Refuting Salon: 7 Huge Misconceptions Part 2

This is a continuation of this article on refuting the claims that Socialism and Communism are systems that are more desirable than capitalism. You can read the Salon article here.

2. Capitalist economies are based on free exchange

The author says, in the first paragraph, that even in the capitalist society we have now (which it is not true capitalism but corporatism, the beast spawned by the very central planning the author is advocating for), that we have all of these competing pressures and life is really hard. We are lonely and feel as though we don’t have “control of our lives” (leave it to a progressive to argue with emotion rather than with logic and facts). So clearly the solution to this problem where there is a “lack of control in our lives” is to have central planners plan for us and our lives. That way, we feel more empowered to… Wait… If someone else is planning for you, like they do in socialist and communist economies, you definitely don’t have control over your life.

The author then claims that the market is in control of our lives. This is a laughable assumption as there are multiple factors for the kinds of choices available on the market. Economics is first and foremost the study of human action, or praxeology. Only individuals act and make economic choices regardless of whether they are working as a collective (or a collection of distinct individuals) or by themselves. A good economist would say that since the fundamental principal of economics is human action, the struggle for the individual is coordinating his actions with others in order to achieve is subjective ends. Therefore, good economists will not actually use mathematics in their theories simply because human action and subjective value, which varies from individual to individual, are not quantifiable values making any mathematical theorem in economics arbitrary and useless.1

This means that there are two options that can be taken in order to solve this problem of coordination. There is the method that we at Logical Anarchy subscribe to vis-à-vis capitalism. This is because capitalism, specifically Anarcho-Capitalism, allows the individual to make those economic decisions for themselves and engage in voluntary relationships with those they choose. The other option is to force people, through the violence of the State, to work with people they do not want to or take a portion of their property through taxation in order to reach the coordinated economic goals dictated by the central planners. One respects human dignity and individuality, the other tramples on it.

The author continues though and makes a few sweeping claims. They claim that capitalists support violent and detrimental regimes. Unfortunately, this is the typical confusion most statists, specifically the progressives, make. As stated above, they confuse “capitalism” with “corporatism”. Corporatism is “the control of a state or organization by large interest groups.” This would not happen in a voluntary society simply because their would be no monopoly on force, namely government, through which special interest groups could work and enforce their ideology on the populace. There are other economic systems that create a state of corporatism and fascism though. Socialism and communism. Since there is a powerful central planner controlling the economic decisions of it’s people through violence, you can be sure that there will be those that seek to manipulate the socialist and communist machine to suite their ends. They have solved the problem listed above about coordinating with others. Unfortunately their methodology involves using violence in order to enforce their will on others. In a truly capitalist society, which respects property rights, this would not happen.

You then have to love the final statement the author makes on this point about free exchange:

“And that’s just the principle of the system. The US’s particular brand of capitalism required exterminating a continent’s worth of indigenous people and enslaving millions of kidnapped Africans. And all the capitalist industry was only possible because white women, considered the property of their fathers and husbands, were performing the invisible tasks of child-rearing and housework, without remuneration. Three cheers for free exchange.”

Really? These progressives are getting better at calling you racists, greedy and sexist in the fewest and least factually cited amount of sentences possible. Slavery is not a tenant of true capitalism, especially the anarcho-capitalist strain that respects human rights and individuality. I’d like to point out that they call the capitalists the slavers all the while advocating for socialism and communism, systems with large central planners that enslave their entire population in order to achieve the economic goals of a rich few. Just look at Soviet Russia or any other socialist or communist regime. Look at the United States with its taxation and rapidly socializing economic policies. If, as the author above claims, it is slavery to take 100% of someones income at what percentage is it no longer slavery but “taxation”? Who is really advocating for slavery here? Certainly not the one advocating for the freedom and respect of the individual.

1. Walker, Deborah L. “Austrian Economics.” , by Deborah L. Walker: The Concise Encyclopedia of Economics. N.p., n.d. Web. 29 Sept. 2014. <http://www.econlib.org/library/Enc1/AustrianEconomics.html>.


Refuting Salon: 7 Huge Misconceptions Part 1

Here at Logical Anarchy we follow Salon on Twitter. It’s mostly because Salon is hilarious and the logic they use to argue their points are idiotic. Everyone needs a good chuckle once and while. But recently, and I don’t know how I missed this 8 months ago, they retweeted an article by Jesse Mayerson entitled “Why you’re wrong about communism: 7 huge misconceptions about it (and capitalism)“. The article is laughable and the economics is completely flawed. The aim here is to take all 7 claims and show that only an imbecile would believe them to be true. Part one here will deal with point one. To explain how they are wrong will take more than one article, so each point will be an article all its own.

1. Only communist economies rely on state violence.

The article first makes a laughable assumption by saying that taxation is “social justice.” Hilarious. As if taking property that does not belong to you and passing it along to people who did not earn it is somehow “justice”. This is a prime example of how statists make a “moral free” zone for their government. If I stole from someone, and even gave it to someone else less fortunate, I would pay the price. Somehow, if I throw on a magic suit and badge and steal from someone else, I’m dealing out “social justice”.

But state violence (like taxation) is inherent in every set of property rights a government can conceivably adopt – including those that allowed the aforementioned hypothetical baron to amass said fortune.”


I’m glad that they acknowledge that taxation is violence but it only serves to highlight that socialists are violent people. This single sentence shows that they totally carve out a moral vacuum for their god, the Almighty State. Violence done by individuals is wrong, but violence done by the state is good. This is the illogical premise their whole economic opinion rests upon. Secondly, they somehow think that private property is compatible with government. Mises has already pointed out that it is not.


“All those in positions of political power, all governments, all kings, and all republican authorities have always looked askance at private property. There is an inherent tendency in all governmental power to recognize no restraints on its operation and to extend the sphere of its dominion as much as possible. To control everything, to leave no room for anything to happen of its own accord without the interference of the authorities. This is the goal for which every ruler secretly strives. If only private property did not stand in the way! Private property creates for the individual a sphere in which he is free of the state. It sets limits to the operation of the authoritarian will. It allows other forces to arise side by side with and in opposition to political power. It thus becomes the basis of all those activities that are free from violent interference on the part of the state. It is the soil in which the seeds of freedom are nurtured and in which the autonomy of the individual and ultimately all intellectual and material progress are rooted. In this sense, it has even been called the fundamental prerequisite for the development of the individual. But it is only with many reservations that the latter formulation can be considered acceptable, because the customary opposition between individual and collectivity, between individualistic and collective ideas and aims, or even between individualistic and universalistic science, is an empty shibboleth.

Thus, there has never been a political power that voluntarily desisted from impeding the free development and operation of the institution of private ownership of the means of production. Governments tolerate private property when they are compelled to do so, but they do not acknowledge it voluntarily in recognition of its necessity.”1

Government does not mix with private property. As Mises points out, private property makes for government, an area of society they cannot control. Being that government is always being lead by controlling psychopaths, it’s something the State does not like and will continually infringe upon. This means violence against the individual and their property. Communism and socialism require complete economic control over a society, or central planning, that means planning by the individual becomes almost impossible.2

The author then goes on to describe property rights in the most twisted fashion. They of course have to make reference to the Koch Brothers because all liberals have a weird fascination with them. I love how they say people own property because government says so. Isn’t that just hilarious? To quote Bastiat, “Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.”3 Isn’t that Statism in a nutshell? “I can’t imagine owning anything unless government has given me permission to do so.”

From there the author tries to confuse the reader by confusing “possessions” as separate from “property”. “When Marxists talk of collectivizing ownership claims on land or ‘the means of production,’ we are in the realm of property; when Fox Business Channel hosts move to confiscate my tie, we are in the realm of personal possessions. Communism necessarily distributes property universally, but, at least as far as this communist is concerned, can still allow you to keep your smartphone. Deal?”

Can you see the fallacy? Here is the thing. If you own your body, you own the work and fruits of your labor that your body produces. You own that which you use to create the fruits of your labor, namely “possessions” like land, machinery, raw materials etc. To try and confuse external possessions as separate from property only highlights their agenda. They need to confuse these terms in order to make the violence of the state through taxation seem moral and just. As far as the smartphone is concerned. If the means of production is centrally controlled, that means that they control the choices you have with your smart phone. And to think that Android or Iphones could possibly be invented under economic systems that frequently experience shortages of scarce resources, you would have to be an imbecile.Something like a tie that you gained justly in the market place is as much “private property” as land that you acquired justly through the same methods. There is no distinction.

To control the “means of production” is to control all the rest of human existence. To play with the semantics of private property as to allow the State room to take away that which it wishes, is to give the State the authority to take away all that you have (including your smartphone, which would not have been created in socialism or communism). Communism requires that a central economic plan be mandated for all individuals, regardless of their own personal wishes, value scales and dreams. Being that humans are a stubborn creatures (because each on is an individual), violence is a necessary tool of the central planner in order to make their socialist/communist plan work.

Violence is inherent in the system! So long as someone plans for someone else, violence will be used in order to limit the property of the individual, their economic choices, and any other aspect of their lives.

1. Mises, Ludwig Von, and Bettina Bien. Greaves. Liberalism: The Classical Tradition. Indianapolis: Liberty Fund, 2005. Print.

2. Hayek, Friedrich A. Von, and Bruce Caldwell. The Road to Serfdom: Text and Documents: The Definitive Edition. New York: Routledge, 2008. Print.

3. Bastiat, Fredric. THE LAW (n.d.): n. pag. Web.

4. “Soviet Food Shortages | Making the History of 1989.” Soviet Food Shortages | Making the History of 1989. N.p., n.d. Web. 27 Sept. 2014. <http://chnm.gmu.edu/1989/items/show/182>.


What is Money? (Part 1: Origin)

What is money? Is money simply the paper bills and notes that we use today? Is it the digits in your bank account when you check it on online? Or, is money actually something far more complicated and intriguing? What constitutes money and the nature of money would probably surprise most people, but as with most things that have to do with economics, the truthful answer is bigger than just “paper with dead Presidents on it.”

Origin:
The origin of money and its uses are interesting. To begin, there are two types of exchange. There is direct exchange and there is indirect exchange.1 Direct exchange is when persons “A” and “B” exchange commodities “x” and “y” with each other. Person “A” exchanges commodity “x” for commodity “y” so that they may immediately use or consume product “y”. Person “B” has the same intention when they exchange commodity “y” for “x”. This is “direct exchange”.

Mises points out that indirect exchange is possible when there is more than two types of commodities and more than 2 people in a market. Mises explains it best here:

“Let us suppose that A brings to the market two units of the commodity m, B two units of the commodity n, and C two units of the commodity o, and that A wishes to acquire one unit of each of the commodities n and o, B one unit of each of the commodities o and m, and C one unit of each of the commodities m and n. Even in this case a direct exchange is possible if the subjective valuations of the three commodities permit the exchange of each unit of m, n, and o for a unit of one of the others. But if this or a similar hypothesis does not hold good, and in by far the greater number of all exchange transactions it does not hold good, then indirect exchange becomes necessary, and the demand for goods for immediate wants is supplemented by a demand for goods to be exchanged for others.”1

What he means to say is that, suppose the subjective value or marginal utility bestowed upon each commodity by all the actors makes direct exchange impossible. This means that each person must trade the commodities they have for transitory commodities, or commodities they specifically acquire with the intention of trading them for the commodities they desire to consume. As you can see this method analyzes “the individual and his actions and choices as the fundamental building block of the economy.”2 It puts the individual at the center, or as the progenitor of all economic activity. This is key to understanding how money comes to be.

Now the above examples of indirect and direct exchange show how both methods of exchange can fall short. It’s a hassle to find someone who has exactly what I want, and who wants exactly what I have in order to trade. It is also a hassle to make all of these trades for items I don’t want to consume in order to eventually make the trade for the item I do want. Direct exchange is out of the question as a method of finding a short cut because indirect exchange becomes necessary as the division of labor becomes more refined.1 Indirect exchange can still work if there is a common medium of exchange i.e. money, “Thus along with the demand in a market for goods for direct consumption there is a demand for goods that the purchaser does not wish to consume but to dispose of by further exchange.”1 This is how money came to be in the forms of gold and silver.

Both gold and silver were rare materials that had functions outside of money, such as jewelry and other such products, therefore it functioned well as a valuable, rare but not too rare, medium of exchange. A commodity that was widely accepted for other goods. This is kind of where it gets a little interesting (at least for me). Not only does the commodity used as money gain value from its secondary uses, but it also gains value from its use as money as well. This seems to develop over time.

A question still remains. How do we come to accept something as a common media of exchange? Sure, once everyone else accepts it, the individual is willing to accept it too. But how does a market get to that point? What incentive is there to accept worthless pieces of paper or metal as something that is a common media of exchange?

“It was in this way that those goods that were originally the most marketable became common media of exchange; that is, goods into which all sellers of other goods first converted their wares and which it paid every would-be buyer of any other commodity to acquire first. And as soon as those commodities that were relatively most marketable had become common media of exchange, there was an increase in the difference between their marketability and that of all other commodities, and this in its turn further strengthened and broadened their position as media of exchange.”1

Carl Menger, the founder of the Austrian School of economics, argued that money did not come about by government edicts, or anything like that. He argues that money came about spontaneously through self-interested individuals and their actions. “In order to understand how this could have occurred, Menger pointed out that even in a state of barter, goods would have different degrees of saleableness or saleability. (Closely related terms would be marketability or liquidity.) The more saleable a good, the more easily its owner could exchange it for other goods at an ‘economic price.’ For example, someone selling wheat is in a much stronger position than someone selling astronomical instruments. The former commodity is more saleable than the latter.”3

During ancient times, the various forms of money used were used as money simply because the people involved in trade had subjectively valued commodity “x” as more “marketable” than commodity “y”. Thus, commodity “x” was more widely accepted than ‘”y” meaning it had greater potential of becoming “money” within a barter system. Back then, things like gold, silver or any other precious metal, was deemed valuable and more marketable than anything else. Not only that, but it was somewhat rare, had secondary uses, and was durable. This meant that it would not degrade with time and therefore lose value.

Money did not occur because some king decided that a certain commodity should be used as money (the problem with this idea is that this ruler would have to know the exchange ratio for every commodity that it would be traded for, which is impossible). Money came about through anarchy. Money came about spontaneously through individuals trying to economize their trade. Governments only come into the equation later, usually, to mess this amazing system up.

1. Mises, Ludwig Von. The Theory of Money and Credit. New Haven: Yale UP, 1953. Print.
2. Rothbard, Murray N. “Money and the Individual.” Mises Institute. Mises.org, 02 Mar. 2010. Web. 22 Sept. 2014. <http://mises.org/daily/4155>.
3. Murphy, Robert P. “The Origin of Money and Its Value.” Robert P. Murphy. Mises Institute, 29 Sept. 2003. Web. 24 Sept. 2014. <http://mises.org/daily/1333>.

Deflation, a Fair Assessment.

You’ve probably heard about how bad deflation is for the economy. It’s usually some analyst on one of the major news networks warning that deflation would be terrible and the economy would suffer. I want to take a little time with my first post on this blog and talk about the basics of deflation and inflation from a free market perspective. 

Inflation
Let’s start with correctly defining what inflation is. Inflation is an increase in the money supply. The state accomplishes this (assuming the state has a monopoly on the money supply) by actually printing more dollars. Now they can just enter more zeros on a computer screen. The Federal reserve is unfortunately in a position to control the United States money supply. In recent years they have been increasing the money supply through something called Quantitative Easing. An argument you will hear today is that inflation is only 2%, but remember that’s by the government’s own measurement. They don’t count food and energy in their measurement either. It just might be a little biased. Energy prices are going up. If you shop at the grocery store you know that food prices are going up. One of the ways we are seeing this today is the reduced size of food packaging. I’m not sure what the exact price of a can of tuna is but I’m going to use it as an example. Say you were able to get a 6 oz can of tuna for $2, well now that same $2 will get you a 5 oz can. That is a symptom of inflation. Cost of living prices are going up. Inflation hurts and punishes the saver, your savings account APY (0.95%, highest I found online) is definitely not going to be high enough to keep up with even what the state says the inflation rate is. Even a decent investment might not keep up with inflation today. 

According to the mainstream consensus, rising prices (a symptom of inflation) are a sign of a healthy economy. In their view, inflation is a sign of economic activity. What kind of economic activity is getting less of something for more money? True economic growth comes when an economy becomes more efficient and products cost less than they did before. Look at cell phones and technology in general. Is it a bad thing that these things are becoming accessible to more people? No, that’s efficient economic growth. It’s about becoming more productive. When the fork lift was invented it allowed one person to do the job of many. Now the people that were not needed for lifting and moving are able to do something else, where they will be more efficient in the economy. This process helps lower production costs which in turn helps prices fall; it’s a good thing. That’s economic growth. 

Deflation
There are multiple ways that prices can fall. Demand falling for a certain product can cause prices to fall and reduce production for that product. Increased production of goods and services can lead to falling prices. A general fall in prices can come as a result of the shrinking of the money supply. This kind of deflation that comes with an economic downturn is a response to inflationary policies from the state, or central banks. The money printing before the downturn, the building of the economic bubble is the real issue. This process misallocates money and resources by bad money (printed money, inflated money) chasing activities that don’t produce real wealth (i.e. recent housing bubble). It’s when it becomes obvious that this growth is not real and is in fact unsustainable that the bubble bursts and the economy re-adjusts. That’s when deflation can hit on a larger scale. It’s the painful correction taking place. 

So why is this correction good? Well think about the housing bubble. When prices came back down, this was good for home buyers. It was not good for those looking to make a quick dollar just buying and selling houses (not fixing them up or adding any value to the home). The home prices had climbed so high, they were unaffordable for people in the market to buy. It was clearly unsustainable. The deflation following that bust is healthy. Your money can now buy you more than it could previously. One argument you’ll hear against deflation is that nobody would buy anything because everyone would be waiting for a lower price. I don’t know about you, but I’m certainly not going to starve because I think this apple could be cheaper tomorrow. I have time preferences. Yes, cell phone prices will probably drop but I still need a cell phone today. Am I not going to buy a $350 cell phone now because in the future the same phone could be $300? I’m not going to wait because I want one now, I have a preference to use it now. Let’s say deflation does have an effect on how consumers act, why would businesses and entrepreneurs not be able to anticipate this? They have to anticipate inflation and how that might affect their business plans in today’s climate. 

Were the Federal Reserve’s policies not so inflationary, we wouldn’t feel the deflation so bluntly. Unfortunately we associate deflation with economic crisis thanks to the Fed. There’s a lot related to this subject and much more that can be said; inflation and war debts, fraction reserve banking, fiat currency, purchasing power and so on. I know Jon has covered some of these in previous posts and I plan to cover some of these in forthcoming posts. 

1) Shostak, Frank “Is Deflation Really Bad for the Economy” – Frank Shostak N.p. Web. 11 Aug. 2010. <http://mises.org/daily/4618/Is-Deflation-Really-Bad-for-the-Economy>.

2) Hollenbeck, Frank “What’s So Scary About Deflation?” – Frank Hollenbeck N.p. Web. 26 Jun. 2013. <http://mises.org/daily/6459/Whats-So-Scary-About-Deflation>.


Intellectual Property, Patents, and Pants

YOU CANNOT ARRANGE YOUR PROPERTY IN A WAY THAT IS SIMILAR TO MINE!

What is intellectual property? There is a lot of confusion out there, even among those that call themselves “libertarian” and champions of freedom and private property. Within libertarianism you will hear debate about whether intellectual property and patents are good for economic activity or not. But the problem is that on the surface, intellectual “property” and patents actually give certain individuals the ability to control the property of others. Libertarians, anarchists and voluntaryists should be strictly opposed to controlling the property of others through violence and coercion. This is a violation of the non-aggression principle which states that violence against another person or their property is inherently unjustified.

But patents and intellectual property is simply one person saying “I can use violence and force to throw you in a cage because you used your own property and arranged it in a way similar to my property.”

“IP rights, at least for patents and copyrights, may be considered rights in ideal objects. It is important to point out that ownership of an idea, or ideal object, effectively gives the IP owners a property right in every physical embodiment of that work or invention.”1 It is nothing more than having the monopolistic ability to control the property of others, keeping them from arranging their property in ways similar to yours thus making it impossible for competition to arise.

I can hear the naysayers now. “But if we give our inventors and creators monopolies on their ideas, there will be more incentive to create innovative ideas!”

False.

You would think that something that uses intellectual property, like the film industry, would show great wealth and innovation compared to something that did not (like the fashion industry). Apparently, the fashion industry dwarfs the film industry. I mean think about it. The dress or shirt you bought at Target or Ross was ripped off of some super expensive runway dress. Yet, no one freaks out. Designers steal ideas from each other all the time. It creates an environment of competition where you are forced to stay on your toes and stay innovative with your designs in order to keep people interested in them.2

Can you imagine if pants or sleeves were patented? Can you imagine the terrible clothing that would be available to us if only one person had the “legal” monopoly to design pants or sleeves? It would be terrible and significantly less innovative than the fashion available now.

The reason patents for sleeves and pants sounds ridiculous is that you very clearly see the fallacy of IP. You see that IP is only partially based off of actual property rights. Actual property rights apply to tangible goods you acquire (lawfully) through trade. This is because these tangible items are scarce, so protecting scarce items makes total and complete sense. Ideas and recipes on the other hand, are not scarce like a tangible item. So when you see patents and IP laws applied to ideas like sleeves and pants, you instantly see the logical disconnect.2

So how does one protect ones inventions and ideas? You do so through other scarce resources like top notch service and other benefits that are scarce, not through a broken legal system that allows you to control the tangible property of others through an intangible idea you have.

1. Kinsella, N. Stephan. Against Intellectual Property. Auburn, Ala.: Ludwig Von Mises Institute, 2008. Mises Institute. Mises Institute. Web.

2. “Intellectual Property Is Bad for Business.” Center for the Study of Innovative Freedom RSS. N.p., n.d. Web. 20 Sept. 2014.

2.