Reserve board member, noted in his paper. “In this way, the gold standard system became in a very real sense a regime or rule of economic health, a method of catching economic disturbances in the bud.”

The Bank of England, the grand master of them all, was the financial center of the universe, whose tight handle on its credit policies was so disciplined that the secured the top spot while not even holding the largest gold reserves. Consistent in its belief that protection of reserves was the chief, and only important, criterion of credit policy, England became the leading exporter of capital, the free market for gold, the international discount market, and international banker for the trade of other countries, as well as her own. The world was in this sense on the sterling standard.

The Bank of France, wisely admonished by its founder, Napoleon, to make sure France was always a creditor country, was so replete with reserves it made England a 500 million franc loan (in 1915 numbers) at the onset of the World War I. Switzerland, perhaps the last “19th-century-style” hold-out today with unlimited-liability private bankers and strict debt-ceiling legislation, also required high standards of its National Bank, founded in 1907. By the 1930s that country had higher banking reserves than the US; the Swiss franc was never explicitly devalued, unlike nearly every other Western nation’s currency, and the country’s domestic price level remained the most stable in the world.

For a time, the disciplined mindset of these banks found its way across the Atlantic, where the idea of a central bank had been long the subject of hot debate in the US. The economist H. Parker Willis, writing about the controversy in The Journal of the Proceedings of the Academy of Political Science, October 1913, admonished: “The Federal Reserve banks are to be ‘bankers’ banks,’ and they are intended to do for the banker what he himself does for the public.”

At first, the advice was heeded: in September 1916, almost two years after its founding on December 23,1913, the fledgling Fed worked out an amendment to its gold policy on the basis of a very conservative view of credit. This new policy sought to restrain “the undue and unnecessary expansion of credit,” wrote Fed board member Miller, in an article for The American Economic Review, in June 1921.

The Bank of Russia, during the second half of the nineteenth century steered itself through the Crimean War, the Russo-Turkish War, the Russo-Japanese War, impending Balkan wars — not to mention all that was to follow — and managed to emerge with sound fiscal policies and massive gold reserves. According to The Economist of May 20, 1899, Russian holdings were 95 million pounds sterling of gold, while the Bank of France held 78 million sterling worth. (Austria-Hungary held 30 million sterling worth of gold and the Bank of England 30 million sterling worth of both gold and silver.) “Russia up to the very moment of rupture [with Japan, 1904–1905], was working imperturbably at the progressive consolidation of her finances,” reported Karl Helfferich of the University of Berlin, at a meeting of The Royal Economic Society [UK] in December 1904. “Even in years of industrial crises and defective harvest, her foreign trade showed an excess of exports over imports more than sufficient to compensate payments sent abroad. And, as guarantee her monetary system she has succeeded in a amassing and maintaining a vast reserve of gold.”

These banks, in turn, drew on the medieval/Renaissance and Baroque-era banking traditions of the Hanseatic League, the Bank of Venice, and Amsterdam banks. Payment-on-demand “in good and heavy gold” was like a blood-oath binding the banker-client relationship. The transfer of credit “did not arise from any such substitution of credit for money,” noted Charles F. Dunbar, in The Quarterly Journal of Economics of April 1892, “but from the simple fact that the transfer in-bank saved the necessity of counting coin and manual delivery of every transaction.”

Bankers were forbidden to deal in certain commodities, could not make loans or create credit for the purchase of such commodities, and forbade both foreigners and citizens from buying silver on credit unless the same amount in cash was in the bank. According to Dunbar, a Venetian law of 1403 on reserve requirements became the basis of US banking law on the deposits of public securities in the late 1800s.

After the fall of bi-metallism in the 1870s, gold continued to perform monetary functions among the main countries of the Western world (and the well-administered Bank of Japan). It was the only medium of exchange and the only currency with unrestricted legal tender. It became the vaunted “measure of value.” Bank currency notes were simply used as auxiliary to gold and, in general, did not enjoy the privilege of legal tender.

The End of An Era

It was certainly not a flawless system, or without periodic crises. But central banks had to act in an exceptionally prudent manner given the all-over public distrust of paper money.

As economist Andrew Jay Frame of the University of Chicago, writing in The Journal of Political Economy, in January 1912, noted: “During panics in Britain in 1847 and 1866, when cash payments were suspended, the floodgates of cash were opened [by The Bank of England], the governor sent word to the street that solvent banks would be accommodated, and the panic was relieved.” Frame then adds: “However, this extra cash and the increased loans that went with it were very quickly put to an end to avoid credit expansion.”

The US was equally confident of its prudent attitude. Aldoph Miller, writing of Federal Reserve policy, remarked: “The three chief elements of the policy of a central bank or system of reserve holding institutions are best disclosed in connection with the attitude towards 1) gold 2) currency 3) credit.” He noted proudly: “The federal reserve system has met [these] tests on the whole with remarkable success.”

But after World War I, a different international landscape was left behind. England had been displaced as the center of international finance; the US and France emerged as the chief post-war creditor countries. The mechanism of the gold standard to which depreciated currencies could be related no longer existed. Only the US was left with a full gold standard. England and France had a gold bullion standard and other countries (Germany, primarily) had a gold-exchange standard.

A matrix of unbalanced trade relationships began to saturate the international economy. Then, with so many foreign countries attendant upon its speculative boom, the US manipulated its own domestic credit policies to ease credit and exchange-standard controls. This eventually culminated in an international financial crisis of 1931. Under Bretton Woods (1944), the gold standard was effectively abandoned: domestic convertibility was illegal and the role of gold was very constrained in favor of the dollar.

“It was, at least in theory, simple enough in the old days,” wrote a wistful W. Randolph Burgess, head of the New York Federal Reserve, in 1938. “In the present strange new world, where the old gold portents have lost their former meaning, where is the radio beam which the central banker may follow? What is the equivalent of gold?”

The men of his era and of the late nineteenth century understood the meaning of such a question and, more importantly, why it is one that must be asked. But theirs was a different world, indeed — one without “QE,” ZIRP,” or “Unknown Knowns” as fiscal policy. And there were no helicopters, either.

Marcia Christoff-Kurapovna is at work on the biography of a prominent European head of state and businessman.  Her work has appeared in such publications as The Wall Street Journal, The Economist and Foreign Affairs.

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.

The New Militarism – Who Profits? – Article by Ron Paul

The New Militarism – Who Profits? – Article by Ron Paul

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The New Renaissance Hat
Ron Paul
April 14, 2015
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Militarism and military spending are everywhere on the rise, as the new Cold War propaganda seems to be paying off. The new “threats” that are being hyped bring big profits to military contractors and the network of think tanks they pay to produce pro-war propaganda. Here are just a few examples:
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The German government announced last week that it would purchase 100 more “Leopard” tanks – a 45 percent increase in the country’s inventory. Germany had greatly reduced its inventory of tanks as the end of the Cold War meant the end of any threat of a Soviet ground invasion of Europe. The German government now claims these 100 new tanks, which may cost nearly half a billion dollars, are necessary to respond to the new Russian assertiveness in the region. Never mind that Russia has neither invaded nor threatened any country in the region, much less a NATO member country.

The US Cold War-era nuclear bunker under Cheyenne Mountain, Colorado, which was all but shut down in the 25 years since the fall of the Berlin Wall, is being brought back to life. The Pentagon has committed nearly a billion dollars to upgrading the facility to its previous Cold War-level of operations. US defense contractor Raytheon will be the prime beneficiary of this contract. Raytheon is a major financial sponsor of think tanks like the Institute for the Study of War, which continuously churn out pro-war propaganda. I am sure these big contracts are a good return on that investment.

NATO, which I believe should have been shut down after the Cold War ended, is also getting its own massively expensive upgrade. The Alliance commissioned a new headquarters building in Brussels, Belgium, in 2010, which is supposed to be completed in 2016. The building looks like a hideous claw, and the final cost – if it is ever finished – will be well over one billion dollars. That is more than twice what was originally budgeted. What a boondoggle! Is it any surprise that NATO bureaucrats and generals continuously try to terrify us with tales of the new Russian threat? They need to justify their expansion plans!

So who is the real enemy? The Russians?

No, the real enemy is the taxpayer. The real enemy is the middle class and the productive sectors of the economy. We are the victims of this new runaway military spending. Every dollar or euro spent on a contrived threat is a dollar or euro taken out of the real economy and wasted on military Keynesianism. It is a dollar stolen from a small business owner that will not be invested in innovation, spent on research to combat disease, or even donated to charities that help the needy.

One of the most pervasive and dangerous myths of our time is that military spending benefits an economy. This could not be further from the truth. Such spending benefits a thin layer of well-connected and well-paid elites. It diverts scarce resources from meeting the needs and desires of a population and channels them into manufacturing tools of destruction. The costs may be hidden by the money-printing of the central banks, but they are eventually realized in the steady destruction of a currency.

The elites are terrified that peace may finally break out, which will be bad for their profits. That is why they are trying to scuttle the Iran deal, nix the Cuba thaw, and drum up a new “Red Scare” coming from Moscow. We must not be fooled into believing their lies.

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.

How Embargoes Destroy Freedom – Article by Ryan W. McMaken

How Embargoes Destroy Freedom – Article by Ryan W. McMaken

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Ryan W. McMaken
February 12, 2015
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In the wake of the Obama administration’s partial normalization of relations with Cuba, proponents of the embargo condemned the move, with National Review publishing an unsigned editorial claiming that allowing Americans to trade freely with the island nation amounts to giving comfort to murderous dictators. NR’s editors concluded with:

The Cuban government is not legitimate, and never has been. It is a one-party dictatorship with a gulag, an archipelago of prisons into which democrats and dissidents are thrown. We hope that the new American policy — Obama’s policy — does not benefit the Cuban dictatorship and harm Cuban democrats. We fear that yesterday was a good day for the Castros and a bad day for the Cuban people, and for American foreign policy.

This is all very interesting from an international relations perspective, and there is no doubt that the Cuban regime is a brutal regime. On the other hand, why does the brutality of the Cuban regime make it alright for the US regime to jail and persecute private American citizens who attempt to trade with people in Cuba?

That is, after all, the position of those who favor the embargo. Embargoes are not something where a magic fairy waves her wand and Cuba suddenly becomes invisible to Americans.

No, supporting an embargo means supporting the government when it fines, prosecutes, and jails peaceful citizens who attempt to engage in truly free trade. Support for an embargo also requires support for a customs bureaucracy that spies on merchants and consumers, and the whole panoply of enforcement programs necessary to punish those who run afoul of the government’s arbitrary pronouncements on what kind of trade is acceptable, and what kind is verboten. Naturally, this is all paid for by the taxpayers.

How the American Federal Government Punishes Trade

To get a taste of the reality of embargoes, one need only consult the Treasury Department’s summary of the Cuban embargo as administered by the “Office of Foreign Assets Control.”

For those who think the embargo has something to do with freedom, they might wish to consult the section on punishments for trading with people in Cuba:

Criminal penalties for violating the Regulations range up to 10 years in prison, $1,000,000 in corporate fines, and $250,000 in individual fines. Civil penalties up to $65,000 per violation may also be imposed. The Regulations require those dealing with Cuba (including traveling to Cuba) to maintain records for five years and, upon request from OFAC, to furnish information regarding such dealings.

Nothing says “freedom” like $250,000 fines and mandatory presentation of five years of private records upon demand from the federal government.

Private companies, of course, regard such potentially draconian sanctions as no joke, and companies must spend time and resources training employees and business associates to be sure that they do not find themselves in violation of federal law. This manual from Snap-on Tools is one example of how private companies must stay up to date on details such as this:

The U.S. Treasury Department’s Office of Foreign Assets Control (OFAC) maintains strict embargoes banning, and lesser sanctions limiting U.S companies and their foreign subsidiaries from entering into commercial transactions with specified foreign countries, persons and business entities. Congress recently quintupled the maximum civil fines per violation of many of these sanctions from $11,000 to $50,000 (each unlawful shipment constitutes a violation), and doubled maximum potential criminal penalties assessed willful violations from 10 years to 20 years in prison. Moreover, enforcement is being given a much higher priority…

It’s easy to see why those who favor greater government intervention in the economy would have no problem with such a program, but it’s alleged defenders of free markets like the editors at National Review who appear to be most insistent that the US government keep all its agents armed and ready, and a prison cell open for anyone who violates their federal programs of choice.

Embargoes as Mercantilist Prohibition

At their heart, embargoes are nothing but a specific type of prohibition. Sometimes, the government imposes prohibitions on transactions involving certain goods, such as cannabis. Other times, the prohibition extends to all transactions with people in a certain place. The fundamentals are the same, however, in that they prohibit peaceful exchange, with heavy penalties for violators.

Moreover, embargoes are a throwback to the mercantilism of the days of yore when economic policy was viewed as a tool of international affairs, and should be designed, at least in part, to benefit the regime of the home country.

Historically, the mercantilist regimes of old tightly controlled trade opportunities which were debated as part of armistice agreements, such as the Peace of Utrech (1713) when the British were able to force the Spanish to allow exactly one ship of merchandise annually into Spanish colonies. At home, during the same era, the British state forbade its own citizens with valuable engineering knowledge from leaving the country, lest they emigrate to a foreign land and share their knowledge with foreigners. The economic needs of the state superceded those of the individual.

This is the type of economic policy that precipitated the American Revolution, when Americans in the colonies were allowed to trade with only specified nation-states and territories in such a way that was seen as advantageous to the British Crown. The freedom fighters in that conflict engaged in rampant smuggling throughout eastern North America to avoid taxes and to trade with the French and the Spanish who were hardly paragons of democratic liberalism.

Unfortunately, the Americans did not learn their lesson in the revolution, and got to work erecting their own trade restrictions by the late eighteenth century. The greatest crime of the era, however, was Thomas Jefferson’s embargo against the British which crippled the shipping and shipbuilding industries in the United States. Naturally, it was pointed out at the time that the Constitution did not permit any such action on the part of the federal government. No such quaint considerations restrain the American state or its pro-embargo allies today.

Cuba is not the only country subject to embargoes handed out by the American state, and North Korea, Iran, and Syria are in similar positions. The question is often asked as to whether or not these sanctions work. I would certainly claim that they do not work in accomplishing their stated purposes, but whether or not they work is really beside the point. Those who advocate for such embargoes need to back up a step and first prove that it is moral and legitimate for nation-states to dictate to the people who pay the bills (i.e., the taxpayers) with whom they are allowed to trade. A society that actually respects private property rights, of course, will accept no such proposition and will respect the right of private citizens to dispose of their property as they see fit. On the other hand, those who believe that it’s the prerogative of governments to micromanage private property and throw violators in prison are encouraged to move somewhere that the government can take a robust and active role in such things. Cuba, for instance.

Ryan W. McMaken is the editor of Mises Daily and The Free Market. He has degrees in economics and political science from the University of Colorado, and was the economist for the Colorado Division of Housing from 2009 to 2014. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre. 
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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.
Humanity Doomed, Says Chicken Little – Article by Bradley Doucet

Humanity Doomed, Says Chicken Little – Article by Bradley Doucet

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Bradley Doucet
January 5, 2015
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A study by a team of NASA-funded researchers has been getting a lot of play in recent months. Headlines scream about the “irreversible collapse” of civilization if we don’t smarten up. In order to stave off disaster, the study says, we need to a) reduce economic inequality, and b) reduce resource consumption, both by using less and by reducing population growth. But a closer look suggests that reports of humanity’s future demise may have been greatly exaggerated.

There are many contentious ideas in the snippets of the forthcoming study excerpted in the various articles I read, but one of them trumps the rest: the time frame. Though some articles fail to get specific, others report the study’s predictions of when we can expect the sky to fall. The best-case scenarios apparently give us 1,000 years before it all comes crumbling down, whereas the worst-case ones give us just 350.

Are you kidding me? Your mathematical models predict collapse in three to ten centuries, and I’m supposed to take you seriously? To quote Michael Crichton, if people in the year 1900 had been worried about their descendants just one hundred years in the future, they probably would have wondered, “Where would people get enough horses? And what would they do about all the horse [manure]?” Today, of course, horse manure in city streets is not a very big problem, thanks to the widespread use of motorized vehicles. A hundred years from now, today’s specific problems will have been replaced by other as yet undreamt of challenges. Three hundred years from now? Please.

By all means, let’s do what we can to reduce economic inequality and use resources wisely instead of wastefully. I suggest greater reliance on markets for both objectives. Population growth is already slowing as people around the world get wealthier, and last I checked, was set to top out at nine or ten billion in the second half of the 21st century. But nobody has any idea what technologies will have been developed in a hundred years, much less three hundred. I don’t, you don’t, and those NASA-backed researchers don’t—whatever their models may say.

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.

Contrasting the Roles of World-Transforming Business Enterprises in the Novels of Hazlitt, Heinlein, and Istvan – Article by G. Stolyarov II

Contrasting the Roles of World-Transforming Business Enterprises in the Novels of Hazlitt, Heinlein, and Istvan – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
December 17, 2014
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Henry Hazlitt’s Time Will Run Back, Robert Heinlein’s Methuselah’s Children, and Zoltan Istvan’s The Transhumanist Wager each portray a different path by which business enterprises can dramatically improve the human condition, catalyzing paradigm shifts in the societies around them. (Follow the hyperlinks above to read my detailed analyses of each novel.) Far from being concerned solely with immediate profits or meeting quarterly earnings goals, the entrepreneurs depicted in these novels endeavor to thrive despite political persecution and manage to escape and overcome outright dystopias.

Among these three novels, Methuselah’s Children shows the tamest business-based route to reform. For centuries the Howard Foundation aims not to transform the broader society, but rather to protect its own beneficiaries and encourage incrementally greater longevity with each subsequent selectively bred generation. The Howard Families adapt to existing legal and cultural climates and prefer keeping a low profile to instigating a revolution. But even their mild outreach to the general public – motivated by the hope for acceptance and the desire to share their knowledge with the world – brings upon them the full force of the supposedly enlightened and rights-respecting society of The Covenant. Rather than fight, the Howard Families choose to escape and pursue their vision of the good life apart from the rest of humanity. Yet the very existence of this remarkable group and its members’ extraordinary lifespans fuels major changes for humanity during the 75 years of the Howard Families’ voyage. By remaining steadfast to its purpose of protecting its members, the Howard Foundation shows humankind that radical life extension is possible, and Ira Howard’s goal is attained for the remainder of humanity, whose pursuit of extended longevity cannot be stopped once society is confronted with its reality.

The path of incremental and experimental – but principled – reform through the use of business is illustrated in Time Will Run Back. Even though Peter Uldanov does not intend to embark on a capitalist world revolution, he nonetheless achieves this outcome over the course of eight years due to his intellectual honesty, lack of indoctrination, and willingness to consistently follow valid insights to their logical conclusions. Peter discovers the universality of the human drive to start small and, later, large enterprises and produce goods and services that sustain and enhance human well-being. Once Peter begins to undo Wonworld’s climate of perpetual terror and micro-regimentation, his citizens use every iota of freedom to engage in mutually beneficial commerce that allows scarce resources to be devoted to their most highly valued uses. Peter, too, must escape political persecution at the hands of Bolshekov, but, unlike the Howard Families, he does not have the luxury of completely distancing himself from his nemesis. Instead, he must form a competing bulwark against Wonworld’s tyranny and, through the superiority in production that free enterprise makes possible, overthrow the socialist dystopia completely. Where Wonworld experienced a century of technological stagnation, Peter’s Freeworld is able to quickly regain lost ground and experience an acceleration of advancement similar to the one that occurred in the Post-World War II period during which Hazlitt wrote Time Will Run Back. Because human creativity and initiative were liberated through free-market reforms, the novel ends with a promise of open-ended progress and a future of ever-expanding human flourishing.

The most explicitly revolutionary use of business as a transformative tool is found in The Transhumanist Wager. Jethro Knights conceives Transhumania specifically as a haven for technological innovation that would lead to the attainment of indefinite lifespans and rapid, unprecedented progress in every field of science and technology. Transhumania is an incubator for Jethro’s vision of a united transhumanist Earth, ruled by a meritocratic elite and completely guided by the philosophy of Teleological Egocentric Functionalism. Like Lazarus Long and the Howard Families, Jethro finds it necessary to escape wider human society because of political persecution, and, like them, he plans an eventual return. He returns, however, without the intent to re-integrate into human society and pursue what Lazarus Long considers to be a universal human striving for ceaseless improvement. Rather, Jethro considers unaltered humanity to be essentially lost to the reactionary influences of Neo-Luddism, religious fundamentalism, and entrenched political and cronyist special interests. Jethro’s goal in returning to the broader world is a swift occupation and transformation of both the Earth and humankind in Jethro’s image.

Jethro’s path is, in many respects, the opposite of Peter Uldanov’s. Peter begins as an inadvertent world dictator and sequentially relinquishes political power in a well-intentioned, pragmatic desire to foster his subjects’ prosperity. Along the way, Peter discovers the moral principles of the free market and becomes a consistent, rights-respecting minarchist libertarian – a transformation that impels him to relinquish absolute power and seek validation through a free and fair election. Jethro, on the other hand, begins as a private citizen and brilliant entrepreneurial businessman who deliberately implements many free-market incentives but, all along, strives to become the omnipotender – and ends up in the role of world dictator where Peter began. The two men are at polar opposites when it comes to militancy. Peter hesitates even to wage defensive war against Bolshekov and questions the propriety of bringing about the deaths of even those who carry out repeated, failed assassination attempts against him and Adams. Jethro does not hesitate to sweep aside his opposition using massive force – as he does when he obliterates the world’s religious and political monuments in an effort to erase the lingering influence of traditional mindsets and compel all humankind to enter the transhumanist age. Jethro’s war against the world is intended to “shock and awe” governments and populations into unconditional and largely bloodless surrender – but this approach cannot avoid some innocent casualties. Jethro will probably not create Wonworld, because he still understands the role of economic incentives and individual initiative in enabling radical technological progress to come about. However, the benefits of the progress Jethro seeks to cultivate will still be disseminated in a controlled fashion – only to those whom Jethro considers useful to his overall goal of becoming as powerful and advanced as possible. Therefore, Jethro’s global Transhumania will not be Freeworld, either.

All three novels raise important questions for us, as human society in the early 21st century stands on the cusp of major advances in biotechnology, nanotechnology, robotics, artificial intelligence, space travel, and hopefully radical life extension. However, reactionary political and cultural forces continue to inflict massive suffering worldwide through brutal warfare, sweeping surveillance and humiliation of innocent people, policies that instill terror in the name of fighting terror, and labyrinthine obstacles to progress established by protectionist lobbying on behalf of politically connected special interests. Indeed, our status quo resembles the long, tense stagnation against which Jethro revolts to a greater extent than either the largely rights-respecting society of The Covenant or the totalitarian regimentation of Wonworld. But can the way toward a brighter future – paved by the next generation of life-improving technologies – be devised through an approach that does not exhibit Jethro’s militancy or precipitate massive conflict? Time will tell whether humankind will successfully pursue such a peaceful, principled path of radical but universally benevolent advancement. But whatever this path might entail, it is doubtless that the trailblazers on it will be the innovative businessmen and entrepreneurs of the future, without whom the development, preservation, and dissemination of new technologies would not be possible.

References

Hazlitt, Henry. [1966.] 2007. Time Will Run Back. New York: Arlington House. Ludwig von Mises Institute. Available at http://library.freecapitalists.org/books/Henry%20Hazlitt/Time%20Will%20Run%20Back.pdf. Accessed December 13, 2014.

Heinlein, Robert A. [1958] 2005. Revolt in 2100 & Methuselah’s Children. New York: Baen.

Istvan, Zoltan. 2013. The Transhumanist Wager. San Bernardino: Futurity Imagine Media LLC.

Henry Hazlitt’s “Time Will Run Back”: Unleashing Business to Improve the Human Condition – Article by G. Stolyarov II

Henry Hazlitt’s “Time Will Run Back”: Unleashing Business to Improve the Human Condition – Article by G. Stolyarov II

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The New Renaissance Hat
G. Stolyarov II
December 13, 2014
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The free-market economist, journalist, and editor Henry Hazlitt wrote his novel The Great Idea in 1951; the book was re-released under the title Time Will Run Back in 1966 in order to emphasize the rediscovery of the lost ideas of free-market capitalism by the novel’s protagonists. In addition to being the most rigorous work of fiction available for the teaching of economic ideas, Time Will Run Back highlights the role of business in taking a society from a condition of destitution, misery, and brutality to one of widespread prosperity, progress, and personal fulfillment.

The novel’s hero, Peter Uldanov, is the son of Stalenin, the dictator of Wonworld – a socialist dystopia that, in the year 2100 (282 A.M. – After Marx) spans the entire globe. Peter, raised away from politics by his mother, has not been indoctrinated into Wonworld’s ideology of totalitarian central planning of all aspects of its citizens’ lives. While completely new to politics, Peter is highly intelligent and an accomplished pianist and mathematician. Stalenin is dying and, out of paternal affection, seeks to engineer Peter’s succession. Peter is intellectually honest and is perplexed at the widespread poverty, famines, and shortages of Wonworld, as well as the constant climate of terror in which its subjects live – even though the regime claims to have “liberated” them from oppression by the capitalists of old. Peter attempts to introduce a series of reforms to allow criticism of the government and free elections, but his goal of achieving human liberation fails to take hold so long as the economy remains completely centrally planned. Peter’s nemesis is Stalenin’s second-in-command Bolshekov, who zealously defends the system of command and control while he is the main agent of torture, execution, and mismanagement within it. Peter enlists the assistance of Thomas Jefferson Adams – the third-highest official in Wonworld. Adams is disillusioned with the socialist system and gropes for alternatives but, like Peter, does not have the benefit of the lessons of history – since any works of literature, economics, philosophy, and political theory that disagreed with Marxism-Leninism were purged after Wonworld’s establishment a century earlier. Adams has become cynical by observing decades of attempted “reforms” within Wonworld, which tinkered with specific policies and plans but never challenged the overarching fact of total central planning. Peter, as an outsider with a fresh perspective, is more willing to overhaul the system’s most fundamental features. In the genuine search for greater prosperity and more humane treatment for Wonworld’s population, he begins to dismantle the socialist system piece by piece, at first without even recognizing that this is the effect of his actions.

Much of the novel depicts Peter and Adams groping toward a system of incrementally freer markets and greater individual liberty as they discuss possible reforms and attempt to understand both their direct and secondary, unintended consequences. As a result of their stepwise sequence of liberalizations, Peter and Adams inadvertently rediscover the old system of capitalism that Wonworld sought to stamp out. Adams often acts as a foil to Peter, proposing modified central plans or mixed-economy systems and attempting to posit the arguments made by inflationists and protectionists that emerge as milder obstacles to liberalization once private property, money, and decentralized economic planning by individuals are restored. Peter, however, is sufficiently wise to be able to perceive the secondary consequences of these proposals and to consistently espouse and act in favor of unhampered individual economic liberty.

Peter’s first successful reform is to permit people to exchange ration coupons which they were allocated for various specific commodities. Previously, each citizen of Wonworld received ration coupons that were limited to his personal use, and there was no way to realize any value from coupons for goods that the individual did not wish to personally consume. Initially, the citizens of Wonworld – terrorized for generations – are reluctant to exchange coupons for fear of being tricked into showing disloyalty, but after a few months of encouragement by Peter’s government, exchanges begin to occur:

At first individuals or families merely exchanged ration tickets with other persons or families living in the same room with them. Then in the same house. Then in the same neighborhood or factory. The rates at which the ration tickets exchanged was a matter of special bargaining in each case. They at first revealed no describable pattern whatever. In one tenement or barracks someone would be exchanging, say, one shirt coupon for five bread coupons; next door one shirt coupon might exchange for fifteen bread coupons.

But gradually a distinct pattern began to take form. The man who had exchanged his shirt coupon for five bread coupons would learn that he could have got fifteen bread coupons from someone else; the man who had given up fifteen bread coupons for one shirt coupon would learn that he might have got a shirt coupon for only five bread coupons. So people began to “shop around,” as they called it, each trying to get the highest bid for what he had to offer, each trying to get the greatest number of the coupons he desired for the coupons with which he was willing to part. The result, after a surprisingly short time, was that a uniform rate of exchange prevailed at any given moment between one type of coupon and another. (Hazlitt 1966, 103)

This reform inaugurates a price system, which facilitates rational planning by individuals and the effective allocation of goods to their most highly valued uses. It also leads to the emergence of markets where large volumes of exchanges can take place:

Then another striking thing happened. People had at first shopped around from house to house and street to street, trying to get the best rate in the kind of coupons they valued most for the kind of coupons they valued least. But soon people anxious to trade their coupons took to meeting regularly at certain places where they had previously discovered that they found the most other traders and bidders and could get the best rates in the quickest time. These meeting points, which people took to calling coupon “markets,” tended to become fewer and larger.

Two principal “markets” gradually established themselves in Moscow, one in Engels Square and the other at the foot of Death-to-Trotsky Street. Here large crowds, composed in turn of smaller groups, gathered on the sidewalk and spread into the street. They were made up of shouting and gesticulating persons, each holding up a coupon or sheet of coupons, each asking how much he was bid, say, in beer coupons for his shirt coupon, or offering his shirt coupon for, say, twelve beer coupons, and asking whether he had any takers. (Hazlitt 1966, 103-104)

As markets take hold, professional brokers emerge to handle large numbers of transactions for ordinary people in exchange for a percentage of ration coupons. The brokers quickly become adept at spotting and eliminating discrepancies among exchange rates between any two types of coupons:

Their competitive bids and offers continued until the relationships were ironed out, so that no further profit was possible for anybody as a result of a discrepancy. For the same reason, Peter found, the ratios of exchange in the market at Engels Square were never far out of line for more than a very short period with the ratios of exchange on Death-to-Trotsky Street; for a set of brokers were always running back and forth between the two markets, or sending messengers, and trying to profit from the least discrepancy that arose between the markets in the exchanges or quotations.

A special name—”arbitrage business”—sprang up for this sort of transaction. Its effect was to unify, or to universalize, price relationships among markets between which this freedom of arbitrage existed. (Hazlitt 1966, 105)

By allowing free exchange and permitting private entrepreneurs to take advantage of arbitrage opportunities, Peter enables a solution to emerge for Wonworld’s previously intractable problem of how to make the best use of scarce resources to fulfill as many human needs as possible. Peter recognizes that, even though the adjustments to prices that guide this process of rational resource allocation may appear automatic, they are in fact the effect of the actions of businesspeople seeking to earn a profit:

They took place solely because there was an alert group of people ready to seize upon the slightest discrepancy to make a transaction profitable to themselves. It was precisely the constant alertness and the constant initiative of these specialists that prevented any but the most minute and short-lived discrepancies from occurring. (Hazlitt 1966, 105)

Allowing free exchange of ration tickets leads to the spontaneous emergence of a monetary system as exchange rates begin to be quoted in terms of only a few leading types of coupons and eventually only in terms of cigarette coupons. These are superseded by packages of cigarettes themselves, which are in turn eventually replaced by gold.

The power struggle between Peter and Bolshekov escalates until Bolshekov engineers Stalenin’s assassination and seizes power in Wonworld. Peter and Adams flee to North America, assisted by their loyal Air Force, and establish their own country – Freeworld – where Peter’s economic reforms continue. Private ownership of land and capital goods is introduced, and large factories are privatized through the issuance of transferable shares to their workers, entitling them to receive a percentage of the profits from the enterprise. This greatly raises the incentives for production, responsibility, and prudent management of resources, as the newly empowered citizens inform Peter:

When he asked one of these new peasant-proprietors about his changed attitude, his explanation was simple: “The more work I and my family put into the farm, the better off we are. Our work is no longer offset by the laziness and carelessness of others. On the other hand, we can no longer sit back and hope that others will make up for what we fail to do. Everything depends on ourselves.”

Another farmer-owner put it this way: “The greater the crop we raise this year, the better off my family will be. But we also have to think of next year and the year after that, so we can’t take any risk of exhausting the soil. Every improvement I put into the farm, whether into the soil or into the buildings, is mine; I reap the fruits of it. But there is something that to me is more important still. I am building this for my family; I am increasing the security of my family; I will have something fine to turn over to my children after I am gone. I don’t know how I can explain it to you, Your Highness, but since my family has owned this land for itself, and feels secure in its right and title to stay here undisturbed, we feel not only that the farm belongs to us but that we belong to the farm. It is a part of us, and we are a part of it. It works for us, and we work for it. It produces for us, and we produce for it. You may think it is just a thing, but it seems as alive as any of us, and we love it and care for it as if it were a part of ourselves.” (Hazlitt 1966, 131)

The ability of individuals to own and run their business and earn a profit turns Freeworld into an economic powerhouse. Whereas Wonworld had, for a century, remained at the level of technological advancement approximately resembling that of 1918-1938, Freeworld becomes a haven for invention, the benefits of which disseminate rapidly to the population. Freeworld’s development appears to rapidly catch up to the condition of Hazlitt’s 1950s and 1960s America:

Constant and bewildering improvements were being made in household conveniences, in fluorescent lighting, in radiant heating, in air-conditioning, in vacuum cleaners, in clothes-washing machines, in dishwashing machines, in a thousand new structural and decorative materials. Great forward leaps were now taken in radio. There was talk of the development, in the laboratories, of the wireless transmission, not merely of music and voices, but of the living and moving image of objects and people.

Hundreds of new improvements, individually sometimes slight but cumulatively enormous, were being made in all sorts of transportation—in automobiles and railroads, in ships and airplanes. Inventors even talked of a new device to be called “jet-propulsion,” which would not only eliminate propellers but bring speeds rivaling that of sound itself.

In medicine, marvelous new anesthetics and new lifesaving drugs were constantly being discovered …

“In our new economic system, Adams,” said Peter, “we seem to have developed hundreds of thousands of individual centers of initiative which spontaneously co-operate with each other. We have made more material progress in the last four years, more industrial and scientific progress, than Wonworld made in a century.” (Hazlitt 1966, 153)

Instead of dreading work and needing to be terrorized into toil, the people begin to welcome and yearn for productive innovation:

Peter was struck by the startling change that had come over the whole spirit of the people. They worked with an energy and zeal infinitely greater than anything they had shown before. Peter now found people everywhere who regarded their work as a pleasure, a hobby, an exciting adventure. They were constantly thinking of improvements, devising new gadgets, dreaming of new processes that would cut costs of production, or new inventions and new products that consumers might want. (Hazlitt 1966, 139)

Peter explains to Adams that this “is precisely what economic liberty does. It releases human energy” (Hazlitt 1966, 139). Whereas, previously, only the Central Planning Board could decide how to direct resources,

Now everybody can plan. Now everybody is a center of planning. The worker can plan to shift to another employer or another line of production where the rewards are higher. He can plan to train himself in a new skill that pays better. And anybody who can save or borrow capital, or who can get the co-operation of other workers or offer them more attractive terms of employment than before, can start a new enterprise, make a new product, fill a new need. And this puts a quality of adventure and excitement into most people’s lives that was never there before. In Wonworld, in effect, only the Dictator himself could originate or initiate: everybody else simply carried out his orders. But in Freeworld anybody can originate or initiate. And because he can, he does. (Hazlitt 1966, 139)

Hazlitt frequently emphasizes the connection between the economic empowerment that freedom in business offers and the resulting surge in the quality of life and daily experience – a sense of responsibility, opportunity, self-direction, and the ability to chart one’s own future that permeates an economy where individuals are their own economic masters. While under central planning, no progress occurs unless initiated by the exceptionally rare enlightened rulers at the top, in a free market every businessman and worker can be an agent of human progress. Peter observes that a free-market system is meritocratic and tends to reward contributions to human well-being: “Everyone tends to be rewarded by the consumers to the extent that he has contributed to the needs of the consumers. In other words, free competition tends to give to labor what labor creates, to the owners of money and capital goods what their capital creates, and to enterprisers what their co-ordinating function creates” (Hazlitt 1966, 139). Adams responds that, to the extent a free-market system is able to achieve this, “no group would have the right to complain. You would have achieved an economic paradise” (Hazlitt 1966, 139). In a later discussion, Peter notes that the profits realized by businesspeople in a free-market system cannot be maintained on the whole except in a growing economy where consumers are increasingly better off; a free-market system cannot be called a profit system “in a declining or even in a stationary economy. It is, of course, a profit-seeking system” (Hazlitt 1966, 150), but the search for profit in a free economy will only succeed if human needs are fulfilled by the entrepreneur in the process.

Cultural and esthetic progress, too, are facilitated by the actions of Freeworld’s entrepreneurs. Hazlitt points out that “it was not merely in material progress that Freeworld achieved such amazing triumphs. No less striking were the new dignity and breadth that individual freedom brought about in the whole cultural and spiritual life of the Western Hemisphere” (Hazlitt 1966, 155). By contrast with Wonworld’s regime-monopolized “art” designed to praise the ruling ideology, the outpouring of creativity and variety in Freeworld “showed itself in novels and plays, in criticism and poetry, in painting, sculpture and architecture, in political and economic thinking, in most sciences, in philosophy and religion” (Hazlitt 1966, 155). Even though freedom in artistic production results in catering “to the presumed tastes of a mass public; and the bulk of what was produced was vulgar and cheap” (Hazlitt 1966, 155), there also emerges the opportunity for some artists to pursue lasting greatness:

What counted, as Peter quickly saw, was that each writer and each artist was now liberated from abject subservience to the state, to the political ruling clique. He was now free to select his own public. He did not need to cater to a nebulous “mass demand.” He could, if he wished, write, build, think, compose or paint for a definite cultivated group, or for his fellow specialists, or for a few kindred spirits wherever they could be found. And plays did have a way of finding their own special audience, and periodicals and books of finding their own special readers.

In contrast with the drabness, monotony and dreariness of Wonworld, the cultural and spiritual life of Freeworld was full of infinite variety, flavor, and adventure. (Hazlitt 1966, 155)

The intellectual honesty of Peter Uldanov enables him to transform the role of inadvertent world dictator to that of guardian of individual freedom. Freeworld overcomes Bolshekov’s Wonworld in a largely bloodless military campaign, due to Freeworld’s overwhelming superiority in production and the eagerness of Wonworld’s citizens to throw off Bolshekov’s totalitarian rule. At the novel’s end, Peter decides to hold free elections and subject his own position to the people’s approval. Running against the mixed-economy “Third Way” advocate Wang Ching-li, Peter narrowly wins the election and becomes the first President of Freeworld, even though his preference would be to devote his time to playing Mozart. Peter has the wisdom to unleash the productive forces of free enterprise and then to step aside, except in maintaining a system that punishes aggression, protects private property, and provides a reliable rule of law. The ending of Time Will Run Back is a happy one, but it is made possible by one key tremendously fortunate and unlikely circumstance – the ability of a fundamentally decent person to find himself in a position of vast political power, whose use he deliberately restrains and channels toward liberalization instead of perpetuating the abuses of the old system. Peter is, in effect, a “philosopher-king” who reasons his way toward free-market capitalism, unleashing private business to bring about massive human progress. Without such an individual, Wonworld could have lingered in misery, stagnation, and even decline for centuries. In our world, however, where the vestiges of free enterprise and the history of economic thought are much stronger, we do not need to rediscover sound economic principles from whole cloth, so perhaps existing societies could eventually muddle through toward freer economies, even though no philosopher-kings are to be found. Hazlitt gave us Peter Uldanov’s story to enable us to understand which reforms and institutions can improve the human condition, and which can only degrade it.

Reference

Hazlitt, Henry. [1966.] 2007. Time Will Run Back. New York: Arlington House. Ludwig von Mises Institute. Available at http://library.freecapitalists.org/books/Henry%20Hazlitt/Time%20Will%20Run%20Back.pdf. Accessed December 13, 2014.

Transhuman Libertarianism – Article by Kyrel Zantonavitch

Transhuman Libertarianism – Article by Kyrel Zantonavitch

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Editor’s Note and Announcement: The Rational Argumentator is hosting a series of articles on the relationship between libertarianism and transhumanism and the question of whether, and – if so – in what manner and to what extent, advocates of indefinite life extension should ever pursue government funding or programs with the aim of lengthening human lifespans.

This article below presents a perspective from Kyrel Zantonavitch, who strongly argues against government support for life-extension research and instead sees solely private research as being the most capable of achieving indefinite lifespans in our lifetimes.

Mr. Stolyarov’s own views are detailed in his articles “Six Libertarian Reforms to Accelerate Life Extension” and “Liberty Through Long Life” and “Liberty or Death: Why Libertarians Should Proclaim That Death is Wrong“.

The Rational Argumentator invites all advocates of indefinite life extension to share their views regarding these questions, and many perspectives will be considered and published – so long as the authors genuinely support the goal of lengthening human lifespans through science and technology. All articles submitted in response to this request will be linked alongside one another once a critical mass has accumulated, so that readers would be able to analyze the viewpoints presented and formulate their own conclusions.

~ G. Stolyarov II, Editor-in-Chief, The Rational Argumentator, December 4, 2014

The New Renaissance Hat
Kyrel Zantonavitch
December 4, 2014
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All transhumanists are libertarians. They are all believers in, and future practitioners of, laissez-faire capitalism. They’re advocates of 100% liberty in politics, economics, and sociology. Transhumanists never initiate force against their fellow man; they never aggress upon or attack them. Transhumanists think people and property are sacred and untouchable. All transhumanists are political and socio-economic freedom-fighters and libertarians to the point of infinity.

Or at least they should be.

Because nothing advances human biological/physical development, and intellectual/spiritual ascent, faster than political and socio-economic freedom. Nothing improves quality and quantity of life more deftly or more powerfully. For immortality to have even a remote chance of being achievable within the next generation or two, government-protected justice and liberty must be pure and limitless.

Nothing generates more opportunity for general and particular success and triumph than freedom. Nothing germinates more innovation and genius — more radical and revolutionary brilliance. And make no mistake: immortality within the next 20-40 years will require a lot of innovation and genius.

For this and reasons of fundamental morality, massive government subsidies of science and medicine, via the evil and tyrannical welfare state, are emphatically not the way to go. It would be like suddenly, militarily seizing the powers of world government, and then trying to physically coerce almost everyone on Earth into studying technology and healthcare. Whips and guns (and chains and cattle-prods) are not the path to longevity. As the philosopher Ayn Rand noted: “You cannot force a mind.”

Firstly, such government funding is a type of slavery. Coercive taxation, especially for non-freedom purposes, is evil at its foundation. And no good thing can ever flower from such bad roots. The ends never justify the means. Tyranny and depravity are never practical or workable.

Those who are talented and slick at obtaining government grants, and those who willingly, passively submit to government edicts, are virtually never good scientists or doctors. Meanwhile, the good and great scientists and doctors — mankind’s innovators, creators, geniuses, saints, and heroes — will be hugely misled. With minimalist political knowledge, they’ll massively tend to follow the money and prestige trail; these brainiacs will massively tend to go work for the Big Brother bozos and frauds. At the least, the Good Guys will solidly incline toward reading the Dumb Guys’ (mountains of worthless) papers, and following them and their organizations intellectually. Thus the only real hopes of mankind will overwhelmingly tend to be side-tracked down a dead end.

The purpose of government is to protect individual rights — not expand the human life span. The state has no ability whatsoever to accomplish the later. It can only get in the way. It can only hurt the cause. Anyone who hijacks the government for longevity purposes is sure to massively damage both liberty and transhumanism.

However ironic, the more state funds are spent on transhumanism, and the more people are forced by government to engage in transhumanist research, the slower progress will be. It’ll be a repeat of the U.S. government’s buffoonish 1970s’ “war on cancer.” We’ll go backward. The effort will be counter-productive. It’ll be like throwing money down a bottomless rat hole — only worse.

The reality of today’s welfare state world is that if we finally get around to terminating all government funding of education, science, and technology, then these three fields will have to turn to private industry and free enterprise. This, in turn, will cause human knowledge in general, and transhumanism in particular, to rise like a rocket.

If, say, a very plausible 10% of the world’s G.D.P. is voluntarily dedicated to transhumanist education, investigation, and experimentation via capitalism, this will generate far more progress than if a wildly unlikely 75% of the world’s G.D.P. is coercively dedicated to transhumanist research via welfare statism.

The paramount and stunning reality is one social system will create new versions of Leonardo da Vinci, Thomas Edison, and Steve Jobs. The other will create new, mindless bureaucrats and lifeless, soulless, hack, quack, bozo drones.

And pray note that the above discussion isn’t trivial or merely theoretical; nor is it some ideologue’s and freak’s dubious mere political opinion. It’s the way reality is. It’s the way government and science really interact and work. Misunderstand this, transhumanists, and we’re all gonna die.

Kyrel Zantonavitch is the founder of The Liberal Institute  (http://www.liberalinstitute.com/) and a writer for Rebirth of Reason (http://www.rebirthofreason.com). He can be contacted at zantonavitch@gmail.com.
Ludd vs. Schumpeter: Fear of Robot Labor is Fear of the Free Market – Article by Wendy McElroy

Ludd vs. Schumpeter: Fear of Robot Labor is Fear of the Free Market – Article by Wendy McElroy

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The New Renaissance Hat
Wendy McElroy
September 18, 2014
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“Report Suggests Nearly Half of U.S. Jobs Are Vulnerable to Computerization,” screams a headline. The cry of “robots are coming to take our jobs!” is ringing across North America. But the concern reveals nothing so much as a fear—and misunderstanding—of the free market.

In the short term, robotics will cause some job dislocation; in the long term, labor patterns will simply shift. The use of robotics to increase productivity while decreasing costs works basically the same way as past technological advances, like the production line, have worked. Those advances improved the quality of life of billions of people and created new forms of employment that were unimaginable at the time.

Given that reality, the cry that should be heard is, “Beware of monopolies controlling technology through restrictive patents or other government-granted privilege.”

The robots are coming!

Actually, they are here already. Technological advance is an inherent aspect of a free market in which innovators seeks to produce more value at a lower cost. Entrepreneurs want a market edge. Computerization, industrial control systems, and robotics have become an integral part of that quest. Many manual jobs, such as factory-line assembly, have been phased out and replaced by others, such jobs related to technology, the Internet, and games. For a number of reasons, however, robots are poised to become villains of unemployment. Two reasons come to mind:

1. Robots are now highly developed and less expensive. Such traits make them an increasingly popular option. The Banque de Luxembourg News offered a snapshot:

The currently-estimated average unit cost of around $50,000 should certainly decrease further with the arrival of “low-cost” robots on the market. This is particularly the case for “Baxter,” the humanoid robot with evolving artificial intelligence from the US company Rethink Robotics, or “Universal 5” from the Danish company Universal Robots, priced at just $22,000 and $34,000 respectively.

Better, faster, and cheaper are the bases of increased productivity.

2. Robots will be interacting more directly with the general public. The fast-food industry is a good example. People may be accustomed to ATMs, but a robotic kiosk that asks, “Do you want fries with that?” will occasion widespread public comment, albeit temporarily.

Comment from displaced fast-food restaurant workers may not be so transient. NBC News recently described a strike by workers in an estimated 150 cities. The workers’ main demand was a $15 minimum wage, but they also called for better working conditions. The protesters, ironically, are speeding up their own unemployment by making themselves expensive and difficult to manage.

Labor costs

Compared to humans, robots are cheaper to employ—partly for natural reasons and partly because of government intervention.

Among the natural costs are training, safety needs, overtime, and personnel problems such as hiring, firing and on-the-job theft. Now, according to Singularity Hub, robots can also be more productive in certain roles. They  “can make a burger in 10 seconds (360/hr). Fast yes, but also superior quality. Because the restaurant is free to spend its savings on better ingredients, it can make gourmet burgers at fast food prices.”

Government-imposed costs include minimum-wage laws and mandated benefits, as well as discrimination, liability, and other employment lawsuits. The employment advisory Workforce explained, “Defending a case through discovery and a ruling on a motion for summary judgment can cost an employer between $75,000 and $125,000. If an employer loses summary judgment—which, much more often than not, is the case—the employer can expect to spend a total of $175,000 to $250,000 to take a case to a jury verdict at trial.”

At some point, human labor will make sense only to restaurants that wish to preserve the “personal touch” or to fill a niche.

The underlying message of robotechnophobia

The tech site Motherboard aptly commented, “The coming age of robot workers chiefly reflects a tension that’s been around since the first common lands were enclosed by landowners who declared them private property: that between labour and the owners of capital. The future of labour in the robot age has everything to do with capitalism.”

Ironically, Motherboard points to one critic of capitalism who defended technological advances in production: none other than Karl Marx. He called machines “fixed capital.” The defense occurs in a segment called “The Fragment on Machines”  in the unfinished but published manuscript Grundrisse der Kritik der Politischen Ökonomie (Outlines of the Critique of Political Economy).

Marx believed the “variable capital” (workers) dislocated by machines would be freed from the exploitation of their “surplus labor,” the difference between their wages and the selling price of a product, which the capitalist pockets as profit. Machines would benefit “emancipated labour” because capitalists would “employ people upon something not directly and immediately productive, e.g. in the erection of machinery.” The relationship change would revolutionize society and hasten the end of capitalism itself.

Never mind that the idea of “surplus labor” is intellectually bankrupt, technology ended up strengthening capitalism. But Marx was right about one thing: Many workers have been emancipated from soul-deadening, repetitive labor. Many who feared technology did so because they viewed society as static. The free market is the opposite. It is a dynamic, quick-response ecosystem of value. Internet pioneer Vint Cerf argues, “Historically, technology has created more jobs than it destroys and there is no reason to think otherwise in this case.”

Forbes pointed out that U.S. unemployment rates have changed little over the past 120 years (1890 to 2014) despite massive advances in workplace technology:

There have been three major spikes in unemployment, all caused by financiers, not by engineers: the railroad and bank failures of the Panic of 1893, the bank failures of the Great Depression, and finally the Great Recession of our era, also stemming from bank failures. And each time, once the bankers and policymakers got their houses in order, businesses, engineers, and entrepreneurs restored growth and employment.

The drive to make society static is powerful obstacle to that restored employment. How does society become static? A key word in the answer is “monopoly.” But we should not equivocate on two forms of monopoly.

A monopoly established by aggressive innovation and excellence will dominate only as long as it produces better or less expensive goods than others can. Monopolies created by crony capitalism are entrenched expressions of privilege that serve elite interests. Crony capitalism is the economic arrangement by which business success depends upon having a close relationship with government, including legal privileges.

Restrictive patents are a basic building block of crony capitalism because they grant a business the “right” to exclude competition. Many libertarians deny the legitimacy of any patents. The nineteenth century classical liberal Eugen von Böhm-Bawerk rejected patents on classically Austrian grounds. He called them “legally compulsive relationships of patronage which are based on a vendor’s exclusive right of sale”: in short, a government-granted privilege that violated every man’s right to compete freely. Modern critics of patents include the Austrian economist Murray Rothbard and intellectual property attorney Stephan Kinsella.

Pharmaceuticals and technology are particularly patent-hungry. The extent of the hunger can be gauged by how much money companies spend to protect their intellectual property rights. In 2011, Apple and Google reportedly spent more on patent lawsuits and purchases than on research and development. A New York Times article addressed the costs imposed on tech companies by “patent trolls”—people who do not produce or supply services based on patents they own but use them only to collect licensing fees and legal settlements. “Litigation costs in the United States related to patent assertion entities [trolls],” the article claimed, “totaled nearly $30 billion in 2011, more than four times the costs in 2005.” These costs and associated ones, like patent infringement insurance, harm a society’s productivity by creating stasis and  preventing competition.

Dean Baker, co-director of the progressive Center for Economic Policy Research, described the difference between robots produced on the marketplace and robots produced by monopoly. Private producers “won’t directly get rich” because “robots will presumably be relatively cheap to make. After all, we can have robots make them. If the owners of robots get really rich it will be because the government has given them patent monopolies so that they can collect lots of money from anyone who wants to buy or build a robot.”  The monopoly “tax” will be passed on to impoverish both consumers and employees.

Conclusion

Ultimately, we should return again to the wisdom of Joseph Schumpeter, who reminds us that technological progress, while it can change the patterns of production, tends to free up resources for new uses, making life better over the long term. In other words, the displacement of workers by robots is just creative destruction in action. Just as the car starter replaced the buggy whip, the robot might replace the burger-flipper. Perhaps the burger-flipper will migrate to a new profession, such as caring for an elderly person or cleaning homes for busy professionals. But there are always new ways to create value.

An increased use of robots will cause labor dislocation, which will be painful for many workers in the near term. But if market forces are allowed to function, the dislocation will be temporary. And if history is a guide, the replacement jobs will require skills that better express what it means to be human: communication, problem-solving, creation, and caregiving.

Wendy McElroy (wendy@wendymcelroy.com) is an author, editor of ifeminists.com, and Research Fellow at The Independent Institute (independent.org).

This article was originally published by The Foundation for Economic Education.

Confusing Capitalism with Fractional-Reserve Banking – Article by Frank Hollenbeck

Confusing Capitalism with Fractional-Reserve Banking – Article by Frank Hollenbeck

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The New Renaissance Hat
Frank Hollenbeck
August 10, 2014
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Today, capitalism is blamed for our current disastrous economic and financial situation and a history of incessant booms and busts. Support for capitalism is eroding worldwide. In a recent global poll, 25 percent (up 2 percent from 2009) of respondents viewed free enterprise as “fatally flawed and needs to be replaced.” The number of Spaniards who hold this view increased from 29 percent in 2009 to 42 percent, the highest amongst those polled. In Indonesia, the percentage went from 17 percent to 32 percent.

Most, if not all, booms and busts originate with excess credit creation from the financial sector. These respondents, incorrectly, assume that this financial system structured on fractural reserve banking is an integral part of capitalism. It isn’t. It is fraud and a violation of property rights, and should be treated as such.

In the past, we had deposit banks and loan banks. If you put your money in a deposit bank, the money was there to pay your rent and food expenses. It was safe. Loan banking was risky. You provided money to a loan bank knowing funds would be tied up for a period of time and that you were taking a risk of never seeing this money again. For this, you received interest to compensate for the risk taken and the value of time preference. Back then, bankers who took a deposit and turned it into a loan took the risk of shortly hanging from the town’s large oak tree.

During the early part of the nineteenth century, the deposit function and loan function were merged into a new entity called a commercial bank. Of course, very quickly these new commercial banks realized they could dip into deposits, essentially committing fraud, as a source of funding for loans. Governments soon realized that such fraudulent activity was a great way to finance government expenditures, and passed laws making this fraud legal. A key interpretation of law in the United Kingdom, Foley v. Hill, set precedence in the financial world for banking laws to follow:

Foley v. Hill and Others, 1848:

Money, when paid into a bank, ceases altogether to be the money of the principal; it is then the money of the banker, who is bound to an equivalent by paying a similar sum to that deposited with him when he is asked for it. … The money placed in the custody of a banker is, to all intents and purposes, the money of the banker, to do with it as he pleases; he is guilty of no breach of trust in employing it; he is not answerable to the principal if he puts it into jeopardy, if he engages in a hazardous speculation; he is not bound to keep it or deal with it as the property of his principal; but he is, of course, answerable for the amount, because he has contracted, having received that money, to repay to the principal, when demanded, a sum equivalent to that paid into his hands. [1]

In other words, when you put your money in a bank it is no longer your money. The bank can do anything it wants with it. It can go to the casino and play roulette. It is not fraud legally, and the only requirement for the bank is to run a Ponzi scheme, giving you the money deposited by someone else if they lost your money and you happen to come back asking for your money. This legalization of fraud is essentially one of the main reasons no one went to jail after the debacle of 2008.

The primary cause of the financial panics during the nineteenth century was this fraudulent nature of fractional reserve banking. It allowed banks to create excessive credit growth which led to boom and bust cycles. If credit, instead, grew as fast as slow moving savings, booms and bust cycles would be a thing of the past.

Critics of the gold standard, (namely, Krugman, et al.), usually point to these cycles as proof that it failed as a monetary system. They are confusing causation with association. The gold standard did not cause these financial panics. The real cause was fractional reserve banking that was grafted onto the gold standard. The gold standard, on the contrary, actually greatly limited the severity of these crises, by limiting the size of the money multiplier.

This is why in the early days of banking in the US, some wildcat bankers would establish themselves in the most inaccessible locations. This was to ensure that few would actually come and convert claims for gold into actual gold since banks had created claims that far exceeded the actual gold in their vaults. And, if by chance a depositor tried to convert his claims into gold, they would be treated as thieves, as though they were stealing the bank’s property by asking for their gold back.

The Federal Reserve System was created following the panics of 1903 and 1907 to counterbalance the negative impact of fractional reserve banking. One hundred years after its creation, the Fed can only be given a failing grade. Money is no longer a store of value, and the world has experienced two of its worst financial crises. Instead of a counterbalance, the central bank has fed and expanded the size of the beast. This was to be expected.

That global poll on capitalism also found that almost half (48 percent) of respondents felt that the problems of capitalism could be resolved with added regulations and reform. Janet Yellen also holds this view, and that regulation, not interest rates, should be the main tool to avoid another costly boom and bust in global finance. This is extremely naïve. We already have more compliance officers in banks than loan officers. Recent banking legislation, Dodd-Frank, and the Vickers and Liikanen reports will probably make the situation even worse. Banks will always be able to use new technologies and new financial instruments to stay one step ahead of the regulators. We continue to put bandages on a system that is rotten to the core. Banking in its current form is not capitalism. It is fraud and crony capitalism, kept afloat by ever-more desperate government interventions. It should be dismantled. Under a system of 100 percent reserves, loan banks (100 percent equity-financed investment trusts) would be like any other business and would not need any more regulation than that of the makers of potato chips.

Notes

[1] Quoted in Murray Rothbard’s, The Mystery of Banking (Auburn, AL: Mises Institute, 2008), p. 92.

Frank Hollenbeck teaches finance and economics at the International University of Geneva. He has previously held positions as a Senior Economist at the State Department, Chief Economist at Caterpillar Overseas, and as an Associate Director of a Swiss private bank. See Frank Hollenbeck’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.