Sunday, December 21, 2008

Global Crises

Many other countries around the world have been in the news with ways to help there own economic aid plans. We mostly hear just about own auot makers and banks with their downward spiral. But this hit to auto industry is world wide.

Japan is pumping 10 trillion yen into their economy, Canada is spending another 3 billion, Germany is putting out some of their own money, and Belgium's government has completely collapsed. It is interesting that the only things I ever hear about the economy are from our own backyard. I had never heard about any of these foreign plans until I started doing a little research.

Record low for interest rates

Interest rates were cut again just again just a couple days ago. This 0% interest rate seems to be a desperate move. This means that if the economic situation gets any worse, there is little that Bernanke could do to help remedy the case.

This last ditch effort is aimed to be a jab at the banks and their prime lending rates. Right now the rates are around 4%, so lowering their rates even lower may indeed help stimulate a bit of the economy or at least stop more big companies from failing. But if this does not work, then things could be ad or worse for a long time.

Another bailout

I suppose several of the other recent blogs on this site have touched on the topic of the new auto industry bailout. But I believe that this topic is something that is very important. This topic seems to be one of those topics that everyone has their own opinion about, but I think this second bailout has its own importance. These two big auto makers are an integral part of the US economy. Their downfall would be a huge moral blow to our stock market.

Although I opposed the idea of another bailout, I think it was needed in this particular instance. I hope that a second bailout does not lead to more government aid. But maybe if more bailouts keep coming, I ought to start a business and run it into the ground, and let the government hand over some money to help me with my bad investment.

Saturday, December 20, 2008

Thomas Jefferson Quotes

I was recently sent these quotes in an e-mail. Jefferson seemed to have a really good understanding of government. Many of the things in the struggle for freedom that Jefferson alluded to have become reality in America.

Jefferson in some cases could be called a prophet:

When we get piled upon one another in large cities, as in Europe, we shall become as corrupt as Europe .

The democracy will cease to exist when you take away from those who are willing to work and give to those who would not.

It is incumbent on every generation to pay its own debts as it goes. A principle which if acted on would save one-half the wars of the world.

I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.

My reading of history convinces me that most bad government results from too much government.

No free man shall ever be debarred the use of arms.

The strongest reason for the people to retain the right to keep and bear arms is, as a last resort, to protect themselves against tyranny in government.

The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants.

To compel a man to subsidize with his taxes the propagation of ideas which he disbelieves and abhors is sinful and tyrannical.

This is a very interesting quote in light of the current financial situation. Thomas Jefferson said this in 1802 :
'I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake-up homeless on the continent their fathers conquered.

Thursday, December 18, 2008


So when I typed in that title it reminded me about the scene in Braveheart where William Wallace leads the charge and yells FREEDOM!!! He was leading the charge against England, fighting for independence in Scotland.

When we in America think of freedom we often think of our Founding Fathers leading the charge against England for independence. This is a good thing because I think many of the people who founded our country had a pretty good understanding of freedom. However, I find too many people in America who look favorably at the freedom our founding fathers established for us yet think we have that same kind of freedom today. Too many people don't take the time to actually think about true freedom. I see some Americans that use the word freedom the way our government tends to use this word. I find that in some contexts this word is used synonymously with security. This is very dangerous. Because many Americans do not have a concept of freedom they give up their freedoms very readily for protection.

Freedom at it's core is not security but liberty. Security to an extent can create an environment that fosters liberty but in some cases these two concepts can be directly opposed to one another. My concept of liberty comes from the Declaration of Independence and men like John Locke, Thomas Jefferson, Ben Franklin, James Madison, F. A. Hayek. I believe that Noah Webster also defines liberty well in his dictionary. Noah Webster wrote the first American dictionary and has been called the “Father of American Scholarship and Education”. To read his definition you can go to this link:,liberty.

So what do I mean when I say that Americans use the word freedom the way our government tends to use the word? I see people in the U.S. federal government who have justified actions in the name of freedom when more accurately the actions were supposedly done for security reasons. . For instance lets talk about Iraq. First we had intelligence of WMDs in Iraq so that was the justification which was presented for invading. Then when our military invaded and supposedly didn't find these WMDs the justification for the Iraq war was that our military was fighting over there for the freedom of Iraqi citizens and so that we could have another ally for freedom and the "War on Terror". Now I don't know why it was hard to find WMDs or why it wasn't reported if they were found. Saddam Hussein had used some WMDs killing Kurds in a genocide.

Ultimately I don't know what actually went down in Iraq. I tend not to believe most of the things I hear in politics. But here are a couple of interesting questions that need to be addressed and I will end with these. My hope is that Americans will wake up a realize what true freedom is.
If we have the justification to invade Iraq to give Iraqis freedom why are we not intervening in the genocides in Darfur and giving them freedom? Is there something that Iraq has that Darfur does not (i.e. resources)? How can a country spread freedom when freedoms are lost in the country every day? Hopefully these are some good questions to ponder.

Wednesday, December 17, 2008

OPEC Spoke and Nobody Cared

So, yesterday I filled up my tank for $1.39 a gallon. It was a delicious experience to say the least. Filling a tank for under $20... Oh yes, I was going somewhere with this.

OPEC just recently announced that they will be cutting production by 2.2 million barrels per day, a 3% decrease in total oil production (Wall Street Journal). This is an attempt to buffer the price of oil and keep it from falling any further as demand slides with the recession. However, oil traders are unimpressed with this announcement as oil continues to drop in price. This is because this is the third production cut that OPEC has announced since September, which makes the total barrels per day cut somewhere around 4.4 million. These cuts haven't seemed to actually have happened though, further dragging OPEC's reputation through the mud.

This shows a great intangible benefit of Corporations that should never be underestimated, reputation. When a company has a good reputation, people pay attention when they make statements and are more likely to take them as fact. Take Office Depot, for example. Office Depot has been leading the charge for big business to become environmentally friendly. When they posted that they managed a 10.1% absolute reduction to carbon emissions while increasing their square footage by 17000 in a year no one cried foul or scoffed disbelievingly at the study. This can be attributed to the fact that Office Depot has made sure to back up their claims by providing proof of their endeavors. This increases their credibility, making it easier for people to accept things they say.

Now take a look at OPEC, who has nations that greedily safeguard the numbers of their earnings and production levels from even the other nations. With such secrecy it becomes difficult for consumers to take what the corporation says seriously. With their reputation in shambles, any announcement OPEC makes will most likely be met with scoffs and inaction until the consumer actually sees some change in the production levels themselves. As such, even with impressive market share, oil will continue to slide in price until at least Jan. 1, the day that the production cut is supposed to begin.

Friday, December 12, 2008

Capitalism and Distrust

Right now, I am reading a book called The Unthinkable: Who Survives When Disaster Strikes - and Why, which is a really interesting book written by Time reporter Amanda Ripley on (surprise!) what kind of person survives a disaster and why he or she does. In chapter 2, Risk: Gambling in New Orleans, the author makes the point that sometimes disasters turn out worse than they have to because those in danger don't trust the government. She says that our current system of political economy engenders suspicion.

I agree with her that it does, but then we diverge as to why. On page 46, she writes, "A capitalist society with a free press has many things to recommend it. But it is not a place where citizens have overwhelming confidence in authority figures." This is a case of mistaken identity: it is not because of the capitalist elements of our government that we distrust the powers-that-be. Rather, it is in spite of capitalism that citizens are wary.

Today, corrupt politicians receive the most rewards. They are able to steal the most money because they don't control themselves and no one else is apparently going to. I frankly haven't seen how having a free press has kept corrupt politicians from being elected and then reelected.

In a truly capitalist society, if there was any regulation at all, it would be to protect property rights, and no one would be able to use force for anything else. As Hayek once wrote, "It is not who governs but what government is allowed to do that seems to me the essential problem." No matter who is in charge, if they have more power, they are more likely to abuse it, and thus the populous becomes more distrustful. People mistrust the government today not because of capitalism, where people are free, but because we live in a society where those who govern take advantage of their power - and we know it.

Thursday, December 04, 2008

Mars or Bust!

In recent years, space travel has become almost ignorable. I don't know about you, but the last thing I remember hearing about was in September, when China sent three men to perform a spacewalk, and the news was mostly important due to people's worries about national supremacy. Most space missions have become blase, obscure science things that most people don't even notice. To be perfectly honest, I mostly don't care about those myself.

For me, the really thrilling part of space travel is that it might soon be available to normal people, not just goevernment appointees. Earlier this year, Virgin Galactic, the world's first spaceline, introduced the WhiteKnightTwo (originally named SpaceCraftTwo). Tickets cost $200,000 apiece, but more than 30,000 people have already purchased spots, and the first group will hopefully begin hurtling into space in 2010. This is exciting not only for being space tourism, but because of what it could mean for the future. If there is profit to be made developing private spacecraft, who knows how swiftly it could become possible to travel to or even settle on space stations or a terraformed Mars.

Many discussions of libertarianism end with someone saying, "Yeah, that would be awesome, but it's impossible to actually do that." Well, if space is the new frontier, as North America was in the past, it may be possible to actually achieve a libertarian society. The vastness of space would allow people to begin new governments, perhaps in a similar fashion to how the United States was formed, that could attempt to form a more lasting libertarian society. This idea has been speculated about in science fiction for decades, so I don't really want to go there, but it is exhilarating that we may get the chance to experiment for ourselves in the relatively near future.

Update: The first private space-port is now starting construction!

Tuesday, December 02, 2008

Even lower interest rates?

Ben Bernanke the Federal Reserve Chairman has stated that lower interest rates are "certainly feasible." The current interest rate for the Fed is 1, which has only been so low once in the past 50 years. But there's an obvious limit to how low the rate can go, 0...which it is coming closer and closer to. This could help the economy bounce back, but would unlikely be able to do it alone and would need help. Bernanke said there are other ways to help stimulate the economy and help it to recover such as buying "longer-term Treasury or agency securities on the open market in substantial quantities, he said. This might lower rates on these securities, 'thus helping to spur aggregate demand,' Bernanke said". The Fed also announced 2 plans about a week or two ago stating that it would increase the availability and lower the costs of credit card , auto, student and home loans. The Fed also said it would spend over $700 billion purchasing securities and mortgages. I've always wondered where it planned on getting all this money needed to bailout all of the businesses and people. Either way it looks like the economy will be weak well into next year.

Sunday, November 30, 2008

Cars Cars Cars!!!

What’s wrong with the auto market today? A quote from a CNN.COM news article Detroit's auto bubble pain sums it up. “Cheap financing, easy credit conditions and attractive pricing on cars due to overcapacity in the U.S. auto market caused record sales earlier this decade.” American markets, time and time again find themselves issuing out loans and financing plans to individuals who other wise can not afford high ticket items. This is all good in the short run as a finical boost for a company, but in the long run, when people can longer afford the items the currently have, and have no way of purchasing new ones, these very industries who seemingly have the best interest of the consumer and the padding of there own packets in mind, are left hurting in the end. The American government has decided to step in and help save the failing markets, I think that this is not the responsibility of our government. Markets fail, and they come back better then before because they learn from there mistakes. Stepping in the handing out free money cause someone in accounting and marketing made a mistake is not the answer.

Localized Economics in San Francisco

Not a very catchy title, is it?  Sorry about that.  I spent some time in San Francisco recently visiting an old friend and laying the groundwork for potential jobs.  There were plenty of things about the city that interested me, but one of the most intriguing was the pervasive notion that San Francisco should be a sustainable city unto itself, and not just in an agricultural or industrial sense. 

The term coined in the article linked to this entry is "locavore," but the author moves the argument into the economic realm, contending that to weather the national (probably global) economic storm, SF ought to take measures to keep economic livelihood within the greater city itself.  In and of itself, I think this is an appealing idea, but the economic principles that are delineated in the article give me some pause:

  • Require banks to set aside funds for local business loans.
  • Local companies should be given a strong local preference on city contracts.
  • The city should use tax policy to discourage out of town chains that "strip mine" SF

Commenters on the article take the sentiment even further, suggesting that city employees such as police be required to live within a certain radius of their precinct or be required to spend a certain amount of time in town when off duty, finally ending with the rousing battle cry "...the sky IS falling... we intend to use the ashes of the economic and ecological collapses to create something viable, sustainable, and green."

I find myself strangely drawn to areas where neoclassical economics appears unable to come to grips with or indeed find solutions for our current, dynamic situation, but its disheartening to me that the knee jerk reaction of many (and indeed SF is a more "liberal" city than most) is to immediately move to enact socialistic policy instead of stepping back and examining the situation from a perspective placing value on individual liberties and property rights.  Could it be that these interventionist ideas are largely responsible for the situations that we find ourselves in, and perhaps aren't the best suggestion moving forward?

Smithean or Ricardian?

Under the Smithean view, gains from trade are a result of specialization. When individuals are able to concentrate their efforts on learning a few tasks well, rather than many tasks minimally, they are much more productive. Specialization plays a large role in developing substantial economies—the assembly line practically revolutionized America’s. In contrast to Smith, the Ricardian view holds that gains from trade are the result of comparative advantage. People produce the goods they are best equipped and skilled to produce and trade for those goods that they are not as well equipped to produce. These two views have different implications for public policy concerning trade. Competitive advantage could eventually lead to “losers” as the trade network expands. Those with greater competitive advantage will force those with less to produce in areas which they are not as well equipped. Those with the most advantages win while others lose. With specialization, as the network expands, the gains from trade increase, because expanding the network increases specialization, leading to greater productivity.

If politicians hold the Smithean view of the gains from trade, it would follow that they would support policies that promote international trade. However, there is much controversy associated with this department, which leads to the conclusion that many politicians hold a Ricardian view. Or, perhaps people do not realize the gains that can be achieved through trade because of specialization. If tariffs were removed, some imports would become cheaper and the money saved could be reinvested into capital and equipment, or labor, which would lead to increased productivity in that industry (Smithean view). However, if the Ricardian view is at the forefront, the tariffs that are in place are seen as “leveling the playing field.” Those with greater comparative advantage cannot drive those with less out of business.

So where does that leave us? Which views should be the one that dictates policy? Should specialization trump comparative advantage? Or visa versa? Ludwig von Mises advocates that the greatest productivity results when the means of production are privately owned and able to move freely to where they will be best employed. This leads me to believe that government regulation of international trade should be minimal, just enough to protect private property rights and enforce contracts. As the trading network expands, the means of production will continue to be employed in their most productive areas and prosperity will result.

Oh My...

A Quote from Austin...

"The only reason I can think of why some libertarians would be against patents and copyrights is because laws like these prevent them from cheating. Obviously any person who swallows the libertarian dogma lock, stock and barrel cannot think for himself, but must be lead around by other people's ideas. So if libertarians can't rely on others ideas, they would be absolutely lost. Hence, they are against copyrights and patents.Or is it because for these laws to exist, there must be some form of government to enforce them? And as these extreme, narrow-minded libertarians know, all government is evil and hell-bent on their destruction."

Here we go I usually don't comment on others blogs as it is their blog, but here Austin I believe that you are talking about two differnt things. As one of your narrow-minded libertarians, I have to question whether or not you are talking about copywriting something that has been earned or something that could be earned.

Austin I have to question whether or not you are taking about property rights being exclusive in all contexts. As I believe it, libertarians argue that if one holds contractual rights in ideas, there seems to be no good reason one could not have an equally coherent property right. Also libertarians argue that one one holds the amount of power and the ability to judge those rights (copyrights) on being fair and contractual. I believe that this is where copyrights have failed....look at where they have led us today; and that is to no actual protection for the individual.

I might be completely off, or mis-understood you but here are my two cents.

P.s. government is out to get me...and you....

Logic or Persuasion?-

Hayek has been discussed several times in Economic Freedom about the theory of knowledge, but forgive me by saying this but does Hayek substantiate the subsitutions of knowledge? Probably because I am writing this late at night, I am probably losing much if any part of an argument but I will proceed. As economists or even philosophers with varied perspectives, could we agree that by loss of informal knowledge people ( sorry to Professor Eubanks) as an aggregate be subsituted with persuasion ( which could lead to popularity)? It seems that this lack of familiarity of ourselves and what we want contributes to this loss of knowledge besides providing others needs at the expense of others should ( normative) be placed in the context of logic of what we do know and the process of logic ( no Modus Ponens here just hypothetical syllogisms- never mind just mindless rant). But its not, it seems unusually reminiscent of high school and elections of student president or prom queen and king in the respect of popularity.

If an individual cannot make their decisions due to many choices wouldn't it make sense to use popularity as a temporary filabuster or a indirect series of choices. Am I hinting that many people do not want to make choices?- Yes. But do they want to make choices to benefit themselves?- Yes. So wouldn't making decision in this context mean limited choices for an individual? - Yes if the individual cannot understand their opportunities. So assuming persuasion is indeed the substitution of some informal knowledge than perhaps that is the problem with people relying on government.

Could logic be replaced instead of persuasion ( since I am assuming persuasion is harmful to an individual in this blog) ? I would guess that logic could not be entirely rectified in the loss of knowledge ( b/c that is part of the reason Hayek brings it up in the first place). So perhaps there is a level of logic and persuasion ( that I for some reason want to seperate as different entities) that will always exist together.

If I include incentives into the mix on limiting choices either through buyer,government and seller incentives, the one creating the incentives ( pick a party/ country) is limiting the choices of the citizens but under what guise or goal?

Perhaps the problem lies in the understanding that a group of individuals that have some authority can seperate the means and the ends of a problem and that infromal knowledge cannot relate to a formal action.

Are We Truly Free?

Johann Wolfgang von Goethe once said that “None are more hopelessly enslaved than those who falsely believe they are free.” I have been wondering lately if Americans could be classified as “those who falsely believe that they are free”. The more I ponder this question, the more I recognize the massive amounts of rhetoric we have been spoon fed over the years to make us believe that we are free. While I still believe that we live in the greatest country in the world, I see increasing signs of our enslavement to federal and local governments every day. I recently realized that there is hardly anything of true significance in my life that I am allowed to do without notifying some level of government – I can’t get married, open a business, build on my private property, drive a car, hire employees, burn my trash, or even home school my kids without obtaining permission from the state or federal government.

As if it wasn’t enough to have to obtain permission from the government to operate a business, now the government is even dictating to privately owned businesses the type of services they must offer to their customers. A New Jersey judge recently ordered to pay $5000 in damages to a gay man, $50,000 to the New Jersey Attorney General’s office and to begin providing dating services to homosexual men and women, even though the founder of eHarmony is an Evangelical Christian.,2933,454904,00.html Does this mean that a male cross-dresser can now sue a women’s shoe store for not offering pumps in a size 14, a pediatrician could be sued for refusing to provide medical care to individuals over the age of 18 or that a carnivore can sue a vegetarian restaurant for not providing beef ribs and chicken on their menu? The eHarmony lawsuit, which I believe amounts to nothing more than a civil rights shake down, will open the flood gates for individuals seeking to make a quick buck off the backs of honest and hardworking private business owners and ultimately will discourage even more entrepreneurs from risking their life savings to exploitation by opportunistic moochers. Lawsuits such as this should outrage every American, for once they set a precedent, and it becomes acceptable for any level of government to dictate to private companies how to run their businesses, it is extremely difficult to gain those freedoms once again after they have been taken away.


With news this weekend of Plaxico Burress of the New York Giants accidentally shooting himself in the leg in a club in New York the NFL's policy on guns came to my mind. They almost absolutelt forbid palyers from haveing guns, and they do forbid players from having guns at any NFL function. This seems to be a direct violation of these mens personal liberty. If we have a society that protects individual liberty how is the NFL able to make their own rules that seem to ignore the constitution. Evene if a player has a licensed gun and a concealed weapons permit they are not allowed to carry it, even thought the law says different. How is this in line with a protective state governement in any way? It seems to me the NFL needs to understand what rights EVERY American citizen has including its own players.

Saturday, November 29, 2008

Because Arguing is my Forte

What follows is my second reply to Austin’s most recent blog post, “This Entry is Illegal Because I’m Sure Someone Else Thought of it First.” I’ve also posted it as a direct reply, but I’m making this entry it’s own, separate post as well, because I need one for the month. In order to fully understand this particular entry I encourage you to read the already existing ones.

I’d like to start with your last point because I think it’s your most grievous error. You hit me with the fact that copyrights are in my “own best interest” and leave it as if landing a knockout punch. The problem with this is it’s also in my own best interest to can you on the top of the head and steal all your money every time I see you. So why don’t I do that too?

I realize you’re not much of a fan of philosophy so I’ll skip the discussion of Kant’s Categorical Imperative and try and phrase this purely in economic terms. My main point here is copyrights look to me like a special privilege, and thus enabling laws for them seems to be rent seeking. You’re right that on an individual level this looks fine for me, as copyrights account for most of a writer’s income. The fact that it’s essentially plundered from the rest of the economy largely goes unnoticed because the loss is spread out over the entire economy, a tiny bit from each person. Again from a single individual’s perspective this looks fine. The problem is if you allow one person to do it, you then begin allowing more and more. And eventually rent seeking is everywhere, and the damage done is massive.

Secondly, you’re flat wrong in your interpretation of patents or copyright covering only the finished product and not production. If you can find a cheaper or faster way to make a product, you are not free to proceed with it if what you‘re producing is recognizably a product that has already been patented or copywritten. Otherwise bootleg DVDs, which surely you’ll admit go through a different production process then official ones, would not be a worldwide issue. I suppose you could always sell your process to the patent holder, but their incentive to buy it would be virtually nonexistent, and they would be the only person capable of bidding on it, so even if they bothered, the price paid would almost assuredly be less then market value.

Moving on to the core of our disagreement, you still haven’t convinced me that patent protection is different from idea protection. Admittedly you are free to have the idea floating about in your head, namely because there’s no way to prevent that sort of thing. But you make an error in your analogy by equating the design in your head with Locke’s idea of nature, simply waiting for labor to be mixed with it. This is, again, due to the immaterial nature of ideas. How you mix your labor with something that has no appreciable real world value is an interesting question. In Locke’s view you mix your labor by the simple act of taking possession. If an apple is on the tree you pick it. If a mineral is in the earth you mine it, and so on. How does one do this with things that exist only in their head?

Your answer for designs is to move it from the realm of ideas into reality by actually inventing it. The problem with this is it bestows the value of possession onto every action you take. If you thought about it before you picked that apple, the action of picking now belongs to you. I suppose you could say materials need to be involved for it to actually apply as an invention, but that still makes odd things into property. Knots for example. Someone actually had to invent every knot we use. Were they entitled to profits from every knot tied? Were people secretly stealing by tying knots and neglecting to send proceeds to the knot inventor? How about recipes? Who do I owe money for the scrambled eggs I cooked today? The problem is you’re telling me I owe someone money for the things I do with my property just because they happened to do it with their property first.

But patent law is even more absurd then that. Many, many patented items have never been made by anyone, anywhere. Some of them don’t even work. The upshot is you’ve literally protected an idea in all it’s ethereal glory.

As to your supposed argument that patents don’t create monopolies, I’m not actually sure you addressed the point at all in the paragraph following its introduction. Perhaps I simply need more clarification. However, as to the point you did bring up, yes Tesla invented a different light bulb (I‘m not willing to concede “better,” because personally I‘ve always hated fluorescent lights. But to each his own), and possibly because he couldn’t use Edison’s due to patent law. But I say again, if the fluorescent bulb was truly better someone surely would have had the incentive to invent it already, simply because it is better. Consider Edison himself, nobody owned a patent on candles, and yet he still applied himself to the creation of the original light bulb. Why? Because it was better, which means there is a market for it. You don’t need patents to make people seek out better alternatives.

Your contention then, seems to be that the patent made the process of seeking alternatives faster, and I’ll concede this point. However, I don’t think it is necessarily a good thing. What you’ve done in this case is create false incentives. Because an entrepreneur’s access to the original invention is restricted they see more reason to create an alternative, but the market hasn‘t dictated a need for that yet, and may well be resistant to it as a result. Interestingly your fluorescent bulb example is a perfect analogy for this. Yes the patent probably brought us the fluorescent bulb sooner then we otherwise would have had it. But to what purpose? Edison’s light bulb began to appear everywhere. What of Tesla’s? It took years and years before widely being adopted. So we got it earlier, yes, but we did not use it until we would have begun to look for it anyway. Remember tampering with one person’s incentives to invent does nothing to change anyone else’s incentives to buy. And an invention need not exist until someone actually wants it.

Finally, I do you think you’ve missed the most important part of the argument. In theory laws exist in order to protect us from harm, either to ourselves or our property. But what harm is patent law protecting against? I say again, it is impossible to steal a design in the conventional sense because by copying it I have not deprived you of it in any way. You may continue to use it exactly as you have in the past, or now see new incentives and choose to act in a different manner, but the fact remains you have just as much of your design, and just as much right to it, as before I copied it. What harm has been done?

Saturday, November 22, 2008

Leave god out of it.

It is not secret to us Economists that interest groups use governments coercive power to force others to do or not do something. There are many active interest groups in Washington, but there is one interest group in particular disguised as something benevolent that is seeking--and has been seeking for some time-- to infrindge on all of our civil liberties. I am talking of course of the extreme right wing, god loving christians, who feel that they need to honor god by not buying alcohol or cars on Sunday and therefore nobody else should be able to either. As humans, we tend to have a short attention span but it was only last July that the Law banning alcohol sales--above 3.2%-- was repealed. Alcohol sales are still prohibited in grocery stores, every day of the week and automobile sales remain illegal on Sundays in Colroado. I wonder how much potential revenue has been lost over the years by forcing liquor stores and car lots to stay closed on Sunday. For those of us not looking at a Calender, thats 1/7th of the week and 1/2 of the weekend. Its funny to me that the stereotypical god loving christian is a republian. And republicans tend to be the ones who are in favor of free markets, and yet it is the people in favor of free markets (for the most part) that are choking the life out of the economy by restricing markets.
All I can say is, I'm glad people have started looking towards reason and rationality instead of a devine power to better their lives. If the owners of liquor stores wanted to have one day off a week they could still close their doors on Sunday....I have yet to find a liquor store closed on Sunday since the law was repealed last july.
Personally, if you want to believe in god thats great, but god is not an economist so lets leave him out of economic issues.

Tuesday, November 18, 2008

This Entry is Illegal Because I'm Sure Someone Else Thought of it First

I've been trying to come up with a valid, sound reason why someone would be against copyrights and patents, but I just can't see it. Property rights are the foundation of a capitalist economy. They are the foundation of a liberal society. It is the protection of such rights that is the raison d'etre of government. Property rights are, in a nutshell, paramount.

Copyrights and patents are laws designed to protect property rights. Where is the disconnect? Why are certain libertarians against this protection of our rights? I've heard the absurd idea that copyrights and patents seek to protect thoughts and words. That is ridiculous. They protect our inventions and our particular modus operandi for solving problems. They very clearly protect our property.

The arguments against copyrights and patents are baseless. They do not seek to stop people from thinking, or of using someone's existing idea to come up with another idea. For instance, Thomas Edison had a patent on a particular design of a lightbulb. Nikola Tesla won a bid to light the world's fair in 1893, but he couldn't use Edison's design for his lightbulbs. So what did he do? He came up with a another design for lightbulbs. Patent haters would have you think that a patent protects the idea of a lightbulb, but this is clearly not the case. What the patent did do, however, was encourage Tesla to become more creative and create competition for Edison. And patents are evil so we shouldn't have them?

The only reason I can think of why some libertarians would be against patents and copyrights is because laws like these prevent them from cheating. Obviously any person who swallows the libertarian dogma lock, stock and barrel cannot think for himself, but must be lead around by other people's ideas. So if libertarians can't rely on others ideas, they would be absolutely lost. Hence, they are against copyrights and patents.

Or is it because for these laws to exist, there must be some form of government to enforce them? And as these extreme, narrow-minded libertarians know, all government is evil and hell-bent on their destruction.

Now I'm sure I angered a lot of people (at least in my imagination, because for me to have angered a lot of people, a lot of people will have had to have read this entry. I'm guessing at most two will). So let me qualify this piece by saying that most libertarians are rational, sound-minded individuals with some great ideas. I am only talking about those extreme, weak-minded, blind, irrational, and yes, silly libertarians that actually believe their narrow, ignorant view of the world is truth.

© Austin Frindt, 2008.

Friday, October 31, 2008

Exploitation and the Working Class

While surfing on the internet the other day, I decided to take a gander at a democratic socialism website in order to gain a greater understanding of how socialism would appeal to the common man. As I suspected, the message was geared toward an audience that has a victim mentality. It was truly shocking to realize the level of blame they place on the wealthy minority for the miseries they experience in their own lives. It was fascinating to take a peek into their view of the world. They believe “the poverty and misery, the oppression and exploitation that marks our society is the result of control of the world’s wealth and productive resources by a tiny class that exploits the vast majority of society.” Ayn Rand counters this socialist argument so much more eloquently than I ever could, so I will just let you read what she has to say about men gaining wealth by “exploiting” lesser men:

But you say that money is made by the strong at the expense of the weak? What
strength do you mean? It is not the strength of guns or muscles. Wealth is the
product of man's capacity to think. Then is money made by the man who invents a
motor at the expense of those who did not invent it? Is money made by the
intelligent at the expense of the fools? By the able at the expense of the
incompetent? By the ambitious at the expense of the lazy? Money is made--before
it can be looted or mooched--made by the effort of every honest man, each to the
extent of his ability.

Is it possible in a society as free as ours, with as many opportunities as we have, for an employer to “exploit” his workers? I have a hard time believing that there are many individuals in our society that would even take a job unless they believed that it was in their best interest, and they had something they would gain from that employment. One of the many benefits of living in a society as mobile as ours, is the fact that employers lack the ability to “exploit” their workers, because as soon as an employee felt that their employment was no longer mutually beneficial, they would quickly move on to greener pastures.

Rock the Vote! Or... Maybe don't. Please?

Since at least high school, if not earlier, I can recall having the importance of my right to vote slammed into my impressionable skull.  Before we are even of age to vote, we are taught that we absolutely must.  This election, according to, the youth voting block is the fastest growing age segment, and also represents the greatest proportion of minority voters.  On the surface, I suppose this is a great feel good story.  Young members of our society are ostensibly taking an interest in how their country is run and what they can do to impact it.  Unfortunately, this may not be quite as exciting as some think.

While it is indeed true that young voters are turning out in record numbers, are we in fact educated enough to do so?  While a huge proportion of young voters cite the economy as a major issue that impacts their voting preferences, these same voters often support socializing medicine, hiking taxes on the wealthy, and bailing out ailing financial institutions at any cost.  Perhaps it would be best if all of us in the 18-28 voting bracket sat down and read a little about the various issues, economics especially.  We could start with, oh... the Constitution perhaps.  While every person is entitled to his or her own opinion, and certainly to vote as he or she sees fit, perhaps we ought not to rush to the polls without first taking some time to really learn about the principles on which our country was founded so that we might one day return to them.

No on 48

I always wait till the last min to write these things, but its always in these last crucial hours that the best things come to me. This morning when I woke up I was surprised to find a flyer on my door encouraging me to vote yes on amendment 48. Needless to say I was all but appalled when I began reading. Upon completion I was disgusted. As a woman I believe that my right to choose what I do with my body should be decided by me, not Colorado voters. As an economist I see only negative ramifications that will come from the passing of this amendment.
The arguments that can be made from the economic perspective may seem hash, but they are ones that can be made. To touch on what we are discussing in class. I believe that this is an unjustifiable use of police power on the part of the government. It is a clear violation of the rights of women to do with their body as they please. The opposition wants us to believe that upon conception the fetus is considered to have rights. But, lets say you plant seeds in your garden, If they are trampled does that mean some one has crushed your flowers? The same idea can be seen in this situation, yes the seeds of life have been planed in the womb of a women, but with there destruction you are not technically destroying life. The only rights that are being infringed on are that of the women. She chose to engage in an act that led to her situation, and it is her choice to handle it in a way in which she sees fit. A big part of economics is efficiency. With the legalization if abortion, women who decide to not have children has a safe and clean place to go to do what needs to be done. If it is outlawed, this will not stop women from having abortions, they will turn to other methods, they can be more detrimental then the practices all ready in place. Also in tune with efficiency there is a certain point to when resources can not sustain beyond a certain point, so abortions are a measure that in since help ease the strain on already scarce resources. American culture is one of the few that does not restrict the limits on the number of children per family. The Inuit (Eskimos) practice infanticide, for the greater good of the whole group. They understand the hash reality of the scarcity of their resources. Many other nations admire American culture for its free thinking people, why then would be limit the rights of our citizens to think for themselves. At then end of the day it is baby pictures that people fawn over when reminiscing, not shots of globs of cells and fetuses.
I am personally against abortion, but again I feel it is every woman’s choice to make her own decision.

Emissions Policy

Why are 25-year (and older) automobiles exempt from emissions programs, while newer vehicles are still held “emissions accountable?” All vehicles produce emissions, whether they are new, old, small or big. However, new vehicles that have new technology are continuously improved making them run more efficient, while producing less carbon dioxide and sulfur. Older models generally produce more, and yet they are not held accountable, so why does the state government system disregard these vehicles? One possibility is that new automobiles are held at a level of “higher accountability” by the state governments, because there are more of them on the road? It could also be said that environmental groups are putting more pressure upon the automotive manufactures to improve upon the emissions control? Rumors circulate that state government has little control over there emissions control program. Many emissions control facilities have become outdated or are non-functioning. Some control stations have been caught taking bribes to make their customers vehicles pass.
Today we all face a cost-benefit decision that suggests that we can buy new automobiles that are economically beneficent and are constantly being held accountable, or we can choose to keep our older vehicles that produce vastly larger amounts or carbon and sulfur. In today’s society a “green outlook” comes with a choice, whether to serve the environment or our own needs.


As we have dicussed throughout the entire semester, most of us agree that a liberal economy is the best way to go. With all of the interventions that the government makes it drives our economy down and is one of the main reasons that we are in such an economic turmoil right now. Why, if this is so obvious of an answer to most of us in class is it so hard for the politicians and the high ranking government officials to figure out. They should have people that are more educated than us, as undergraduate students. Why don't they see the same things we do. Could it be that we are actually wrong, or is it that with all of the interventions that have already been made that it is already too late to change what we have? Whatever the answers we need to fix this mess we have made and need to have the right people in place to be able to do the things that this country so desperately needs.

Should Government Intervene in the Automobile Industry for the Sake of Global Warming?

The automobile industry encompasses two fundamental issues at the forefront of the American society today—global warming and dependence on oil. The automobile industry uses vast amounts of oil and, thus, contributes to global warming through excessive carbon emissions. The question then arises, what should be done? Automobiles create externalities that cause environmental harm; should the government step in and regulate the industry? Or should the market be relied upon to correct for the environmental damages inflicted by cars? In his essay “How a Free Society Could Save Global Warming,” Gene Callahan advocates that corrections for global arming are more likely to result through free-market interactions, rather than government intervention. An argument against this point is whether or not the market will be able to adjust quickly enough. Environmental problems take some time to recognize and address (partially why global warming is just now becoming a public issue though it has been occurring for some time). Will the market be able to reflect the additional costs of environmental damage in a timely manner so that the problems can actually be halted and corrected?
On the other hand, if government does regulate the industry, will it be able to do so in a manner that will correct for global warming? Government intervention also takes time, and there is no guarantee that government will “get it right.” If government decides to regulate the amount of emissions cars are allowed to produce, will they be able to establish the “correct” amount? (What would this amount be? And, how would they determine it?) Government, having less-complete information about the auto industry because they are outside of it, it seems, would be less likely to set the “efficient” amount of emissions. If they allow too much carbon emissions, global warming may not be corrected, and if they allow too few, that could negatively impact the industry and consumers. However, it could still be argued that any decrease in emission is better than no decrease or an increase.
Besides regulating emissions, should government require auto producers to make more fuel-efficient vehicles or alternative-fuel vehicles to decrease oil consumption and the effects of global warming? In Chapter 13, “Conservation, Ecology, and Growth,” of For a New Liberty, Murray Rothbard argues that technological improvement will lead to a higher standard of living. Based upon his reasoning, it could be concluded that the technology of the automobile industry will improve to the point where vehicles will be more fuel-efficient or utilize alternative fuels because this would make people better-off (fuel would likely be less expensive and air pollution would decrease). The question again arises of whether or not these changes will take place through the market in a timely enough manner to preserves the environment, or whether government regulation is warranted and would be effective. Rising oil prices would increase the incentives for auto producers to develop alternative fuels and fuel-efficient vehicles, but if oil prices decline, these incentives are reduced. The development of new technology might then be delayed; meanwhile, cars continue to pollute the air and contribute to global warming. Government intervention (through regulation, or subsidies) could recreate incentives to continue the development of such technologies. Thus, the question remains, should government intervene in the automobile industry to correct for environmental damages, or should it be left to free-market interactions?

Thursday, October 30, 2008

Bring on the gas guzzler!

With the economy doing so bad, we have to look at the good things that also come with it. Lower gas prices! I was driving on union down towards Platte today and I saw gas prices as low as $2.27 that's like a dollar cheaper than 6 months ago. I remembered when it cost me like over $30 to fill up my tank and now it's like $10 less so I'm happy. And since we live in a state where almost every other car is an SUV or Truck or some other kind or gas guzzler, I'm sure they are all ecstatic too. I know this helps me out alot especially since I work in the restaurant industry and not many people are willing to go out these days. And if you don't own one of these guzzlers, I'm sure you can find one cheap now seeing how the auto industry is taking a big hit like most other industries

So I'm debating whether I should fill up my tank now or wait and see if it can get any lower...

Buy Nine Fingers, Get the Tenth Free

Do you own your body?

I think the vast majority of people, at least in America, would answer yes. In fact, conceptually it’s difficult to answer in any other manner. Even the question must be phrased with the term “your body” in order to properly be understood. And yet I’m not entirely convinced our bodies are truly our own.

George Carlin once asked “Why should it be illegal to sell something, that it‘s perfectly legal to give away?” Carlin was talking about prostitution, but I think the quote remains just as valid in reference to the organs of our bodies. And the only answer I can think of, is because we don’t own the organs, and the true owner has set the rules.

The fact that you can’t legally buy transplant organs in America has created a chronic shortage of them. At the moment, unless you can get someone to donate to you directly, the method of acquiring one involves, essentially, signing up to wait in line for who knows how many years until your number is called. The entire process eerily resembles the DMV, except with hospital beds instead of 6 inch high plastic chairs.

Why such a long wait? Because the value of organs is some number greater then zero, but for the moment zero is all people are allowed to receive in exchange for those organs. Thus the system relies solely on the altruism of donors, not just in giving up something of value, but in undertaking the risk of doing so (even minor surgery, which this is not, always carries a risk, and of course there’s the long term risk of only having, say, one kidney instead of two).

If money were to be allowed into the equation, it stands to reason that many more people might be convinced that parting with an organ that could help the sick is a reasonable idea.

Among the many objections to this policy is the suggestion that allowing monetary payments for organs would restrict transplants only to the rich. This is far from the truth though. Donations haven’t been taken out of the equation, they’re just no longer the only option. Charity is still at play, just as it is in every other market in the world. And in fact, it’s conceivable that donations could increase after a fashion, because now those who either couldn’t donate organs, or were unwilling to take on the risk of doing so, may simply donate money that can be used to buy an organ from another party.

Others argue that allowing a market in organs would encourage criminals to murder fellow citizens in order to harvest and sell their organs. The fact of the matter is though, since organs are not a zero value item, this could already be occurring under the radar. In fact since the market has been restricted and a shortage created, the value of organs currently would be abnormally high. Legalizing a market here would likely reduce crime in this area by lowering the expected price, and thus reducing the incentive for criminals.

The other common argument against organ selling is that the introduction of money into the process of getting organs for sick people somehow makes the entire activity immoral and disgusting. And perhaps it does. I’ll be the first to admit, for one reason or another, my stomach seems to turn a little bit at the idea, and I can‘t keep my imagination from conjuring images of Dr. Frankenstein and his monster. But there’s two key things to remember here. First off, it’s none of our business. I’m sure there’s quite a few things we all find disgusting that we allow to continue simply because it doesn’t involve us (and I‘d like to nominate any and everything Madonna does as a case study in this). And second, no matter how repulsive you find the idea of selling organs it’s far more disgusting to think of all the people suffering and dying, waiting for transplants that they can’t get because the market has been restricted.

Finally, and perhaps most importantly, if we don’t own the organs of our bodies can we truly be said to own the bodies themselves? I encourage you to think carefully about this, because the concept of self ownership is the most crucial element to property rights. As a general rule we tend to view property from a Lockian perspective, which says because we own our bodies the unowned elements which we mix the labor of that same body with become ours. However, if we don’t fully own those bodies the entire idea falls apart. And then, can we truly own anything at all?

-Jaeson Madison

Tuesday, October 28, 2008

The Mighty Dollar

If you would have told me four years ago, that economics, would have
got this interesting I wouldn’t have believed you. Yesterday the
American congress rejected a 700 billion dollar deal to bail out
failing banks. I honestly feel like the longer they wait to pass it,
the less effective it is going to be. They are going to reach a point
where is probably just better to let the market self-correct, cause
that’s what markets do. In the bigger picture, the problem is what it
is and something needs to be done. Yet the cause of this problem
should also be evaluated so it does not happen again. I feel like the
government set themselves up for failure years ago, when they decided
that they needed to force banks to give loans to individuals who other
wise could not afford to have houses cause get them. Not the housing
market is in shambles, and foreclose is an all time high. Banks where
forced to loan out money that they where not going to get back, and
now look the system at is core is falling apart. Some will arguer that
its creed and corruption at the center of the issues, granted I do
believe it has its place, I don’t believe it is the final answer to
the problem as to why the banks fail. Now congress is trying to pass a
bill to rectify the situation, but this bill goes against the very
fabric that is our American constitution. It delegates power to the
legislated and judicial that are in no way implied by our nations
highest written law. The very fundamental principles on which this
country was built are being ignored and all in name of the all mighty

Danielle Scott

An Unrealistic Utopia

In Chapter 3 of his book Liberalism In the Classical Tradition, Ludwig von Mises writes, “The starting point of liberal thought is the recognition of the value and importance of human cooperation, and the whole policy and program of liberalism is designed to serve the purpose of maintaining the existing state of mutual cooperation among the members of the human race and of extending it still further. The ultimate ideal envisioned by liberalism is the perfect cooperation of all mankind, taking place peacefully and without friction.” This statement paints an utopist picture of the world—all people getting along peacefully. Von Mises maintains that if this were the case, the means of production would freely move from areas less favorable suited for production to those that are more favorable suited. This goes beyond specialization and comparative advantage. This free movement of the means of production would allow humanity to be more productive than ever.

While Von Mises makes a valid point that if the means of production were employed in the environment best suited for production humanity would be more productive, this is highly unrealistic. To envision that all of humanity will be able to lay aside their differences and engage in capitalism together is to create an impracticable and out of reach utopia. Von Mises paints a nice picture of a highly productive and peaceful society, which could even be viewed as the solution to poverty, but it is virtually impossible to obtain. People are not just going to suddenly decide to forget all conflict and cooperate. Even if this did occur and the world reached its productive capacity based on the division of labor and free movement of the means of production, this might have unintended consequences. How much more production can the earth sustain? This becomes an especially prevalent issue in today’s society, with all the concerns about global warming a climate change. If increased production impacts the environment (in the form of global warming/climate change, or other ways), government would then have to intervene to establish policies to protect the environment. This intervention would interrupt the liberal, capitalist society. Because this liberal, capitalist picture of society is littered with questions and “what-ifs”, the question must be asked “is it actually attainable?” Likely, it is not, and is instead an unrealistic utopia.

Whitney Lund

Sunday, October 26, 2008

An Expose of the National Park Service

From Bill Bryson's great book, A Walk in the Woods:

"The National Park Service actually has something of a tradition of making things extinct. Bryce Canyon National Park is perhaps the most interesting -- certainly the most striking -- example. It was founded in 1923 and in less than half a century under the Park Service's stewardship lost seven species of mammal... Quite an achievement when you consider that these animals had survived in Bryce Canyon for tens of millions of years before the Park Service took an interest in them. Altogether, forty-two species of mammal have disappeared from America's national parks this century.

"...The Park Service in 1957 decided to 'reclaim' Abrams Creek, a tributary of the Little Tennessee River, for rainbow trout, even though rainbow trout had never been native to Abrams Creek. To that end, biologists dumped several drums of a poison called rotenone into fifteen miles of creek. Within hours, tens of thousands of dead fish were floating on the surface like autumn leaves. Among the thirty-one species of Abrams Creek fish that were wiped out was one called the smoky madtom, which scientists had never seen before. Thus, Park Service biologists managed the wonderfully unusual accomplishment of discovering and eradication in the same instant a new species of fish.

"Today the National Park Service employs a more casual approach to endangering wildlife: neglect. It spends almost nothing -- less than 3 percent of its budget -- on research of any type...

"...consider the grassy balds -- treeless, meadowy expanses of mountaintop, up to 250 acres in extent, which are quite unique to the southern Appalachians. No one knows why the balds are there, or how long they have existed, or why they appear on some mountains and not others. Some believe they are natural features, perhaps relics of lightning fires, and some believe that they are man-made, burned or cleared to provide land for summer grazing. What is certain is that they are central to the character of the Smokies... For unknown numbers of years they were used first by Indians and then by European settlers for grazing summer livestock, but now, with graziers banished and the Park Service doing nothing, woody species are steadily reclaiming the mountaintops. Within twenty years, there may be no balds left in the Smokies. Ninety plant species have disappeared from the balds since the park was opened in the 1930s. At least twenty-five more are expected to go in the next few years.

"In constant dollars, the Park Service budget today is $200 million a year less than it was a decade ago. In consequence, even as visitor numbers have soared -- from 79 million in 1960 to almost 270 million today -- campsites and interpretation centers have been shut, warden numbers slashed, and essential maintenance deferred to a positively ludicrous degree. By 1997, the repair backlog for the national parks had reached $6 billion. All quite scandalous. But consider this. In 1991 as its trees were dying, its building crumbling, its visitors being turned away from campgrounds it could not afford to keep open, and its employees being laid off in record numbers, the National Park Service threw a seventy-fifth anniversary party for itself in Vail, Colorado. It spent $500,000 on the event. That may not be quite as moronically negligent as tipping hundreds of gallons of poison into a wilderness stream, but it is certainly in the right spirit."

Besides being interesting, I think this is a good illustration of the gross inefficiencies of government ownership. I'm sure Rothbard would enjoy reading that chapter.

Tuesday, October 21, 2008

Voter Suppression: Scare tactics?

Currently, both parties McCain and Obama, have been knee deep accusing the other of voter fraud according to some sources like CSPAN and other networks like Fox News. Voter supression is in the same category apparently with Voter Fraud. Voter fraud defined by wikipedia is "a form of electoral fraud and refers to the use of governmental power, political campaign strategy, and private resources aimed at suppressing (i.e. reducing) the total vote of opposition candidacies instead of attempting to change likely voting behavior by changing the opinions of potential voters. This method is particularly effective if a significant amount of voters are intimidated individually because the voter might not consider his or her single vote important".

Even though voter supression may be considered political hoopla, voter fraud sounds familiar to our last election between Bush and Kerry. From a New York Times Ad online dated August 16th 2004, the author of this article, Bob Herb, stated that in our past election Florida was under criminal investigation of the organization of Orlando League of Voters by state officials. The only reason that I could find for this investigation during the 2004 elections was that the Orlando League of Voters must have commited a crime to convince black voters for whom they should vote for. The goal of this association which was made up of older, black volunteers, was to encourage black voters to vote by transporting voters to voting destination for those that do not have the capacity to do so ( ie. lacking income to support gas or other means of transportation). From these criminal investigations many of the blacks that were recieving assitance getting to the polls may have lost their vote because the Orlando League (that was under investigation)may have influenced their vote. The larger problem with this situation is that perhaps removing votes because of such associations helped a particular political candidate (Bush) in recieving less votes for John Kerry because blacks were thought to have voted for Kerry if their votes had counted.

Besides allegations of voter fraud during the last election of Bush and Kerry and the current election of democrat and Republican there is also speculation about the processes of voting that may also misrepresent a person's vote. Some have pointed out potential problems with the voting machines and perhaps even the people that count the votes ( even mail in ballots). The ES &S voting machines (made by John Waveright) was reported to have some issues with their touch screens. When an individual dragged their finger to their candidate it typically selected the first candidate on the list which was McCain. People in the news also had speculated about the accuracy or assurance that those that aided the voting process could intentionally or intentionally misrepresent one's vote.From all these stories of votes being misrepresented why the scare tactic(Florida in the last election?)?

More questions: Can anyone disenfranshise or suppress an individual's vote?

If a vote is considered to be part of capitalism that shouldn't voter fraud occur? Or should voting be simply considered democratic?

And is voter persuasion equal to some voters who believe that celebrity opinions are more important than their own as voter fraud?

Monday, October 20, 2008

In Defense of Quantitative Reasoning

The following is a direct quote from Friedrich von Hayek’s 1968 essay “Competition as A Discovery Procedure”:

I should like to add a few words about the consequences of the disappointment in microeconomic theory caused by fallacious methodological criteria of scientism. The notion that we must formulate our theories so that they can be immediately applied to observable statistical or other measurable quantities seems to me to be a methodological error. It is a false epistemiological principle to adapt the theory to the available information, so that the observed variables appear directly in the theory.” (Hayek, 11-12).

It is indeed tempting to subscribe to Hayek’s opinion that to deserve a title of scientific theory, it must be formed independently and regardless of the facts and empirical data. Hayek makes a valid argument that at times data are tailored to fit the initial hypothesis and questionable, at best quasi-scientific results emerge.
To demand the opposite is admirable yet highly impractical. The entire reason why a hypothesis is formed in the first place is due to suspicion of a certain relationship existing between the observable variables. Such is the nature of analytics as a science itself: human minds perceive patterns and seek verification of their initial assumptions. It calls for a formulation of clear and unambiguous hypotheses. Once the null and the research hypotheses are defined, a scientist designs an experiment. At this stage of research, arguably the most important one, a number of independent variables is considered. An experiment can be designed to simply test the strength of a relationship between a single dependent and a single independent variable. If that is the case, a researcher might not be careful enough and might falsely conclude that the two variables will always act in a manner consistent with the outcomes of the experiment. “We might be able to notice certain regularities in the observed behavior of these variables. Often these regularities apply, but sometimes they do not. Yet using the means of macrotheory, we can never formulate the conditions under which they apply,” writes Hayek (12). I am afraid I disagree that we can literally never formulate those conditions. For if it were so, the field of macroeconomics would cease to exist. The few relationships that are firmly anchored in the minds of macroeconomists exist due to the strong empirical evidence that support those relationships in the first place. Every single one is supported by a verifiable model.
That brings me to another point. When observing a change of a dependent variable that is a function of an independent variable, a coefficient of determination between the two is of utmost importance. For if the “R squared” explains a minor portion of the dependant variable’s variation (like 20 percent), it surely calls for a more complete model. So, a model gets rebuilt and the research continues. As long as a model of a dependant variable captures a significant and sizable proportion of this variable’s variation, it does not deserve to be labeled methodologically flawed. Modern computing grants us power to split atoms with a precision of our forecasting and other econometric models. That was clearly not the case when Hayek wrote his original essay in 1968.
Hayek lived during the time when the Might and speed of modern computers would be a scientist’s wild dream. He lived in a scientific community severely constrained by the lack of any automated computational capabilities. Unable to perform any rigorous quantitative analyses, he chose to abandon all efforts to do so all together, labeling the attempts of all other economists to describe the world numerically as “fallacious methodological criteria of scientism.” Instead, he chose to practice economics in the form of political philosophy, a form that was prevalent for centuries, a form lacking quantitative rigor and precision but abundant with ideological implications.
Hayek claimed that the attempt to quantify the world around us is “a methodological error.” Such claim is severely biased and can be easily contested by one of the Forefathers of all Science, Isaac Newton himself. In his work “Rules for the Study of Natural Philosophy” Newton establishes clear provisions of the Scientific Method. To be termed scientific, a method of inquiry must be based on gathering observable, empirical and measurable evidence subject to specific principles of reasoning. A scientific method must further include the collection of data through observation and experimentation, and the formulation and testing of hypotheses. That is the scholarly method a respectable scientific community follows, not rhetorical demagoguery regarding the political philosophy and the mere rhetoric of the government’s coercive powers.
Last but not least, this post is written by an author practicing a Science of Economics. This is the science concerned with an endless myriad of choices, tradeoffs, and opportunity costs. This is the science describing people’s behavior and their interactions with other individuals. This is the science aiming to accurately and precisely describe people’s welfare and fluctuations thereof. This is a Science and it deserves its quantitative rigor, and we, the growing generation of tomorrow’s scientists, will fight to preserve it.

Sunday, October 19, 2008

Click-it or Ticket

I was driving down I-25 the other day and I saw one of those signs on the highway that said, "Click-it or Ticket". I started thinking about the implicatons of a law that requires drivers to wear a seatbelt. From a liberty perspective, a person should be able to do whatever he or she wants as long as it does not harm the person or property of another. Does not wearing a seatbelt pose any harm to another person or person's property? Perhpas you could get into a crash and you're body could go flying out of the car and and slam into another car. I guess in this senario, your body does cause damage to another person's property. Beyond this senario, I can not think of any cases in wear not wearing your seatbelt causes harm to another person or persons property.
I feel that wearing your seatbelt is a great idea. The addition of seatbelts in cars have saved many lives. We should all wear seatbelts while in our cars. However, I do not feel that the government should be able to fine its citizens for not wearing a seatbelt. An automobile is the private property of the person inside. The Only danger possed by a driver not wearing the seatbelt is directed toward the driver, and nobody else.
Rational people can make a value judgement as to whether or not they wear a seatbelt. If car manufactures were not required to put seatbelts in cars, we would still see them in cars, even if they cost extra as an option, because consumers would have a demand for the belts.
I feel that seatbelt laws are unnessary, and in the case of click-it or ticket, are a violation of our personal liberties.

Friday, October 03, 2008

An Unrealistic Utopia

In Chapter 3 of his book Liberalism In the Classical Tradition, Ludwig von Mises writes, “The starting point of liberal thought is the recognition of the value and importance of human cooperation, and the whole policy and program of liberalism is designed to serve the purpose of maintaining the existing state of mutual cooperation among the members of the human race and of extending it still further. The ultimate ideal envisioned by liberalism is the perfect cooperation of all mankind, taking place peacefully and without friction.” This statement paints an utopist picture of the world—all people getting along peacefully. Von Mises maintains that if this were the case, the means of production would freely move from areas less favorable suited for production to those that are more favorable suited. This goes beyond specialization and comparative advantage. This free movement of the means of production would allow humanity to be more productive than ever.

While Von Mises makes a valid point that if the means of production were employed in the environment best suited for production humanity would be more productive, this is highly unrealistic. To envision that all of humanity will be able to lay aside their differences and engage in capitalism together is to create an impracticable and out of reach utopia. Von Mises paints a nice picture of a highly productive and peaceful society, which could even be viewed as the solution to poverty, but it is virtually impossible to obtain. People are not just going to suddenly decide to forget all conflict and cooperate. Even if this did occur and the world reached its productive capacity based on the division of labor and free movement of the means of production, this might have unintended consequences. How much more production can the earth sustain? This becomes an especially prevalent issue in today’s society, with all the concerns about global warming a climate change. If increased production impacts the environment (in the form of global warming/climate change, or other ways), government would then have to intervene to establish policies to protect the environment. This intervention would interrupt the liberal, capitalist society. Because this liberal, capitalist picture of society is littered with questions and “what-ifs”, the question must be asked “is it actually attainable?” Likely, it is not, and is instead an unrealistic utopia.

Tuesday, September 30, 2008

"Main Street" Economics

While I'm loathe to post about the "bailout" (or "rescue" or whatever they're calling it these days to make us feel better) the simple fact is that it is the most fitting example and practical application of the economic ideas we have been discussing in class.  That being said, I'll try to tackle an angle other than just the bailout itself: the idea that the general public has no idea what the hell it wants or needs in regards to the plan, or lack thereof, but the armchair economist is looking for someone to blame.

Anchors, pundits, analysts, and presidential hopefuls are all fond of regurgitating the "Wall Street vs. Main Street" scenario, casting the two as arch economic rivals (bourgeois and proletariats?  Socialism?), eternally locked in a duel of wits, attempting to see who can outsmart whom, and how much each can make the other pay for it.  This characterization, which Senator Obama is especially fond of using, allows those using it to create an invisible but inescapable division between we plebes on Main and the Dom Perignon quaffing, caviar guzzling, yacht sailing elites that run Wall Street.

Or so the talking heads would have you believe.

In the eyes of this admitted denizen of Main Street, the only difference between those that have been demonized and me is that they're just much, much better at what they do.  Well, and they've been at it a little longer maybe.  The idea that "rich" people are "bad" people, though comforting, is completely absurd.  Unfortunately for the more level headed, or just Eubanks educated, among us, current events lend this idiotic world view even more credence.  With a bailout plan that continues a long standing tradition of interventionalist economic policy poised to pass in the near future, it might be prudent to examine why exactly the Main Streeters are willing to get behind it rank and file.  Is it truly that we feel the only way to right the troubled ship of our economy is to turn it over in its entirety to the government?  Is it that we really do fully believe a $700,000,000,000 Band-aid placed on a gaping, gangrenous wound will make it better?  Or is it, as a class mate mentioned today, that the Main Street "economist"  is really just interested in his "bread and the circus," in a good old fashioned bloodletting where we toss those dastardly Wall Streeters into the pit and watch the lions tear them to pieces? We all like to blame people, and no one likes a parachute made of gold (how would that be of any use anyway?!) but is revenge a valid basis for happily (ignorantly?) skipping down the path to Socialism?

Interventionalist Turds

Close your eyes and listen....relaxed? Now ask yourself what happens when government has to fix a policy or a law? Many wonderful pictures of a giddy lawmaker rushes through your head and you can picture him getting passed by congress and signed by the president. And you think to yourself what a lovely picture....

But then really think what government does when they do this... The answer we have learned about in Eubank's class is that government intervenes. So lets say for example that there was a failure of governmental policy where the Fed backs up many loans from institutions with taxpayer money and reserve. Then you give those loans some time, now take into account that most of the loans are low to middle level income earners, meanwhile it has been about 15 years since the last real recession....

...then when it is time for a financial fluctuation and business cycle to hit a low. A big low...another recession. Now remember that lawmaker who passed the first law? Now he has to fix a problem in his original bill and fix it with another. OK lets use the people's money and bail out those loans? Not only bail em out, heck we'll use 700 billion dollars to bail em out. We will buy them, and appoint government hired officials to run and organize/coordinate them. And in say five or ten years from now, well see if they made any money, and if they didn't then we'll ask the corporations to pay for them then.

Now keep your eyes closed, and picture the government with 700 billion of worthless assets. Now the Bill maker has to make another law to bail out the first and second laws. Then a couple years later he has to make another and another and another??!!??!!


Now the lawman has to ask himself why this all happened. And his answer could be Well maybe I should have not intervened?

In all seriousness, I have to ask why these lawmakers with a bailout plan such as this, did not think about their plan? I sure would if I were responsible for 700 million, and not have to intervene again? Wouldn't you?

Are Europeans doing any better with their financial markets?

Not only does the US have financial issues but so does England, Belgium, Germany...
Many countries like the US are creating bailouts and Darwin-like behavior to internalize overweighted companies by transferring assets to neighboring institutions.
A few examples of those companies suffering under their own type of financial difficulty have somewhat different theories of bailout... Could we impart some of these theories in the US? Or are our problems much more complex than these following examples?

-Fortis= Dutch Central Banking and Insurance Co. that according to Wikipedia is a "banking, insurance, and investment management company is the 20th largest business in the world by revenue". Fortis operations are based in the Benelux countries( the Economic Union in Western Europe) which is composed of Belgium, Netherlands, and Luxemburg. Fortis' banking operations include network (retail), commercial, and merchant banking; its insurance products include life, health, and property/casualty lines. Products are sold through independent agents and brokers, financial planners, and through Fortis Bank branches. It is listed on the Euronext Brussels, Euronext Amsterdam, and Luxembourg stock exchanges.

How the government or investors are trying to fix the companies assets from buying out smaller companies and trying to remain afloat.

- Lets other companies (A) in the market internalize risks by letting companies A ( insitutions that take some of the overbearance of assets by purchuse of companies or other banking or insurance institutions) from companies B that reduce thier load to buy less risky investments.

- When purchuses occur between seller and buyer of assets there is set policies or condtions of the ammount of risk that a company buys.
* These two theories may not work however because there is still no injection into the banking system because of uncertainty of Chinese buyer. But the idea that these institutions it appears to me can buy and sell amongst themselves before asking for bailout money from the government.

Fortis's Story from International Herald Tribune: Link-

Fortis NV announced a series of moves late Tuesday and early Wednesday that follow from the €11.2 billion (US$16.4 billion) government bailout it received over the weekend to ward off insolvency.
First, Fortis said Ping An, China's second-largest insurer, had pulled out of a €2.15 billion (US$3.39 billion) deal to buy a 50 percent stake in the Dutch-Belgian bank's asset management arm.
The company blamed "current severe market disruption and the ongoing uncertainty in the global capital markets."
Second, it said the Dutch central bank would not approve the sale of some ABN Amro assets in the Netherlands to Deutsche Bank AG, pending further review.
Deutsche Bank had agreed to buy the operations for €709 million (US$1.1 billion), in what was widely considered a bargain given that they had earnings of €140 million (US$221 million) in 2007.

Fortis had been ordered to sell the operations by the European Commission's antitrust regulator in order to gain approval for its €24 billion (US$38 billion) acquisition of ABN Amro's Dutch operations last year.
However, as a condition of the bailout, Fortis must now resell ABN Amro anyway.
The Dutch central bank cited "the exceptional circumstances on international financial markets, the uncertainty with regard to the future (owner of) ABN AMRO Bank and the implications of this uncertainty for all parties involved."
If the sale of the Dutch units to Deutsche Bank are scrapped, then Fortis may get a capital boost.

-Some large banks rather than buying and selling assets amongst each other, sell themselves to private owners to reduce the risk without losing the company.

- There is a financial service authority ( media doesen't seem to describe who) that checks to make sure certain financial decisions seem either sound or legotimate with past contracts (?)

Bradford and Bingley announced to their shareholders that they were to be privately owned by over 50,000 individual owners.

Bradford and Bingley's story according to Times Online:

This alternative theory is still pretty risky especially since a financial service authority and state treasurer are speculating the value of the shares for its respective private owners.

Not sure if these theories would help the US with our current financial standing but they are at least theories rather than blame.
With that said, in closing I found through the internet a British spoof of their take on America's Crisis.

Below a British comedy video about the financial crisis overseas from NPR.

Government Intervention in the Custody of Children

Some people don't consider the economics of having kids before they commit, but it really is an economic decision. People have fewer as the opportunity costs rise when wages rise and as retirement depends less on your own adult children. Whatever changes occur in the market are reflected in how many parents will supply, but this is one area in which government intervention is common place, particularly when state governments regulate child custody and support payment laws.

When a couple splits, they theoretically have joint custody over their children, but many times the mother gets the child regardless of either parent's fitness. I know this personally, because when my parents got divorced, my father was told he could get custody if my mother had ever committed a felony, if she had been adjudged insane, or if he was willing to plant evidence. I have heard that this was not always how it is now in Colorado, but I read this: and it looks like that's not the case in every state. As that blogger writes, " makes me think that if Baldwin had such problems with the system with all his fame and money, what chance does the average joe have?"

Transferring custody away from a parent who hasn't committed a crime is a violation of his (or sometimes her) right to private property. This could be settled much more efficiently and freely with contracts between the two parents, with government only enforcing their decision. Then government would not have to know what was best in every case because the people with the knowledge for it could do it for themselves. It actually seems to me that it would probably end more equally as one parent wouldn't be forced to give way to the other by coercion.

Marx's 10 Measures of Communism

Last Thursday, Professor Eubanks asked each one of us whether our government was capitalist, socialist or interventionist. We all agreed that our government practices a great deal of interventionism, but it is difficult to know if the current level of intervention still allows for unrestrained capitalism or if our government’s interventions are increasingly socialist in nature. I decided to re-read Marx’s 10 measures of communism to help me get a feel for where we rank.

1. Abolition of property in land and application of all rents of land to public purposes.
· The federal government is the largest land owner and maintains control over 650 million acres or one-third of the land in the United States (86% of Nevada is owned by the federal government).
· Private property rights are slowly being eroded as private organizations lobby to protect the ever growing list of endangered species such as the Panamint Alligator Lizard, Brown Pelican, Giant Armadillo and the Preble’s Meadow Jumping Mouse.
· The government’s power to seize private property for public use under eminent domain laws is being abused not only by the federal government, but also by private corporations to “provide for the public good” by building condos, restaurants and shopping malls.
· Zoning laws often prevent property owners from utilizing their personal property as they see fit.

2. A heavy progressive or graduated income tax.
· The top 1% pay as much in taxes as the bottom 95% of the population combined, and the current democratic presidential nominee would widen that gap even further.

3. Abolition of all rights of inheritance.
· Current laws allow the government to confiscate up to 55% of a family’s wealth if left unprotected.

4. Confiscation of the property of all emigrants and rebels.
· Colorado law currently states that “whenever a police officer is permitted, with or without judicial approval, to conduct a search to investigate a potential crime, the officer may seize and keep as much property associated with the alleged criminal as the police officer considers appropriate. “

5. Centralisation of credit in the banks of the state, by means of a national bank with state capital and an exclusive monopoly.
· The government seized control over our country’s largest mortgage underwriters Fannie Mae and Freddie Mac on September 7.
· The current 700 billion dollar bailout offers US taxpayers a stake in each of the firms the government bails out. The collective ownership of capital IS socialism.

6. Centralisation of the means of communication and transport in the hands of the state.
· It is illegal for anyone but a United States postal employee to place mail in mailboxes.
· The federal government has always had major control over our transportation system. Are they gaining even more with the federal takeover of airport security and the intermittent bailout of the airline and railroad industries?

7. Extension of factories and instrument of production owned by the state; the bringing into cultivation of waste land, and the improvement of the soil generally in accordance with a common plan.

8. Equal liability of all to work. Establishment of industrial armies, especially for agriculture.
· Today’s labor unions are the modern-day equivalent of the industrial army. Federal and state laws have a hand in enforcing the labor unions power and control.
· Government subsidies to farmers have maintained control over the agriculture industry for years.

9. Combination of agriculture with manufacturing industries; gradual abolition of all the distinction between town and country by a more equable distribution of the populace over the country.

10. Free education for all children in public schools. Abolition of children’s factory labour in its present form. Combination of education with industrial production.
· We have achieved free education for all children in public schools and abolished child labor – which, of course, are good things. But there continues to be an assault on the freedom to choose where you want your child to be educated (school vouchers and home schooling) and the things you wish for them to be taught.

Of course, we could find countless amounts of evidence to argue either side of these 10 measures – I only pointed out some of the points that were obvious to me. The current economic and financial crises will force our politicians and the American people to take a stand and show their true colors for either capitalism or socialism.

A sigh of relief and a sign of things to come or a calm before the storm

A day after the Stock Market plummeted 778 points, it has bounced back almost 500 points. This was done by bargain shoppers and others who saw the low prices as a chance to jump in and buy some stock. Maybe this trend will continue and the stock market will bounce back in no time. I mean in the middle of the page I was reading there was an advertisement for "Etrade"! Then again this could just be a fluke and our economy could fall more and more, unless some action is taken.

In response to our troubled financial situation, many have taken action to make sure they don't make the same mistake. "The benchmark London Interbank Offered Rate, or LIBOR, that banks charge to lend to one another, rose sharply Tuesday, making it more expensive and difficult for consumers and businesses to borrow money." "LIBOR for 3-month dollar loans rose to 4.05 percent from 3.88 percent on Monday. LIBOR for 3-month euro loans, meanwhile, rose to 5.27 percent, from 5.22 percent Monday." This will hopefully make it harder for banks to give out loans that can be seen as high risk and could probably fail. That's what got us into this situation in the first place...