A Brief Comment on Ted Kennedy

The long-baseless tradition of treating the recently deceased with respect regardless of their past conduct, as if death exonerates us of our transgressions, of course should not apply whatsoever when it comes to the late "great" Senator Ted Kennedy.

Along with the Roosevelts, the Kennedy family has the distinction of, for years, being reliably and routinely scornful of individual rights and have used their economic and political power in myriad ways to subvert our market economy, Teddy being one of their most fervent members. He has made a career out of augmenting and perfecting the coercive authority of the State to the detriment of the American people, erecting and supporting an array of legislative enhancements that have helped plunge our economy into a macroeconomic abyss of government invigilation and coercive intervention.

Now, while having been the beneficiary of a horribly mistaken resolution to release his carcass into a now forever desecrated hole adject to and flanked by legions of men and women of tremendous courage, pride, and honour at Arlington Cemetery effectively creating a most lamentable symbolic contradiction, he is further celebrated by a droolingly, shamefully prostrate media that has taken the time these passed few days since his midnight expiration to wallow in sentimental, romanticized Kennedy nostalgia. Though he is adored by left-liberals far and wide, it is a sickly love that follows from ignorance, from an erroneous evaluation of his convictions, decisions, and actions. As popular assessments of tyrants passed have changed when not-so-flattering knowledge was finally acquired by a once favorably disposed and naïve populace, one can wager that America's love affair with the "liberal lion" would collapse with equal haste and accompanied by equal disgust if its citizens were to ever become cognizant of the sloppy, moral filth of this man.

Economic Policy Journal

I have been writing for economicpolicyjournal.com, a website run by economist and consultant Robert Wenzel, lately which explains my absence. I have two columns on his site thus far and all of my work there can be viewed here:

http://www.economicpolicyjournal.com/labels/MichaelLabeit.html

A Critique of "Religious Roots of Liberty" by Reverend Edmund A. Opitz

Does liberty, the absence of the initiation of physical force, depend upon the intellectual edifice of religion? Rev. Edmund A. Opitz would have us believe so, arguing that popular religious belief is a necessary condition for the existence of liberty in an essay of his just posted by the Mises Institute. Unfortunately for the good reverend his argument fails to prove his conclusion.

In his introductory paragraph of his article "Religious Roots of Liberty" Rev. Opitz muses on the nature of tyranny, correctly stating that tyranny may come from a single ruling despot as well as from a democratic mob. History certainly confirms this fact. Opitz then begins this next paragraph with

"Liberty rests upon the belief that all proper authority for man's relationships with his fellow men comes from a source higher than man — from the Creator. Liberty decrees that all men — subject and ruler alike — are bound by this higher authority which is above and beyond man-made law; that each person has a relation to his Maker with which no other person, not even the ruler, has any right to interfere."

It is an irritating habit of the religious to, among other things, impetuously presume the existence of a "Creator" or of a divine consciousness, as if the existence of one is a demonstrated fact. Opitz hinges his entire argument upon the claim that an intervening, meddling god exists. To prove his proposition regarding the relationship between liberty and the "Creator," Opitz would have to prove the antecedent assertion that such a "Maker" is existent. It cannot be countered that by "Creator" and "Maker" Opitz refers to nature for he makes it quite clear that his is a distinctly Judeo-Christian philosophy.

Opitz goes on to emphasize the fact that unlike the various other famous ancient civilizations that archaeologists and historians have documented and studied, Palestine has the distinction of perhaps being the only one thus examined who's political authorities were humble and subservient enough to refrain from either proclaiming their own alleged majesty or christening laws with their personal, egotistical inscriptions declaring that their authority was what formed the basis of rules of social conduct. Opitz writes

"An authority states that there is not a single royal inscription from any of the Bible kings. The Prophets saw to that! No boastful king in ancient Israel would have presumed to leave an inscription dedicated to his own glory, much as he felt he deserved such. The Prophets would have quickly put such a king in his place, and popular resentment would have run high against such inflation of human pride."

By constrast, according to Opitz,

"In Greece and Rome there were men noted as great lawgivers: Lycurgus, Solon, Justinian and others. In other countries there were royal decrees by the thousands. A law would be promulgated with some such words as, "I, the King, command…." In Egypt and in Babylon, even as in Greece and Rome, authority for a law stemmed from a man, the ruler. But in Palestine the situation was different."

Not to say that the Israelites dwelled in a state of anarchy, of lawlessness, which Opitz denies, rightly so. They, Opitz holds, viewed the God of Abraham as the exclusive authority behind laws. Opitz subsequently offers quotes from the Old Testament that confirm the fact that the God of Abraham demanded recognition as the authority behind "statutes," that God commanded the Israelites to abide by and enforce his declarations and that the Jewish prophets/authors of Isaiah recognized the God of Abraham as the ultimate "judge," "lawgiver," and "king." "This," Opitz concludes, "is the system of law, laid down in the Scriptures, expanded and interpreted by human reason, of' which the Psalmist said, "[H]is delight is in the law of the Lord; and in his law doth he meditate day and night" (Ps. 1:2)."

Again, that the God of Abraham did these things presumes the existence of such a being which Opitz does not burden himself with proving in his piece. If the existence of the God of Abraham is proposed without evidence, then such a proposition is arbitrary. Furthermore, if God's existence is in question here, then why should we trouble ourselves with God's commandments (broadly speaking)? If God is not proven to exist, then it cannot be concomitantly suggested that he said such things. Surely if his existence is submitted arbitrarily, then his status as a "judge," or "lawgiver," or "king" must be equally arbitrary. It may be countered that the proclamations of Scripture are sound regardless of whether the author was divine or not. I am inclined to argue against this point but given that Opitz clearly presumes the existence of a divine consciousness, I will hold it against him if he fails to prove its existence.

Opitz further writes that

"Nearly every man was learned in this [God's] law, and also deeply involved in the religious relation to God in which the law was rooted — and liberty was a precious by-product of these conditions. Establish these conditions — that is, widely held religious values in which God is regarded as the source of authority and justice, superior to any earthly power — and they provide a firm foundation for political liberty."

Let us scrutinize this sweeping claim from a historical perspective. No doubt we are all aware of the fact that God's injunctions to the Israelites demanding that they massacre opposing tribes within Palestine glitter the Old Testament. Take the following Biblical verse 1 Samuel 15:2-3:

"This is what the LORD Almighty says: 'I will punish the Amalekites for what they did to Israel when they waylaid them as they came up from Egypt. Now go, attack the Amalekites and totally destroy everything that belongs to them. Do not spare them; put to death men and women, children and infants, cattle and sheep, camels and donkeys.'"

As part of making the maximum amount of logically permissible concessions and taking opposing arguments at their strongest, let us assume that the Israelites were indeed attacking the Amalekites in righteous retaliation for what they had done to them previously. This still miserably fails to justify killing the "children and infants, cattle and sheep, camels and donkeys" of the Amalekites. Children and infants do not possess a sufficient ability to reason, therefore they cannot be depended upon to make rational decisions, therefore they cannot morally be blamed or punished in such a draconian way. Furthermore, given the very limited cognition of children and infants, there is no way they could have contributed significantly to any war effort against the Israelites on behalf of the Amalekites. And why kill the animals? Killing them for food is one thing but the passage in Samuel suggests that God wanted them killed en masse because they were simply the previous possessions of the Amalekites and that by slaying them the Israelites would be effectively extinguishing the memory of the tribe of Amalek from history.

Surely this undermines Opitz's claim that popular acceptance of religious values and broad adherence to God's commands over those of men yields liberty. It certainly did not produce liberty for the Amalekite youth. Moreover, liberty as the absence of the initiation of physical force grants no one the right or moral authority to use deadly coercion against children. Au contraire, it appears that popular acceptance of religious values and broad adherence to God's commands over those of men very easily yields tyranny and socio-economic ruin.

Naturally, Opitz argues that abandoning religious values and reverence for God inexorably paves the way toward repression. In addition he concedes that even the devoutly religious are vulnerable to ingorance which can prove to obstruct the maintenance of liberty. Yet despite this, Opitz maintains that liberty is contingent upon religiosity.

Opitz immediately follows with perhaps the most erroneous portion of his entire piece saying

"Collectivist regimes, in the nature of things, must be profoundly irreligious, even to the extent of pressing a corrupted religion into service to shore up tyranny. Genuine religious experience entails the recognition of an inviolable essence in men, the human soul. It inculcates a sense of the worth and dignity of the person and breeds resistance to efforts to submerge individuals in the mass."

I must admit that I barely completed these two statements without blowing a fuse in disgust. It takes real nescience to argue that collectivist governments per se must be irreligious. In order to rebut Opitz's claim, let us analyze what Opitz means by "religious." Given that Opitz is of the Judeo-Christian persuasion and that he extols the subordinate behavior of the Jewish kings with respect to law, I believe its safe to say that when Opitz asserts that "Collectivist regimes, in the nature of things, must be profoundly irreligious, even to the extent of pressing a corrupted religion into service to shore up tyranny," he means that "Collectivist regimes in the nature of things, must be profoundly unJudeo-Christian, even to the extent of pressing a corrupted religion into service to shore up tyranny." Surely he does not give credit to religion per se - after all, the many enemies of the Israelites including the Amalekites and the Egyptians were deeply religious. Opitz isn't hawking religion, he is hawking Judeo-Christian faith. Surely he does not hold that Egyptian or Amalekite or Islamic or Hindu mysticism can offer us mere mortals the salvation provided by Judeo-Christianity. It is perhaps safe to say that Opitz would not be alarmed by a lack of Shinoist devotion; it is a lack of Judeo-Christian piety that he warns against. Similarly, when Opitz claims that "Genuine religious experience entails the recognition of an inviolable essence in men, the human soul," he must mean that "Genuine Judeo-Christian experience entails the recognition of an inviolable essence in men."

Now, can it be said that collectivist regimes must necessarily be unJudeo-Christian? A cursory look at European history reveals that Europe has had an extraordinarily chronic, centuries-old problem of oppression wraught by self-professed Christian governments. The infamously autocratic Romanov Dynasty, with its ritual pogroms and its fetish for militarism, had represented itself as the harbinger of Orthodox Christianity for countless Russian generations. Christopher Hitchens has tirelessly stressed that fascism has roots in Catholic politics. Benito Mussolini and António de Oliveira Salazar were both self-professed Roman Catholics. General Franco, a Catholic as well, invaded Spain with a Muslim mercenary army (what Hitchens dubs "ecumenical outreach") with a moral sanction from the Vatican. According to Paul Johnson, a Catholic historian mind you, 50% of the Waffen SS was staffed with confessing Catholics. The more recent bouts of ethnic cleansing and genocide attempts perpetrated by Slobodan Milosevic were inspired, according to Milosevic and his cohorts, by their Christian faith. Atheists have become well-adept at recalling instances of religiously-inspired violence given that the religious have given us so many examples from which to choose.

It may be counter-argued that these examples of alleged Christian-inspired bad behavior are indeed unChristian because they contradict the essential teachings of Jesus. I actually accept this argument as I do believe its more than a stretch to compare the convictions and actions of Christ with the policies and procedures of European fascists. However, would a social system based upon the claims of Jesus Christ be a liberty-loving one? No.

Christ issued many commandments and subcommandments that, taken seriously, would ruin a nation adopting them and serve the worst among us. He, according to Luke 6:30, encouraged others to "give to everyone who asks you, and if anyone takes what belongs to you do not demand it back." If this is a true "ought" proposition, then as Craig Biddle writes, "the legitimacy of increased welfare spending and taxes is simply unassailable." Jesus also counseled people to "turn the other cheek" when assailed, hardly a rational response to coercion - nothing could encourage further aggression from one's enemies. Slavery was well established at the time Christ lived and preached in Palestine and, even with conditions like these, there are no quotes within the Bible that indicate any specific opposition from Christ against slavery. On the contrary, as Jesus said [Matthew 10:24-25]

"A disciple is not above his teacher, nor a servant above his master. It is enough for the disciple to be like his teacher, and the servant like his master. If they have called the master of the house Beelzebul, how much more will they malign those of his household."

It is commonly believed that by "servant" Jesus meant "slave." It is fair therefore to argue that Jesus considered slavery as morally permissible. This fact alone would, by definition, evict the principle of liberty from society if institutionalized as part of a social system. A society based upon the convictions of Christ would have to at least sanction slavery if it wished to remain Christian.

Can dignity and self-worth, two products of religious piousness according to Opitz, survive "turning the other cheek," giving liberally to all who ask, and being, as a slave, the recipient of unchosen duties? Please.

Opitz continues by claiming, as many religionists do, that America is the product of faith-based fervor and lends limited credit to "the rationalism of the Enlightenment" for civilizing the early Puritans who are now well known for being notoriously and unbelievably superstitious and unwitting. I can't help but disagree with Opitz's allegation that "The Enlightenment by itself in France ran its course and became its own caricature. It teamed up with a revolution at the end of which was Napoleon."

The true political economy advanced under the rubric of the Enlightenment began with John Locke and stressed the recognition and protection of negative, individual rights including rights to life, liberty, and private property as well as limited government. Enlightenment political economy was developed by Thomas Jefferson, Thomas Paine, Charles Montesquieu, Adam Smith, Voltaire, Patrick Henry, Benjamin Franklin, John Adams, and James Madison, among others. They all advocated the "rights of man;" by contrast, the French Revolution represented not the manifestation of Enlightenment rationalism, not of a revival and reinvigoration of Greek and Roman philosophy and jurisprudence, but the first "green shoots" of romanticism and a European communitarian collectivism.

In addition to this, it must be stressed that the Enligtenment thinkers were predominantly liberal Christians, deists, and skeptics, not fundamentalists. They pioneered the concept of a free society without clinging to heavy-handed mystic spirituality. Jefferson rewrote the New Testament and deducted the divinity of Christ. Paine's Age of Reason begins with his contempt for organized religion. The Framers (the best of them anyway) were, for the most part, nothing like our modern-day, "shout and holler" evangelicals.

Opitz resumes declaring that liberty requires religiosity but fails to ultimately identify any causal connection between the two. He insists that one exists but how may we be convinced of this when a primary virtue of all religion, especially Christianity, is faithfulness - belief without evidence; the acceptance of arbitrary propositions as true. It is faith that condemns religion more so than any other facet because faith forms the very epistemology of religion. Faith counsels unchecked, unverified belief. I agree with Hitchens that if one thing could be changed about the discourse within this country, it should be the approbation people lend to those who announce that they are "men and women of faith," for to confess such a thing is equivalent to disclosing that one is willing to absorb a tremendous amount of information on pure trust. Such an approach promises the very opposite of what Opitz asserts; a faithful person is a gullible person and a gullible person is susceptible to demagoguery, deception, and everything tyrants use to consolidate and centralize political power. Politicans have for millenia thrived off of unaware citizens. Religion supplies them with fresh pools of servilty and obedience, the product of a commitment to faith and the rejection of a rational mentality.

On the Mathematical Inadequacy and Parasitism of Socialism

Throughout her works, Ayn Rand depicted evil as neither rational nor productive but as weak and feeble. This insight applies wonderfully to the concept of socialism.

What is Socialism?

Socialism is a social system where the means of production or factors or production or productive factors or producer goods are owned by, and therefore controlled by a single agency, namely the government. Like all producers for mass consumption, producers under socialism must answer three perennial questions:

-What to produce?
-For whom to produce it?
-How to produce it?

Producers under socialism can answer the first two questions but not the last.

Why Rational Economic Calculation is Impossible under Socialism

-A Preliminary Description of Production

Economic calculation in this context refers to the practice of identifying the quantitative difference between one's gross revenue and one's cost. All action involves revenue and cost. To "act" means to use one's resources to attempt to exchange one state of affairs in favor of another state of affairs. The revenue of an act is the gross benefit it affords an actor. The cost of an act is the forgone next best use of one's resources. A positive difference between gross revenue and cost is called "net revenue" or "profit." A negative difference between gross revenue and cost is called "loss." A cost-benefit analysis demonstrates whether an act was "worth it," i.e., whether gross revenue sufficiently exceeded cost. In a complex economy, revenue, cost, profit, and loss are all expressed quantitatively, i.e., in terms of a monetary unit.

The purpose of an entrepreneur in a social context is to satisfy market demand by using factors of production to produce goods, either consumer goods or further productive factors. Productive factors are goods that indirectly satisfy consumer demand by enabling the production of other factors of production or of consumer goods. Consumer goods are goods that directly satisfy consumer demand. For example, a consumer good such as an operating T.V. must be produced using a multitude of productive factors, from electricity to electricity-generating infrastructure to metal alloys and plastic composite parts, etc. Productive factors fall into three categories: land, labour, and capital goods. Land refers to productive space and natural resources, labour to human effort and capital goods to all factors that are produced with human effort as well as reproducible with human effort. Its the obligation of an entrepreneur to acquire these productive factors and use them to assemble goods that their customers desire. Yet, within a complex, monetary economy, there are billions upon billions of productive factors to choose from. Entrepreneurs must choose among these billions.

-The Mathematical Dilemma

Again, socialism is a social system where the non-human factors of production are owned exclusively by a central organization - the government. From this, we can deduce the conclusion that under socialism the market for productive factors is legally abolished. The market for productive factors, the network of voluntary exchanges of ownership claims over productive factors, is illegalized. Thus, we may further deduce that under socialism no productive factors may be labelled with market prices. A market price is a term of exchange arising through the voluntary association of two parties; it relates to potential buyers how much of what they must surrender in order to acquire a good for sale. Nationalized productive factors cannot be labelled with market prices, with terms of exchange, because by definition under socialism government ownership of the factors of production may never be relinquished. Terms of exchange over goods cannot possibly exist if those goods may not be exchanged in the first place, for terms of exchange imply the possibility of exchange. Real terms of exchange of a good cannot be agreed to by two parties if the owner of the good in question refuses to consider his good as exchangeable. Thus, under socialism the factors of production are truly priceless.

The problem of socialism is that since it forbids the labelling of productive factors with market prices, it subsequently prevents entrepreneurs from identifying their costs of production. Costs of production are prices themselves representing the prices entrepreneurs pay in order to acquire and use factors of production. Even allowing for the right of labourers to bargain for wages, a socialist society would still be unable to identify the monetary costs of acquiring and using land and capital goods since these productive factors would be the exclusive goods of the State and therefore off limits to market participants. Since producers under socialism are prevented from identifying their true costs of production, they subsequently are prevented from identifying the quantitative difference between their gross revenue and their costs, i.e, from engaging in rational economic calculation. Socialism prevents entrepreneurs from engaging in mathematical analyses; it literally makes conclusive deductive reasoning impossible.

If costs equal "y" and revenue equals "x," the difference "z" between the two would equal "x-y" as follows:

: x - y = z

A producer under socialism would be able to identify his revenue simply by analyzing his monetary sales. Let's say producer (A) made a gross revenue of $100 monetary units. In order to identify his cost-revenue difference he would be saddled with trying to identify "y" in the above equation. Of course, he could partially solve for "y" as follows:

: $100 - y = z
: ($100 - y) - $100 = (z) - $100
: -y = z - $100
: -1 • (-y) = -1 • (z - $100)
: [y = -z + $100]

Such simple algebra works through a process called transposition by inverse operations. To solve for "y," "y" is isolated and turned into a positive number. So while a producer under socialism could identify his costs as "-z + $100" such a number is entirely inadequate for purposes of economic calculation because it is a binomial containing an unidentified variable. So, in summary socialism makes rational economic calculation impossible by abolishing the market for productive factors and therefore the rational pricing of productive factors. It reduces costs of production to a vague binomial making a mathematical analysis of the cost-revenue difference impossible. Furthermore, by making the identification of costs of production impossible both before and after production occurs, socialism prohibits producers from evaluating alternative courses of production. As stated above, entrepreneurs must choose among billions of productive factors. Without market prices for productive factors, an entrepreneur cannot identify the most cost-effective course of production. Should entrepreneur (B) ship his goods by land, by air, or by sea? Who knows, for under socialism, capital goods such as planes, trains, trucks, and ships would be owned by the government and consequently off limits to market pricing.

-The Roots of Socialism's Mathematical Failure

The economic calculation problem is fundamentally a private property problem. Socialism banishes respect for private property rights in productive factors, the freedom to control the productive factors one produces and/or earns through production and voluntary exchange. Socialism institutionalizes the use of force, of non-consensual disruptive physical contact, against those who wish to exercise their right to private property. This institutionalized coercion infringes upon man's freedom of action, prohibiting him from enjoying the product of his productive effort, of his commitment to rationality. Socialism, by mandating coercion against private property holders, abolishes the intellectual division of labour, the network of market participants who, by bidding for productive factors, indicate to all market participants the monetary value of productive factors. Socialism, by abolishing voluntary associations between productive factor sellers and potential productive factor buyers, effectively abolishes the dissemination of information. Thus socialism is both prohibitive mathematically and epistemologically. It stunts the growth of man by submitting him to legalized aggression.

-Why Socialism Needs Capitalism in Theory and in Practice for its Continued Existence

As we have seen, socialism prohibits the dissemination of crucial production information by enforcing systematic physical coercion against market participants. Yet even though socialism does this, the question producers must answer - how do I produce for the masses? - must nevertheless be answered. Just because socialism makes rational economic calculation impossible by abolishing the market for productive factors doesn't mean that the problems of production become non-existent. Producers under socialism must answer this inevitable question. They still must attempt to discover the most efficient, most cost-effective courses of production. Yet this most essential task cannot be done without respect for private property rights and markets for factors of production. Thus, socialist producers must seek the aid of capitalism.

-Theory

Capitalism is a social system based upon individual rights including the right to private property where all property including factors of production and consumer goods are owned privately. Under capitalism, entrepreneurs have every right to engage in voluntary association and to peacefully exchange productive factors; they have every right to form a market for productive factors. As a result, capitalist economies are bastions of productive factor commerce and they constantly generate and regenerate market prices, prices representing the demand for productive factors relative to the supply of productive factors. It is in these markets within capitalist economies where socialist producers must obtain their information. By copying the market prices of productive factors generated abroad and plugging these market prices into their cost-revenue equations, socialist producers can engage in a crude, semi-rational form of economic calculation, allowing them to roughly determine if they are reaping profits or losses. They also are enabled to approximately identify efficient, cost-effective courses of production. There is no substitute for local markets of factors of production, eliminated by socialism, but with foreign productive factor markets socialist economies can continue to linger for longer than they would without such markets.

Thus, socialist producer (A) whom we met eariler, upon learning through foreign correspondence that his costs of production "y" equaled $90 monetary units could now plug $90 into his equation:

: x - y = z
: [$100 - $90 = $10]

He could also identify "z" in the binomial "-z + $100:"

: y = -z + $100
: $90 = -z + $100
: ($90) - $100 = (-z + $100) - $100
: -$10 = -z
: -1 • (-$10) = -1 • (-z)
: [$10 = z]

Socialist producer (A) in this situation could discover that he reaped a profit of $10 monetary units. This discovery is made possible by capitalism however.

-Practice

More or less "socialist" economies have existed in the past (and still do today). If socialism requires capitalism for its survival in theory, than it should also require capitalism for its survival in practice as well.

The most notable historical instance of socialist parasitism on capitalism is that of the central planning of the Soviet Union. According to Dr. Gene Callahan,

"Historical examples of nominally socialist states, such as the Soviet Union, operated within a worldwide market order. They mimicked the more market-oriented countries' methods of production, their products, and their technologies. Soviet planners even copied commodity prices out of The Wall Street Journal to use in their calculations. Lew Rockwell told a wonderful story about Gorbachev's press secretary. When asked about his dream for mankind, the secretary replied that he hoped to see all of the world embrace socialism, except for New Zealand. "But why not New Zealand?" a reporter wondered. "Well," the secretary responded, "we will need someone to get the prices from."

Socialist parasitism can occur within relatively capitalist economies as well. According to Gabriel E. Vidal,

"At the outset of the Medicare program, its central planners were able to set their prices as parasites of the then-existing competitive private-healthcare price structure, just as Soviet central planners were forced to copy the price structure of Western economies to direct Soviet production processes and meagerly subsist for eight decades. This parasitic existence of copying the free-market pricing structures continues to be the theoretical edifice of Medicare central planners. But as the proportion of Medicare, Medicaid, Veterans Administration, and other state, county, and city health expenditures grow, and as the proportion of eligible population for these payors increases relative to the rest of the population, the private-sector pricing is crowded out of the market and is distorted; a health czar has fewer and fewer free market pricing signals to copy. Inevitably, our health system will continue to descend into further and further chaos, in which actors will be unable to rationally allocate capital. This is exactly what happened to the economy of the Soviet Union."

-Why Irrational Behavior Requires Rational Behavior for its Continued Existence

Socialism depends upon capitalism for its survival ultimately because irrationality, the willful rejection of reason, depends upon rationality, the willful acceptance of reason. Socialism is institutionalized irrationality; it establishes de jure prohibitions against rational action. While many individuals under socialism may not want the nationalization of productive factors and may wish to guide their lives in accordance with reasoned thought, socialism by violating the right to private property, nevertheless obstructs their attempts at acting in a way that is conducive to a flourishing, productive existence. Capitalism provides the entrepreneur with the identification of both his gross revenue and costs. Socialism denies the entrepreneur the identification of his costs, yet continues to trouble him with solving cost-revenue equations. Socialism is a legalized injunction against the discovery of costs of production, of information. It is a ban on seeking knowledge, of obtaining awareness of reality. In this way, it criminalizes the very use of reason. Capitalism, by contrast is the only social system that completely facilitates the use of reason by prohibiting the initiation of physical force against person and property.

Irrational behavior is unproductive. Technological solutions to overcoming scarcity and producing wealth are embodied in propositions that are conclusions of valid arguments. Valid argumentation is the form reason takes. By rejecting reason, irrational behavior rejects valid argumentation and, by implication, rejects the only method by which individuals can solve technological problems. How else could one discover the internal combustion engine or the mechanized assembly line or nuclear fission or landscape architecture without reason? These inventions involved tremendous chains of causal inductive/deductive reasoning and mathematical genius in geometry, algebra, and calculus. Take architecture and its foundation in geometry. The area of a circle equals the number Pi (3.14) multiplied by the radius to the second power as follows:

: A = 3.14 • r^2

If the floor area of a circular building is 7850 feet squared, an individual can, using deductive reasoning, determine the radius of the floor of that building as follows:

: A = 3.14 • r^2
: 7850ft sq = 3.14 • r^2
: (7850ft sq) ÷ 3.14 = (3.14 • r^2) ÷ 3.14
: 7850ft sq ÷ 3.14 = r^2
: 2500ft = r^2
: {2500ft = {r^2
: [50ft = r]

Through deduction we see that if the area of the floor is 7850ft sq, the radius must be 50ft. Only a rational mentality could discern this; only a rational mentality is intellectually equipped to deal with such problems. Such is the case with all things from food, to shelter, to a livelihood. Only by adopting rationality can one understand, can one discover true conclusions. Those who act irrationally must depend upon those who act rationally for the irrational have the same needs as the rational. Humans require foodstuffs, housing, infrastructure, utilities, and a fleet of other goods in order to survive and to progress. Capitalism, by recognizing individual rights, is that system which makes rationality a virtue that people can assume. Socialism denies rights and therefore makes rationality that much more non-existent. Therefore, socialist societies, wherever they lay withering, depend upon capitalist economies for their continued subsistence.

On Jurists and Mortgage Loans

After having become intimately familiar with philosophy and its constitutent parts, one cannot help but wonder, with a slight sense of apprehension, if our law makers and law interpreters in government share the same intellectual awareness. No well-versed individual can deny how profoundly dependent law is upon philosophy at large. A wise jurist must be a logician, an ethicist, a political scientist, and an economist if he is to make laws and/or make legal interpretations that harmonize with individual rights and therefore raise the standard of living. Can it be said that our jurists in government possess this sort of knowledge? Juridical history confirms they don't.

Take the issue of the mortgage loan contract. Though it is a stubborn fetish of Marxists, socialists, and interventionists to characterize the American economy as "hyper-capitalist" or "super-capitalist," (other such clumsy terms are in use as well) in reality the American economy bears the burden of supporting and submitting to a vast coercive enterprise also known as the government. This fact denies anyone the authority to claim that America is governed by some form of pure or unregulated capitalism. The government's decades long coercive interference in mortgage loan contracts is a prime example of what makes our "free" market unfree. In order to be a recipient of a mortgage loan, prospective borrowers had to:

-Offer sizeable down payments often 10% to 20% of the principal loan amount or more.

-Possess a steady, well-paying job.

-Have a satisfactory credit-rating reflecting both a past willingness and ability to repay creditors.

With such rigorous standards for creditworthiness, moneylenders significantly reduced their default risk, the likelihood of borrower failure to repay the principal plus interest. Eventually however, law makers determined that these creditworthiness criteria were too rigorous, that too few individuals could qualify as borrowers of mortgage loans. So over time law makers erected a plethora of federal agencies and legislative acts in order to, among other things, increase the demand for mortgage loans by easing the general terms of exchange in favor of prospective borrowers, i.e., lowering mortgage interest rates (the price of credit), forcing moneylenders to increase the supply and availability of subprime mortgage loans, forcing moneylenders to accept lower or zero down payment rates, etc. In summary, legislators did what they could to undermine the three chief creditworthiness criteria listed above.

The calamitous effects of these executive and legislative decisions have been well publicized. Reduced creditworthiness criteria imposed greater default risk upon moneylenders, risk that translated ultimately into real defaults which led to mass housing foreclosures and wasted mortgage payments.

The entire housing fiasco could have been averted completely if jurists in government were well-read in economics. Moneylenders used to lend credit in accordance with strict standards of creditworthiness in order to hedge against default risk and generate a profit. Default risk was carefully calculated through a mathematical analysis which included the prospective borrower's income and credit-rating information. The accuracy of such mathematical analyses was assured by the fact that the financial status of moneylenders was contingent upon correct assessments of risk. Force economic agents to incur greater risk against the facts of risk reality revealed through such assessments and one ensures that those agents will yield losses. Had government jurists known this bit of economic logic, the housing crisis could have been avoided.

Knowledge of ethics certainly could have assisted our jurists as well. The fleet of federal agencies and legislation established to increase homeownership was undoubtedly pursued under the impression that certain people were entitled to mortgage loans, to credit, even though they were uncreditworthy by market standards. But is this proposition true? Are people who do not meet the criteria of creditworthiness still morally entitled to credit? No. Loanable funds prior to a voluntary exchange belong to the lender in question as his private property, his material values that he produced or earned through his productive effort. By what right may the government compel a moneylender to use his scarce funds against his own independent judgment? Is it morally sound to force moneylender sto ignore risk asessments, to ignore facts of reality Entrepreneurs must act rationally and productively in order to yield goods demanded by consumers. They cannot act in accordance with their judgments, i.e., with their risk assessments if governments use compulsion against them. Freedom means the absence of coercion where individuals fully retain the opportunity to use their minds to create, to innovate, to discover, etc. Its this entrepreneurial spirit which makes mass production possible. If freedom is dead, nothing (good) is possible. Ethics demonstrates this.

Finally, a knowledge of epistemology is critical for jurists and would have helped them to avert disaster as well. How can a jurist, unfamiliar with hypothetical deductive syllogisms and induction, even begin to grasp the long chains of causation found within ethics and political economy? Knowing the dangerous implications of preliminary compulsion in ethics and government intervention in political economy involves understanding how concepts are formed and used and how one my logical proceed from antecedent claims to consequent claims. Had our jurists understood this, the crisis would never have happened.

A moral, rational jurist would have seen all this coming.

On Bill Moyers's Insane Clown Posse

Look at the ongoing discussion at Bill Moyers's blog where I take some of his micreants to task for literally endorsing the fairness doctrine, government nationalization of the broadcast industry, and other downright retarded policies and ideas.

http://www.pbs.org/moyers/journal/blog/2009/07/fear_and_loathing_in_political.html#comments

On the Inescapable Contradiction of Fractional Reserve Banking

(This is a response to an inquiry by a fellow student in NYC on what I thought about FRB.)

A great void within monetary economics has been filled by the release of Dr. Jesus Huerta de Soto’s epic magnum opus, Money, Bank Credit, and Economic Cycles. The text, at 906 pages, is an exhaustive, tour de force focused on the economics and history of the monetary irregular deposit contract, the loan or mutuum contract and the calamitous social effects men have experienced throughout the ages by violating these contracts. Of much value is De Soto’s meticulous critique of fractional reserve banking, an issue of grave importance today given the fact that we are in the midst of an economic contraction produced by a fractional reserve based system. De Soto’s critique runs as follows.

The Deposit Contract

The issue of fractional reserve banking centers on the monetary irregular deposit contract. According to De Soto,

"…the contract of deposit (depositum in Latin) is a contract made in good faith by which one person—the depositor—entrusts to another—the depositary—a movable good for that person to guard, protect, and return at any moment the depositor should ask for it. Consequently, the deposit is always carried out in the interest of the depositor. Its fundamental purpose is the custody or safekeeping of the good and it implies, for the duration of the contract, that the complete availability of the good remain in favor of the depositor, who may request its return at any moment. The obligation of the depositor, apart from delivering the good, is to compensate the depositary for the costs of the deposit (if such compensation has been agreed upon; if not, the deposit is free of charge). The obligation of the depositary is to guard and protect the good with the extreme diligence typical of a good parent, and to return it immediately to the depositor as soon as he asks for it… [A] deposit is always held and available to the depositor, and it terminates as soon as he demands the return of the good from the depositary."

In a regular deposit contract, custody of the specific goods deposited by the depositor is transferred over to the depositary and it is the depositary’s duty to protect the entirety of the depositor’s goods as well as to return those specific goods to the depositor whenever he demands them. Depositors who want depositaries to protect and return those exact items they choose to deposit such as rare coins or jewelry will seek and agree to a regular deposit contract. Paying to keep ones possessions within a safety deposit box is an example of a regular deposit contract.

In an irregular deposit contract, custody of the specific goods deposited by the depositor is transferred over to the depositary but the duty of the depositary is only to protect a tantundem, that is an amount of goods equal in quantity, quality, and type to that which the depositor deposited as well as to return a tantundem to the depositor whenever he demands it. Thus, depositors who don’t particularly care if the exact items they deposited will be returned to them will, as long as they retain full availability to a tantundem, be willing to opt for an irregular deposit contract.

Goods that are suitable for an irregular deposit are fungible goods. According to Lawyers.com, fungible goods are "goods of which any unit is by nature or by usage of trade the equivalent of any other unit…"

As De Soto writes,

"The only difference between the deposit of fungible goods and the regular deposit, or deposit of specific goods, is that when the former takes place, the goods deposited become indiscernibly mixed with others of the same type and quality (as is the case, for example, in a warehouse holding grain or wheat, in an oil tank or oil refinery, or in the banker’s safe)."

To further clarify, De Soto writes,

"In other words, whereas in the regular deposit the specific good deposited must be continually guarded conscientiously and in individuo, in the deposit of fungible goods, what must be continually guarded, protected and kept available to the depositor is the tantundem; that is, the equivalent in quantity and quality to the goods originally handed over."

As a result of the difference between the regular and irregular deposit contracts, it can be said that the custody authority or concrete ownership authority of the depositary under an irregular deposit contract is greater than the custody authority or concrete ownership authority under a regular deposit contract because under an irregular deposit contract the depositary may return to the depositor any mixture of goods he chooses as long as he abides by his promise to protect a tantundem and return a tantundem when requested whereas under a regular deposit contract the depositary must abide by his promise to protect and return the exact goods deposited.

Since money is the classic fungible good, the most common irregular deposit contracts have been monetary irregular deposit contracts.

The Loan or Mutuum Contract

Historically, we have come to know bankers as the predominant depositaries as they offer demand deposit services. However, banks also have participated in mutuum or loan contracts, a radically different type of voluntary agreement.

According to De Soto,

"Mutuum (also from Latin) refers to the contract by which one person—the lender—entrusts to another—the borrower or mutuary—a certain quantity of fungible goods, and the borrower is obliged, at the end of a specified term, to return an equal quantity of goods of the same type and quality (tantundem in Latin). A typical example of a mutuum contract is the monetary loan contract, money being the quintessential fungible good. By this contract, a certain quantity of monetary units are handed over today from one person to another and the ownership and availability of the money are transferred from the one granting the loan to the one receiving it. The person who receives the loan is authorized to use the money as his own, while promising to return, at the end of a set term, the same number of monetary units lent. The mutuum contract, since it constitutes a loan of fungible goods, entails an exchange of "present" goods for "future" goods. Hence, unlike the commodatum contract, in the case of the mutuum contract the establishment of an interest agreement is normal, since, by virtue of the time preference (according to which, under equal circumstances, present goods are always preferable to future goods), most human beings are only willing to relinquish a set quantity of units of a fungible good in exchange for a greater number of units of a fungible good in the future (at the end of the term). Thus, the difference between the number of units initially delivered and the number received from the borrower at the end of the term is, precisely, the interest. To sum up, in the case of the mutuum contract, the lender assumes the obligation to hand over the predetermined units to the borrower or mutuary. The borrower or mutuary who receives the loan assumes the obligation to return the same number of units of the same sort and quality as those received (tantundem) at the end of the term set for the contract. Plus, he is obliged to pay interest, as long as an agreement has been made to that effect, as is usually the case. The essential obligation involved in a mutuum contract, or loan of a fungible good, is to return at the end of the specified term the same number of units of the same type and quality as those received, even if the good undergoes a change in price. This means that since the borrower only has to return the tantundem once the predetermined time period has ended, he receives the benefit of temporary ownership of the thing and therefore enjoys its complete availability. In addition, a fixed term is an essential element in the loan or mutuum contract, since it establishes the time period during which the availability and ownership of the good corresponds to the borrower, as well as the moment at which he is obliged to return the tantundem. Without the explicit or implicit establishment of a fixed term, the mutuum contract or loan cannot exist."

The Differences between the Monetary Irregular Deposit Contract and the Loan or Mutuum Contract

Since contracts are both economic and legal phenomena, de Soto identifies both economic and legal differences between the monetary irregular deposit contract and the loan or mutuum contract.

Economic Differences

Under a monetary irregular deposit contract:

-There is no exchange of goods available for use at the present for goods available for use only in the future.
-The tantundem remains fully available to the depositor; it is not transferred.
-Since there is no exchange of goods available for use at the present for goods available for use only in the future there is no interest charge.

Under a loan or mutuum contract:

-There is an exchange of goods available for use at the present for goods available for use only in the future.
-The full availability of the tantundem is transferred from the lender to the borrower
-The lender usually charges the borrower a interest fee.

Legal Differences

Under a monetary irregular deposit contract:

-Custody or concrete ownership of the tantundem is transferred from the depositor to the depositary
-There is no term which declares when the tantundem must be returned; the tantundem remains in the custody of the depositary until the depositor requests it which he may do whenever he wishes.
-The depositor must protect the tantundem and keep it available to the depositor at all times.

Under a loan or mutuum contract:

-Both custody and availability of the tantundem are transferred from the lender to the borrower
-There is a term, the voluntarily agreed-to amount of time during which the tantundem is fully available to the borrower.
-The borrower must return the tantundem plus any agreed-to interest fees at the end of the term to the lender.

What is Fractional Reserve Banking?

According to Wikipedia (which offers a very good definition),

"Fractional-reserve banking is the banking practice in which banks keep only a fraction of their deposits in reserve (as cash and other highly liquid assets) and lend out the remainder, while maintaining the simultaneous obligation to redeem all these deposits upon demand." Italics Mine.

Fractional reserve banking has existed for well over two millennia and is well documented by de Soto as well as by economist Dr. Jorg Guido Hulsmann in his book The Ethics of Money Production. However, its status as a banking tradition cannot mitigate its contradictory nature.

As stated above, under fractional reserve banking bankers voluntarily assume all the responsibilities of being a depositary under a monetary irregular deposit contract, i.e., the duty to protect the deposits of their client depositors and keep those deposits fully available to those depositors. Keeping the deposits of depositors available to those depositors entails retaining custody or concrete ownership of them. How depositaries should exercise their custody authority is a matter of business management. But depositaries must retain custody in order to abide by the monetary irregular deposit contracts they agree to. This means that, regardless of the quantity of money deposited to them, they must protect and make available 100 percent of their deposit reserve, the total amount of money deposited to them under monetary irregular deposit contracts, to their client depositors in accordance with how much each depositor has deposited.

This promise, to protect and make available 100 percent of the deposit reserve to depositors, is breached by the simultaneous dereliction of the custody of any portion of the deposit reserve by the depositary. Fractional reserve banking, by definition, commits this very contravention. Under fractional reserve banking, depositaries promise to protect and make available a tantundem to each and every one of their client depositors. Concurrently, they possess, under fractional reserve banking, the authority to relinquish their custody of a portion of their deposit reserve to another or others, either by spending, investing, or, as has been the case historically, by loaning a portion of their deposit reserve. Does this necessarily involve a breach of contract? Yes. Can depositaries surrender custody over a portion of their deposit reserve and simultaneously abide by all of the monetary irregular deposit contracts they’ve participated in? No. Under a monetary irregular deposit contract, the depositary must both protect and make fully available the deposit of his client depositor to his client depositor. A depositary can neither protect nor make fully available the deposit of his client depositor to his client depositor if he renounces custody over the deposit in question. Spending, investing, or loaning all or a portion of his client depositor’s deposit necessarily involves surrendering custody to another person who is not bound by a monetary irregular deposit contract to either protect or make fully available that relinquished portion in question to the depositor in question. A depositor cannot reclaim all of his deposit, as he should under a monetary irregular deposit contract, if a depositary has relinquished custody over some or all of the depositor’s deposit. If a depositary has participated in multiple monetary irregular deposit contracts, then spending, investing, or loaning all or a portion of his deposit reserve necessarily means that he will not be able to either protect or make fully available a tantundem to each and every one of his client depositors. The actions of a depositary who relinquishes custody contradict his obligations as a depositary under a monetary irregular deposit contract. Therefore, fractional reserve banking involves a breach of the monetary irregular deposit contract.

This is especially the case regarding loaning a portion of a depositor’s deposit, as is the case under fractional reserve banking. The loan or mutuum contract is fundamentally different from the monetary irregular deposit contract. Under a monetary irregular deposit contract, there is a transfer of concrete ownership, of custody of the goods in question between the parties but not a transfer of availability of the goods in question. Under a loan or mutuum contract, there is both a transfer of custody and availability. If a depositor enters into monetary irregular deposit contract with a depositor, the money he is given by the depositor does not come with availability to it, only with custody of it. Since availability of the money is not transferred to the depositor, it is not a loan or mutuum contract and therefore the depositor may not further loan the deposit to another. A depositor would only be legally able to loan money given to him if he entered into a loan or mutuum contract where both custody of and availability of the money is transferred to him. As De Soto further notes,

"any bank loan granted against demand-deposit funds results in the dual availability of the same quantity of money: the same money is accessible to the original depositor and to the borrower who receives the loan. Obviously the same thing cannot be available to two people simultaneously, and to grant the availability of something to a second person while it remains available to the first is to act fraudulently."

If a depositary loans out a portion of his deposit reserve, he thereby defaults on his responsibility to protect and make available 100 percent of the deposit reserve to depositors since the loan involves relinquishing custody of the portion in question.

Some have alleged that a monetary irregular deposit contract accompanied by fractional reserve conditions is not inherently contradictory because it is possible that the parties involved can agree to the stipulations of the association. This view is careless. A monetary irregular deposit contract accompanied by fractional reserve conditions is inherently contradictory because under such a "contract" a depositary has the obligation of retaining custody of the depositor’s deposit and simultaneously the option to surrender custody of the depositor’s deposit. Even if a depositor is aware of this, the agreement is null and void because it involves a contradiction of obligations and rights. As De Soto writes,

"…let us now assume that a certain group of bank customers (or for the sake of argument, all of them) enter into a deposit contract aware and fully accepting that banks will invest (or loan, etc.) a large portion of the money they deposit. Even so, this knowledge and hypothetical authorization does not in any way detract from the essential cause or purpose of the contract for these customers, whose intention is still to entrust their money to the banker for safekeeping; that is, to carry out a monetary irregular-deposit contract. In this case, the contract the depositors believe they have finalized is impossible from a technical and legal standpoint. If they allow the banker to use the money, then it can no longer be available to them, which is precisely the essential cause or purpose of the contract."

De Soto finishes the alleged legitimacy of a monetary irregular deposit contract accompanied by known fractional reserve conditions as he states,

"A natural incompatibility exists between the legitimate irregular deposit contract, the purpose of which is the custody or safekeeping of the deposited goods, and the authorization for depositaries to use for their own profit the money they receive. These depositaries (bankers) take in funds they agree to return as soon as requested by checking-account holders, but once the bankers have received the money, they make investments, grant loans and enter into business deals that tie it up and under various circumstances actually prevent its immediate return. The supposed authorization, either express or tacit, for bankers to use money on deposit is of little importance if the essential purpose of the contract, the deposit of money for safekeeping, continues intact. In this case the supposed authorization would be irrelevant, due to its incompatibility with the contract’s purpose, and it would thus be as legally null and void as any contract in which one of the parties authorizes the other to deceive him or accepts in writing self-deception to his own detriment."

Conclusion

It has thus been demonstrated that fractional reserve banking, by obligating depositaries to both protect and make fully available a tantundem to each and every client depositor in accordance with his individual deposit amount, i.e., retain custody of the entire deposit reserve, and simultaneously granting depositaries the right to spend, invest, and, especially, to loan a portion of the deposit reserve to another or others, i.e., relinquish custody of a portion of the deposit reserve – that by doing so, fractional reserve banking becomes a unavoidably contradictory activity, even when scrutinized under the most charitable conditions. It declares that a depositary may not surrender custody of a deposit to anyone other than the depositor in question and simultaneously may surrender custody of a deposit to another other than the depositor in question.

On the Problem of Arguing from the Constitution

It has become a habit both of conservatives and left-liberals to argue in favor of their respective public policies by referring to the Constitution for argumentative support. This approach has its pros but also its cons as well.

Arguing from the Constitution is the argumentative method of emphasizing the fact that one's given claim is congruent with the Constitution or with a section of the Constitution. This is done with the intention of infering that one's claim therefore is sound. We see this tactic used often by ACLU representatives who can be found referring to the 1st Amendment. We also see it from the NRA, a group that appeals incessantly to the 2nd Amendment.

Full use of the method usually involves the assertion of that fact that one's proposition corresponds harmoniously with the Constitution coupled with the further claim that propositions that correspond with the Constitution in such a way are sound. Finally, these two claims are used as premises in a deductive syllogism which typically yields the conclusion that one's initial proposition is therefore sound. The full argumentative framework looks like this:

-All conclusions that are congruent with the Constitution or with a section of the Constitution are conclusions that are sound.

-My conclusion is a conclusion that is congruent with the Constitution or with a section of the Constitution.

-Therefore, my conclusion is sound.

Arguing from the Constitution is an attractive method because given the fact that the authors of the Constitution, the Founders, command broad respect from Americans its likely that arguing from the Constitution will persuade otherwise undecided Americans. This approbation is well deserved as the Founders were extraordinarily erudite for their time.

However, I can think of two interrelated problems with arguing from the Constitution. First, the Constitution is by no means perfect though it is legally perfectable. This is especially true for laissez-faire liberals who, for example, have problems with the various nebulous Constitutional clauses, clauses that because of their imprecise language are vulnerable to broad interpretation by ambitious "living Constitutionalists" seeking to enhance the authority of the federal government. Thus one can deduce conclusions with premises that identify a congruence between one's convictions and the tenets of the Constitution; however if the given congruence involves a flawed aspect of the Constitution then the deduced conclusion will be false. The Ayn Randian adage "garbage in, garbage out" applies to deduction as well.

The second dilemma of arguing from the Constitution is that since the Founders were human beings prone to error they themselves were far from perfect. Why should we give credence to the fact that Thomas Jefferson recognized the right to bear arms? Many people claim that gun control and even outright gun prohibition works to make society safer by depriving criminals of coercive instruments with which to commit crimes. Why should we care about free speech when some may offend others by exercising such a right? Why should the people have legal protection from the ability of soldiers to garrison their homes? Of course, gun control, censorship, and military seizure are abominable things but it hardly suffices to say, for instance, that freedom of the press is important because the Founders said it was. Though they recognized many truths and incorporated those truths within the Constitution, given that men are volitional and therefore vincible to logical inaccuracy, its certainly plausible that the Founders were mistaken on a number of issues.

Thus I propose that while arguing from the Constitution should not be completely discouraged, I believe that such a method should be subordinate to a more proper inductive/deductive approach. For instance, the prudence in recognizing the rights to liberty and private property should be grounded in a proof of the rationality of such an action, not in a demonstration of the fact that others believe that such an action is wise. We must focus on demonstrating that recognizing rights is existentially beneficial, not simply popular (though its popularity is wanning). This way, we cleanse ourselves of argumentative drag.

Midget, Midget, Midget, Midget, Midget....

Yes, those who shout and holler for governement to use its coercive instruments in their favor come in all ages, colors, shapes, and sizes. According to Jennifer Maloney of Newsday.com, "Little People of America, at its annual conference in Brooklyn this week, has called for the Federal Communications Commission to ban the use of the word "midget" on broadcast TV." Yes we may now add "midget" to George Carlin's infamous list of 7 naughty words the utterance of which ensures punishment from the federal government. It pains me to see our lawful lexicon reduced because of the ever so delicate sensibilities of a few though it must be stressed that certainly not all of our smaller comrades support this measure. Well, here's a hodge-podge words and phrases that offend me. Hark, I submit my grievances:

-social justice
-living Constitution
-cap and trade
-family values
-stimulus
-living wage
-price gouging
-spreading the wealth
-green jobs
-private-public partnerships
-predatory lending
-neoliberal agenda
-paradox of saving

These words and phrases tick me off because they're typically used to justify legalized acts of aggressive coercion by the state. Where's my reprieve???

Now I'm positive that living as a dwarf entails many many agonizing and humiliating experiences, surely. However, this hardly vindicates the right of government to therefore forcibly silence someone who uses the word "midget" because it inexorably contradicts the principle of "freedom of speech." "Freedom of speech" is actually an extension of the right to liberty, the moral principle which sanctions the freedom of every individual to express his thoughts and beliefs, free, that is, from physically coercive suppression or the threat of such suppression. The goodness and practicality of recognizing this moral principle is easily understood by imagining a "society" that was either hostile or ambivalent towards it. If individuals could not guide their lives by their own independent judgment, they would perish. It may be countered that some people refuse to guide their lives in accordance with reason and that, therefore, it is morally permissible to submit them to coercion if such coercion is motivated by a desire to force the irrational to act rationally. This argument certainly sounds seductive given that so much of our socio-economic problems exist as a result of a deficit of rational people. Nevertheless, the "coercion for rationality's sake" argument commits a crucial error.

The dilemma of the argument is that one cannot force another to be rational. Rationality is the voluntary acceptance of the fact that reason is the only appropriate means with which to achieve the end of possessing knowledge. Rationality cannot be imposed upon another because of the fact identified by the axiom of free will which states that each and every (non-physiologically inhibited) human being is capable of fully controlling all of his thoughts and is capable of making decisions. The denier of free will, the determinist, in order to be consistent with his determinism must concede that his advocacy of determinism is determined as well. Thus, if his endorsement of determinism is determined how does he know that determinism makes a true claim instead of a false one? His advocacy of it, according to determinism, occurs without his control, regardless if its true or not. As N.L. Geisler writes,

"A determinist must contend that both he and the nondeterminist are determined to believe what they believe. Yet the determinist attempts to convince the nondeterminist that determinism is true and thus ought to be believed. However, on the basis of pure determinism "ought" has no meaning. For "ought" means "could have and should have done otherwise." But this is impossible according to determinism. A way around this objection is for the determinist to argue that he was determined to say that one ought to accept his view. However, his opponent can respond by saying that he was determined to accept a contrary view. Thus determinism cannot eliminate an opposing position. This allows the possibility for a free will position."

At least in regards to free will, we have all witnessed through perception countless opportunities where alternative courses of action have existed and that we were capable of pursuing one among others. Thus, we may conclude that free will exists because the contradiction of "the free will axiom is true" is false.

The specific reason why one cannot forcibly deposit rationality into another is that the acceptance of rationality is a mental task stemming from an act of free will. Rationality is a mentality. Though it may be true that "Socrates is mortal," I cannot coerce another into knowing its true. Since a man controls his thoughts and choices, the exclusivity of his control means no one else may do so. A man cannot both control and not control his thoughts and choices simultaneously and in the same respect. Thus, I cannot control another in such a way so as to make him become rational. We may like for people to be rational, to be respectful and refrain from calling dwarfs "midgets." However, it would be erroneous to assert that we could make them rational by instituting force against them.

Moreover, being called a pejorative term does not suspend the recipient's mind. Dwarfs do not have their right's violated, their freedom of action reduced or removed because another calls them a name. And effectively dealing with the offense of calling another a "midget" would entail criticism and social ostracism, not coercion, as we see with the use of the infamous "N" word which, as a result of increased critical scrutiny, has been reduced to usage with an entirely different connotation.

On Sonia Sotomayor and Judicial Craptivism

Juridical irrationality - Latina style!!!

For economic interventionists and contemporary liberals concerned with fulfilling the end of racial diversity, the nomination of Sonia Sotomayor is an event worthy of commemoration; for economic non-interventionists and, concomitantly, believers in reduced government, her pursuit of a seat on the Supreme Court is a dispiriting goal, one which, if realized, would further doom the already exhausted hope that the seemingly inexorable trend towards autocracy will be genuinely (and. permanently) reversed. Sadly, the Sotomayor nomination is but one vexing decision among a fleet of imprudent decisions made by President Obama. The moral blame for whatever legal horrors produced or endorsed by Sotomayor in the future will ultimately fall upon the president.

The best predictor of future events is the past and Sotomayor is certainly no exception. Her most famous (or infamous) judicial decision came in Ricci vs. DeStefano. Here is a summary of the dispute as well as the arguments made by the litigants from the Legal Information Institute:

"Ricci v. DeStefano raises questions as to what steps employers may take where avoidance of discrimination against one group may mean discrimination against another group. The City of New Haven, Connecticut administered a civil service examination for fire department promotions. The exam produced racially disproportionate results, favoring white candidates over black candidates. As a result, New Haven ultimately did not certify the examination. Ricci and other candidates who scored higher on the examination and thus were eligible for promotion sued New Haven, claiming racial discrimination against the higher scoring candidates. The district court granted summary judgment for New Haven, and the Second Circuit affirmed. Ricci and the other petitioners claim New Haven discriminated against them on the basis of race in violation of the Equal Protection Clause and Title VII. New Haven, on the other hand, claims it was complying with Title VII in declining to certify the exam and thus did not violate either the Equal Protection Clause or Title VII."

According to Bloomberg news, "When the case came before a three-judge court that included Sotomayor, the panel nonetheless rejected the (Ricci) lawsuit with just a paragraph of discussion.... The judges wrote that the city’s civil service board “was simply trying to fulfill its obligations under Title VII when confronted with test results that had a disproportionate impact.”

Seriously? Are we so dogged in our quest for racial proportionality that we are willing to dismiss human aptitude in a trade because those who possess this aptitude are lacking in racial heterogeneity? What good could come from penalizing demonstrated ability? Here we have a lucid example of diversity-preservation over talent-recognition.

Imagine if the imperative of racial diversity was applied with such rigor in the military or in law enforcement. After making specialist (E-4), soldiers on active duty in Army must go before a board in class A uniform in order to qualify for a promotion. For majors looking to become lieutenant colonels, they must go before Congress! Preventing qualified specialists from becoming sergeants and qualified majors from becoming colonels and eventually generals could easily reap disasterous consequences. With increased rank comes increased command responsibilities. Obstructing the best from assuming command positions that must be fulfilled could potentially put military personel, and ultimately the American people, at risk. The most capable soldiers and marines should be given the most distinguished command positions because the greatest assurance of success can only come from those who have previously demonstrated their military skill. Enforced diversity could only inhibit the efficiency with which the military operates.

U.S. special forces have very few blacks within their ranks. How do we correct this imbalance? Are we then to reduce their size because they suffer from racial disproportionality? We have thankfully not tried to socially engineer our special forces and other clandestine military groups because the irrationality of applying racial diversity over capability within highly specialized military units is very difficult to evade or ignore.

Sotomayer, I'm sure, could have done something other than rule against Ricci & Co, perhaps ruling in their favor or at least abstaining.

Sotomayor's legal perspective has been as deleterious of individual rights within the realm of the Second Amendment. In Maloney vs. Spitzer, Maloney filed an injunction against then New York attorney general Eliot Spitzer demanding permanent relief for every citizen from the state's statute banning the possession of a nunchaku, a martial-arts weapon adopted by the people of Okinawa Island after, as Jim Maloney held, " invading oppressive governments disarmed them, making it illegal to possess a sword or other weapon."

Here's is Jim Maloney's summary statement on a website of his:

"On February 18, 2003, I brought a constitutional challenge to those provisions of the New York Penal Law that criminalize the mere possession of nunchaku within one's own home. I have raised numerous constitutional bases for this challenge, including but not limited to the Second Amendment's protection of "the right of the People to keep and bear arms." There is currently a great deal of legal and scholarly debate as to whether the Second Amendment confers a personal right to bear arms and, if so, whether that right is applicable against the states or only against the federal government. Virtually all of the other provisions of the Bill of Rights have been incorporated as applicable to protect citizens against abuse by state governments. The Second Amendment is a notable exception.

In light of the uncertain success of my Second Amendment challenge, I have also challenged the constitutionality of the New York criminal provisions on other bases, such as the Ninth Amendment and the Due Process Clause of the Fourteenth Amendment.

The federal case names Eliot Spitzer (the New York Attorney General) and Denis Dillon (the District Attorney for Nassau County) as defendants, and seeks only declaratory relief (i.e., a ruling to the effect that the criminalization of the simple possession of nunchaku within one's home is unconstitutional). No money damages are sought. I am proceeding pro se in order to save myself and (if I am successful) the taxpayers of New York some money: if my challenge is successful, there can be no award of attorney's fees unless I use outside counsel, which I hope to avoid doing."

When the case was brought before Sotomayor (renamed Maloney vs. Cuomo), she ruled against Maloney arguing as follows:

“The Second Amendment applies only to limitations the federal government seeks to impose on this right.”

!?! What good is a Second Amendment if it can be dismissed entirely by any state or local authority? Sotomayor suggests that the Second Amendment can be categorically abolished within a jurisdiction as long as the authority administering the abolition is sub-federal! Not only is this a rape and butchery of the Founders' original intent behind the Second Amendment, it is a spectacular affront to individual rights, including the right to private property. What difference does it make between your president confiscating your property and your mayor confiscating your property?

In the near future, I will comment on Sotomayor's judicial philosophy, on what is it within her mind that encourages her to commit such ill-advised decisions.

On Recession and Price Deflation

Economists, including those who encouraged and failed to predict the 08’-09’ recession, have been warning against price deflation. The irony is that price deflation is the solution to our economic despair.

Price deflation simply refers to a general, macroeconomic fall in prices. Why is it then the key to economic adjustment? Because the problem is not the recession, it is the monetary inflation that has preceded the recession. Monetary inflation refers to a macroeconomic increase in the money supply caused by the government. Governments via central banks inflate the money supply by abetting the expansion of bank credit or loanable funds. This is done simply by printing fiat paper money. When entrepreneurs receive these loanable funds from banks, they are given the impression that consumers, their clients, are more future-oriented than present-oriented. Why? Because an expansion of loanable funds is normally caused by an increase in saving and investing by consumers. Consumers express their greater future-orientedness by saving and/or investing and reducing consumption.

Thus when entrepreneurs are given the impression that consumers are more future-oriented, they act on this assumption by catering to this future-orientedness through purchasing producer goods (labour, capital goods like machinery, land). In particular, an expansion of credit prompts entrepreneurs to purchase more higher-order producer goods, goods that can yield consumer goods only further in the future. Such is the case because an expansion of credit is seen by entrepreneurs as representative of a greater consumer demand for future goods. This entrepreneurial demand for producer goods increases the prices of producer goods. Purchasing and using goods like labour and land require entrepreneurs to pay wages and rent.

The problem commences when labourer-consumers who receive these wages and rent in turn spend this new money instead of save or invest it, i.e., exhibit a greater present-orientedness. Such consumers exhibit a greater present-orientedness as opposed to greater future-orientedness because they were not future-oriented to begin with. The false impression that consumers are more future-oriented is given to entrepreneurs through the monetary inflation abetted by the government. Credit expansion can occur two ways: either through increased consumer future-orientedness expressed through more saving or through monetary inflation. When either occur, entrepreneurs who receive this bank credit generally attribute it to increased consumer saving, to greater consumer future-orientedness.

The result of monetary inflation is that entrepreneurial demand for producer goods increases in accordance with the bogus impression that consumers are more future-oriented. Higher-order entrepreneurs emerge to satisfy the increasing lower-order entrepreneurial demand for producer goods. Prices of producer goods rise but consumers simply remain more present-oriented and spend instead of save or invest their wages. Once it is discovered that consumers are actually more present-oriented, the unprofitability of firms selling producer goods, i.e., of firms catering to a false consumer future-orientedness, is recognized and it is further realized that these failed businesses and ventures must be liquidated. Liquidation, the method of recession, involves selling real estate and laying people off, i.e., a decrease in the entrepreneurial demand for producer goods. This decrease causes price deflation as the demand decrease allows the prices of producer goods to reflect the actual future-orientedness of consumers. The inflated prices of producer goods caused by government monetary inflation serve to misinform entrepreneurs. Price deflation serves to reorient entrepreneurs by providing them with correct information regarding consumer preferences.

Instead of allowing price deflation, the Obama administration has engaged in further monetary inflation by allowing the Fed to lower interest rates almost to 0%! Thus the seeds of the next recession have already been sowed.

On "Common-Sense Regulations"

President Obama has said he is interested in introducing and enforcing "common-sense regulations" within the financial system. The illogic of such rules can be unearthed with a basic analysis of the term.

What are regulations? By "regulations" Obama means preventive laws. According to Dr. Harry Binswanger, "Regulatory agencies deal in preventive laws, laws that treat men as guilty in advance, requiring them to satisfy the government that they will not bring about a certain result, in the absence of any specific evidence that they will do so." Thus preventive laws essentially are rules of social conduct that hold men as guilty and require them to prove their own innocence. Thus preventive laws stand in contrast to what I call innocence-presumption laws, rules of social conduct that treat men as innocent until proven guilty and that permit coercion only against individuals who initiate aggression or threaten to initiate aggression. From the definition we can see that innocence-presumption laws are based upon sound epistemology. Such laws hold that men cannot be declared guilty until measures are taken to socially demonstrate as to whether they are or not.

In a society governed by innocence-presumption laws, Smith, an accused thief, is presumed innocent until the prosecution proves otherwise. The categorical proposition “Smith is a thief” is considered false until the prosecution can logically illustrate that that categorical proposition is true, i.e., until the prosecution, by appealing to empirical evidence, shows publically that “Smith is a thief” is a true proposition. In such a situation, those who proclaim the allegation “Smith is a thief” possess the burden of proof – they must prove their claim is true to others. Propositions that are advanced in the absence of evidence are called arbitrary and should be dismissed. Why should one believe a claim that is made without evidence? Evidence, and a method of using evidence to support a claim (logic), are indispensible when it comes to rational belief. Why should we believe that "Socrates is mortal" if the evidential premises "All men are mortal" and "Socrates is a man" are not offered as evidence? Why should we believe that Smith is a thief without proof suggesting that he is a thief? Why should we believe that company ABC may sell spoiled food if there is no evidence suggesting they have or will in the near future? Why should we believe that John will commit an act of terrorism if he never has and hasn't threatened such an act?

Under innocence-presumption law, once the conclusion “Smith is a thief” is supported with evidential premises, Smith, if he maintains his innocence, must socially demonstrate that the argument offered by the prosecution is false. If Smith maintains his innocence after a genuine argument against his innocence is made in court, he must fulfill the burden of rejoinder.

Preventive laws butcher the epistemology behind the burdens of proof and rejoinder. In spite of this, President Obama has endorsed them anyway and, in addition to this, he has added the prefix "common-sense" next to "regulations" in order to disarm our caution, to charm us over. However, because of their nature, "common-sense regulations" are analogus to "common-sense coercion" or "common-sense groundless accusations." All are based upon responses to non-threats and non-acts of initiated force and thus must be eliminated.

On the Epistemological Problem of Anarchy

With the intellectual campaign of libertarian anarchists to abolish government, it has become necessary once again to prove the conditional proposition that if society is going to remain free and productive, then it will require a limited government.

The necessity of limited government emerges in conjunction with the manifestation of society. A society is a sum of individual human beings and their interpersonal relationships. A society consists of people engaging in interpersonal exchange with each other, whether material or spiritual. A free society is a sum of individual human beings and their interpersonal relationships where the only interpersonal action that is banned is the initiation of phsyical force. The initiation of physical force refers to the preliminary use of disruptive physical contact that negatively affects another's body, property or relation to his property. Such examples include murder, theft, fraud, assault, armed robbery, etc. In a free society, the initiation of physical force, otherwise known as aggression, are outlawed. The only uses of force that are legally and morally legitimate in a free society are defensive force and retaliatory force. Defensive force refers to force employed in emergencies, in reaction to and during the initiation of physical force (the threat of force included) where recourse to the police is not possible in time to stop the assailant(s). Retaliatory force refers to after-the-fact force - force employed in reaction to the initiation of force and after the initiation of force as been commenced and ceased.

The reason why the initiation of physical force is prohibited in a free society is because the only way to violate another person's rights is by initiating force against them. Rights are moral principles that define and sanction a man's freedom of action within a social context. Without the social recognition of his rights, man cannot advance his standard of living.

Given that every society has its fair share of criminals and aggressors and that most people are completely unable to properly defend themselves, it is natural that the demand for defensive and retaliatory services arises. The private supply of and demand for private defensive services provided by bodyguards, bouncers, and consultants (or by oneself) is contested neither by anarchists nor by limited governmentalists. It is the provision of retaliatory services that is contested.

Limited governmentalists believe in establishing "an institution that holds the exclusive power to enforce certain rules of social conduct in a given geographical area" as articulated by Ayn Rand. A government is an institution with a legal monopoly on the use of retaliatory force over a given geographical territory. Here is a summary of the argument for limited government:

Let's say Smith and Jones live in a society. Jones accuses Smith of thievery against him and Jones wants to use retaliation against Smith. Jones may not retaliate forcefully against Smith personally, regardless of whether Jones retaliates himself or hires a private defense agency to do it because:

-How does society in fact know that Smith actually has stolen from Jones? and
-If Jones uses force against Smith, how does society know that Jones's use of force is actually retaliatory?

The fact that society must know whether Jones's allegation is true or not and whether force used against Smith is indeed retaliatory or not is crucial and is enough to morally and legally prohibit Jones from employing personal retribution. Why? As Don Watkins brilliantly notes,

"Morally, a man has the right to retaliate against those who initiate force. In fact, as Ayn Rand pointed out, assuming he is able to do so, retaliation is a moral imperative. Refusing to retaliate against an aggressor is to sanction his aggression -- and to welcome more of it. Yet, if he is living in a society of other men, it is not enough that an individual determine in his own mind that his use of force is retaliatory. Since whether an act of force is initiatory or retaliatory is not self-evident, and since a man who initiates force is by that fact a threat to society, any man who engages in force that has not been proved by objective means to be retaliatory must be considered a threat. This is the deepest reason why the use of retaliatory force must be delegated to the government: an act of retaliation that isn't first proved to be an act of retaliation is indistinguishable from an act of aggression -- and must be treated as such." Italics mine.

Watkins's argument is spectacularly logical here. While a free society bans the initiation of physical force and permits retaliation, whether the use of force is either initiatory or retaliatory is not self-evident to society. A self-evident fact is a aspect of reality that can be discovered through sense perception alone, without reasoning. As Ayn Rand wrote "Nothing is self-evident except the material of sensory perception."

The question "How do we know a given act of force is initiatory or retaliatory?" arises from the fact that whether a given act of force is initiatory or retaliatory is not self-evident. Since whether a given act of force is initiatory or retaliatory is not self-evident, it must be logically demonstrated to society whether a given act of force is initiatory or retaliatory; whether a given act of force is initiatory or retaliatory must be made evident socially. How does one do this? An act of force must be proven to be either initiatory or retaliatory. According to philosopher John J. Toohey, "Proving means making evident something which is not evident. If a truth or proposition is self-evident, it is useless to attempt to prove it; to attempt to prove it would be to attempt to make evident something which is already evident." An institution working for and on behalf of society must prove that initiatory acts of force are indeed initiatory acts of force and prove as well as ensure that retaliatory acts of force are indeed retaliatory acts of force.

Regarding the case of Smith v. Jones this institution must have the authority to investigate as to whether Smith initiated force against Jones in the first place. As Watkins writes, it is not enough that Jones prove to himself that he was the victim of initiated coercion and that his reciprocal force will be retaliatory. As long as he acts in response to an alleged aggressor without publically proving that he was coerced and that his response is retaliatory, his act is indeed indistinguishable from the initiation of force. The danger of such private after-the-fact force is explained by Dr. Harry Binswanger as he writes, "Private force is force not authorized by the government, not validated by its procedural safeguards, and not subject to its supervision."

Due to its nature, private force, Binswanger rightly further notes, is a threat of initiatory force that government, by outlawing it, retaliates against. Binswanger states that, "The government has to regard such private force as a threat—i.e., as a potential violation of individual rights. In barring such private force, the government is retaliating against that threat."

(Binswanger also notes that "a proper government does not prohibit a man from using force to defend himself in an emergency, when recourse to the government is not available; but it does, properly, require him to prove objectively, at a trial, that he was acting in emergency self-defense." This fact illustrates that private defensive force used in emergencies is a threat as well, for whether it is truly initiatory or retaliatory is also not self-evident to the public. However, since it is the only method of self-defense available to those in the midst of being the victim of an initiation of force by an aggressor, it may not be outlawed by the government.)

To reiterate, private force is a threat of initiatory force because its nature as either initiatory or retaliatory is socially unknown. The reason why private after-the-fact force as a threat must be legally abolished by government on behalf of society is because such force greatly threatens society's members. Aggressors must be apprehended and punished - to refrain from doing so would constitute pacifism, a policy that would encourage and reward aggression. However private after-the-fact force, being unregulated by a limited government (and therefore by and for society), is indistinguishable from initiatory force and since it is indistinguishable from initiatory force, it may very well be initiatory physical force and may end up improperly punishing the alleged aggressor, Smith, (who hasn't even been proven to be an aggressor by and for society in the first place) and/or may end up violating another member of society's rights, making the alleged initial victim, Jones, now an aggressor as well. The individual rights of individual members within society are at stake when it comes to private after-the-fact force (and private force in general). All their rights are threatened by such force - this is why an institution must retaliate against this threat by and for society.

The libertarian anarchist rejects the need for government. The anarchist denies that society requires an institution with a legal monopoly on the use of retaliatory force over a given geographical territory. The anarchist believes that:

-the individual has the right to retaliate on his own, or
-the individual must at least delegate his right to retaliate to a third party, namely a private defense agency, or
-the individual has the right to do both, whichever one he chooses.

At the very least, the anarchist denies that government must exist. The problem caused by this denial is following: a strictly limited government as a legal monopoly on the use of retaliatory force over a given geographical area is the only institution that can properly approach and cope with the fact that whether an act of force is initiatory or retaliatory is not self-evident. The legal monopoly possessed by government gives it the authority and the ability to properly satisfy the need for social proof, to satisfy the obligation to prove that the use of force in a given situation is retaliatory. Its monopoly grants it the power to retaliate against the threat of all private force within the area stipulated by its monopoly (called its jurisdiction) and thus the power to prevent all possible and potential acts of initiatory force on the part of alleged victims carrying out their unsupervised retaliatory force.

The individual anarchist retaliating himself or the private defense agency retaliating on his behalf may decide to voluntarily prove to society that he was wronged and that his response to his alleged aggressor is retaliatory and proper - but under libertarian anarchism, the alleged victim and/or his private defense agency may, by right, refuse to prove to society that he was the victim of initiated force and that his act, whether personal or committed by a private defense agency, is retaliatory. Private force is exempt by right from regulation and supervision under anarchism. This is the logical result of any opposition to a legal monopoly. A legal monopoly on the use of retaliatory force possessed by a limited government demands that all alleged acts of retaliatory force under the given territory stipulated by the monopoly be publically proven to sincerely be retaliatory so as to eliminate the rights-threatening risk created by private force.

The libertarian anarchist wants unregulated private force on the part of the alleged victim. Under libertarian anarchism, no one can forcefully demand that alleged retaliatory force be socially demonstrated as retaliatory and proper because to do so would constitute an imposition of a legal monopoly on retaliation over a geographical territory. under limited government, the "imposer" government in this situation would be asserting its authority to demand and ensure to society that retaliatory force used is actually retaliatory and that the alleged suspect targeted for retaliation actually acted criminally. This is what it means to have such a legal monopoly. Any forceful regulation on the use of retaliatory force so as to ensure to society that retaliatory force used is indeed proper and retaliatory constitutes a legal monopoly. Within the jurisdiction of a properly limited government, all retaliatory force is restricted in such a way so as to demonstrate publically that it is legitimate when used.

Under anarchism, the right possessed by each individual within society to organize the retaliation against the threat of private force is not recognized. Libertarian anarchists believe they have the right to retaliate against aggressors without having to publically prove either that their targets are aggressors or that their use of force is indeed retaliatory. By rejecting government, the only method of socially proving these two assumptions, the anarchists reject the possibility of legally ensured social demonstration. Thus under libertarian anarchism one must live in an environment where private feuds are settled by individuals who reserve the right to refuse to publically demonstrate that their use of force is retaliatory or that their targets are aggressors. Binswanger describes this environment as he states,

"The attempt to invoke individual rights to justify "competing" with the government collapses at the first attempt to concretize what it would mean in reality. Picture a band of strangers marching down Main Street, submachine guns at the ready. When confronted by the police, the leader of the band announces: "Me and the boys are only here to see that justice is done, so you have no right to interfere with us." According to the "libertarian" anarchists, in such a confrontation the police are morally bound to withdraw, on pain of betraying the rights of self-defense and free trade...In fact, of course, there is no conflict between individual rights and outlawing private force: there is no right to the arbitrary use of force. No political or moral principle could require the police to stand by helplessly while others use force arbitrarily—i.e., according to whatever private notions of justice they happen to hold."

Private force is just that - arbitrary. A proposition is arbitrary if it is presented without proof of its truthiness. A coercive action is arbitrary if it is employed without proof of its retaliatory and proper nature. The libertarian anarchist's non-aggression principle (or if he chooses "axiom") is useless to him since his rejection of limited government nullifies his ability to socially distinguish initiatory force from retaliatory force to begin with. What the anarchist wants ultimately is the right to secede from the necessity to publically prove that he was the victim of aggression and that his use of retaliatory force will genuinely be retaliatory. Private force in this context thus is "socially-indistinguished force" whereas retaliatory force employed by a limited government is "socially-demonstrated retaliatory force." This is why when a properly limited government bans the practice of private after-the-fact retaliation either employed by individuals, groups, or delegates, it does not initiate force.

How government must go about retaliating against the threat of private after-the-fact force and socially demonstrating that it will use retaliation properly and only against aggressors is a subject matter for legal and law enforcement specialists. This is about the structure of government, not the nature of government. As part of its obligation to investigate claims made by plaintiffs and to publically prove that it is using retaliatory force properly against criminals, governments must be regulated by the citizenry to operate using objective means of proof. On "objective means" Watkins notes,

"To determine that an instance of force is retaliatory, men must know what the act of force was, the general standard by which guilt is to be determined, and what evidence was used to meet that standard in a particular case. Every member of society must have access to this information. And, of course, each of these elements must be objective (the laws, standards of evidence, and the evaluation of whether the evidence in question meets that standard)."

Now just because a government assumes the legal monopoly on employing retaliation over a certain area certainly doesn't mean that it will do so properly. To date, no government has been reduced by its citizens it’s charged to protect to a level where it is exclusively concerned with protecting individual rights. That governments are fallible is a truism for which there exist generous amounts of proof. In order to maintain a limited government the citizenry within the jurisdiction encompassed by their government must express concern and vigilance regarding the structure and purpose of their government. They must ensure that the purpose of their government is that of protector of individual rights and that the structure of their government corresponds to this purpose. While government must be charged with "placing the retaliatory use of force under objective control," it is the obligation of the people to demand that their government conform to this model. Naturally a properly limited government would be staffed with competent employess and would be constructed by the people in such a way so as to include mechanisms which encourage efficiency and discourage corruption, e.g., tools for the prompt identification and removal of bad employees from office secretaries to legislators to judges. A properly limited government would include checks and balances, separation of powers, etc., incentive structures established to promote virtuous behavior as described by Objectivists such as Ayn Rand, Leonard Peikoff, and, most recently and thoroughly, by Tara Smith. But the fact that government officials are capable of making mistakes is no reason to single handedly reject government. All social systems require a great deal of trust. It is the author's contention however that a peaceful society with a limited government is a metaphysical possibility while a peaceful society without any government is not. The need for government is primarily epistemological. Government's chief legitimate function is an epistemological one.

Some libertarian anarchists such as Roderick Long state that, "for Market Anarchists, coercively barring someone from practising any legitimate profession – including the provision of legal services – counts as initiation of force." Libertarian anarchists such as this one from mises.org make similar assertions about the non-aggression principle and government:

"In a sense, all Objectivists have to do is remove the territorial monopoly aspect of their ideal form of government and they would be free market anarchists. But they refuse to do this. Yet they are contradicting their own ethical principles in supporting a state in the first place. No Objectivist to my knowledge has ever been able to explain how their Objectivist government obtains its territorial monopoly in the first place without initiating force against competition within the given territory, and further continually initiating force in order to maintain that monopoly. Supposing that an Objectivist government already is in place, what if I wish to start up my own private protection agency or dispute resolution organization within the territory? Or what if I wish to patronize such an agency instead of the Objectivist government? The Objectivist government has only two options: initiate force against me or cease to be a government in any rational sense of the word."

An example of a genuinely rational response would be the following:

The demand that others recognize one's right to "start up my own private protection agency or dispute resolution organization within the territory" or "to patronize such an agency instead of the Objectivist government" represents the demand to be able, by right, to use force against an alleged aggressor without having to prove to society whether the accused is guilty or whether one's use of force will be retaliatory and proper. It represents the demand to be able, by right, to employ private after-the-fact force and, therefore, to take actions that threaten the rights of members of society. Anarchist Roderick Long asks Robert Bidinotto the following question: "Why couldn’t an anarchic legal order likewise require that individuals “submit to an objective process to justify, publicly, their uses of force"?" The answer is that such an action, committed coercively, could only be executed legally by an institution with a legal monopoly on the use of retaliatory force over a given geographical area. If an anarchic legal order did this, it would no longer be anarchic. Without such a monopoly, no institution could legally force non-subscribers to submit to such a process. Any action taken by society to organize in retaliation against the threat of private force due to its indistinct nature - any such action would be a monopolistic action. If society organizes to counter the threat of private force, such action would have to be deemed as monopolizing. How? If society organizes against the threat of private force that confronts it, regardless of the form of its response, society would be controlling the use of retaliatory force irrespective of what dissenting individuals within that area do or argue, albeit indirectly, i.e., society would essentially be monopolizing the use of retaliatory force over a given geographical area. When society does organize against the threat of private force, the institution it forms - the means it uses - is called "government."

As Binswanger states, "The real target of the anarchist's attack is objectivity. Objectivity requires one to prove that one is acting within one's rights; they do not want to be held accountable to anyone for anything—not even regarding their use of physical force. They damn governmental retaliation because it is objective; they demand to be "free" to use force on whim." Limited government, as Ayn Rand wrote, was the means of separating force and whim. With no government, society has no mechanism for distinguishing initiatory force and retaliatory force and thus no means of retaliating against the threat of indistinguished force, giving whim the chance of influencing the use of force.

The reason why I believe many young people who endorse freedom and capitalism end up being "befuddled" by libertarian anarchism as Ayn Rand put it is because it seems intuitive that if the market can yield consumer and producer goods more efficiently, more cheaply, and more innovatively than the state, why should we "radicals for capitalism" cease our campaign for capitalism at the border of the coercive services (defense, law enforcement, justice, etc.)? Why not proceed into the realm of force? Indeed, the euphoria of discovering the absolute fact that capitalism bows to no other social system in terms of productivity, efficiency, and creativity tempts us to push forward into rejecting the state entirely. With the vast number of goods being offered by private enterprises, a government to offer law enforcement services seems artificial. In order to avoid this, one must ground one's advocacy of capitalism in a philosophical framework, especially an epistemological one. If one adheres properly to the principles of rights and to the non-aggression principle, all coupled with reason, one must logically promote a limited government.

"....the point is not that individuals are unable to make objective determinations of what constitutes retaliatory force -- it's that objectivity demands they prove it to every other member of society. Only a government can provide such a mechanism." - Don Watkins

Italics mine.

-Binswanger, Harry. "Anarchism vs. Objectivism." The Harry Binswanger List. 24 April 2009. http://www.hblist.com/anarchy.htm
-Long, Roderick. "Anarchism as Constitutionalism: A Reply to Bidinotto." Strike the Root. 24 April 2009. http://www.strike-the-root.com/3/long/long11.html
-Long, Roderick. "Anarchism as Constitutionalism, Part 2." Strike the Root. 24 April 2009. http://www.strike-the-root.com/4/long/long1.html
-Rand, Ayn. Philosophy: Who Needs It. Signet Books. November 1, 1984
-Rand, Ayn. The Virtue of Selfishness. Signet Books. November 1, 1964
-Toohey, John J. Notes on Epistemology. (Washington D.C.: Georgetown
University, 1937). http://mises.org/books/toohey.pdf
-Watkins, Don. "Epistemological Anarchy." Noodlefood. 24, April 2009. http://www.dianahsieh.com/blog/2005/12/epistemological-anarchy.html

On Janeane Garofalo's Ineptitude

Though very much underreported by the mainstream news media, thousands of American citizens across the country have staged "Tea Party" protests, demonstrations made against the interventionist economic policies advanced by President Obama, including his decision to increase government debt incursion and increase monetary inflation. The protests have been met with vitrole and opposition by the news media with perhaps the most insulting commentary coming from Miss Janeane Garofalo. In an interview with MSNBC host Keith Olbermann, Miss Garofalo made the following claims regarding the tea parties in response to an introduction by Mr. Olbermann:

"Thank you. You know, there's nothing more interesting than seeing a bunch of racists become confused and angry at a speech they're not quite certain what he's saying. It sounds right and then it doesn't make sense. Which, let's be very honest about what this is about. It's not about bashing Democrats, it's not about taxes, they have no idea what the Boston tea party was about, they don't know their history at all. This is about hating a black man in the White House. This is racism straight up. That is nothing but a bunch of teabagging rednecks. And there is no way around that. And you know, you can tell these type of right wingers anything and they'll believe it, except the truth. You tell them the truth and they become -- it's like showing Frankenstein's monster fire. They become confused, and angry and highly volatile. That guy, causing them feelings they don't know, because their limbic brain, we've discussed this before, the limbic brain inside a right-winger or Republican or conservative or your average white power activist, the limbic brain is much larger in their head space than in a reasonable person, and it's pushing against the frontal lobe. So their synapses are misfiring."

Miss Garofalo further asserted that,

"And again, this is about racism. It could be any issue, any port in the storm. These guys hate that a black guy is in the White House. But they immigrant bash, they pretend taxes and tea bags, and like I said, most of them probably couldn't tell you thing one about taxation without representation, the Boston tea party, the British imperialism, whatever the history lesson has to be. But these people, all white for the most part, unless there's some people with Stockholm syndrome there."

Anyone familiar with argumentation and verbal logic would realize that Miss Garofalo has assumed a tremendous epistemological responsibility. It is safe to say the Miss Garofalo believes that the propositions she has presented are true. She honestly believes that the tea parties are motivated by racism aimed at blacks, in particular at President Obama. She honestly believes that those who attend these demonstrations who are non-white suffer from "Stockholm syndrome." She honestly believes that those who participate in these exhibitions are ignorant of the American Revolution.

It is also safe to assume that Garofalo wishes that others believe these allegations of hers are true - after all, she did disclose them to Keith Olbermann on a nationally syndicated cable T.V. show. Now propositions are true only when they correspond with the facts of reality, only when they are accurate descriptions of existence. An allegation is true when what it claims is actually the case. In order for Garofalo to properly persuade others that her assertions regarding the tea parties are true, she would have to publicly demonstrate that her allegations correspond with the objective facts. She would have to appeal to empirical evidence that suggests that the tea parties are indeed populated by racists - mission statements made by those who organize these demonstrations, personal statements proclaimed by recognized tea party authorities, etc.

As it just so happens, Garofalo appeals to no empirical evidence. Read the transcript at http://newsbusters.org/blogs/noel-sheppard/2009/04/16/garofalo-tea-partiers-are-all-racists-who-hate-black-president. Garofalo appeals to no statements, no behavior, no actions, no decisions, no choices - nothing. She commits what I call the fallacy of premises-omission, the cognitive error of advancing conclusions in the absence of supporting-premises. An argument is a composite product of two primary components: a premise or premises and a conclusion. Garofalo offers gratuitous conclusions but no premises. Why then should we as critical thinkers accept her allegations as true? Conclusions require premises because conclusions are not self-evident. Empirical evidence confirms conclusions because empirical evidence is the product of our senses and our senses are the gateway towards the attainment of knowledge. Denying empirical evidence represents a denial of our senses. This unfortunately does not dawn on Garofalo who doesn't even mention empirical evidence. She expends no energy documenting proof that her claims are factual. As a result we as critical thinkers may designate her propositions as "arbitrary," as endorsed without evidence and as unworthy of further attention or scrutiny.

Lastly, while it is unsurprising it is equally unfortunate that Keith Olbermann thanked Garofalo for her appearance. For what reason could Olbermann appreciate Garofalo's presence. As it is shown above Garofalo contributed nothing to the provision of information - she offered nothing of tangible value. Rational behavior would entail the opposite, i.e., the castigation of erroneous and substanceless commentary and the renewal of informative and logical debate.

On Faith-Based Finance

What if I told you that the causes behind the current global financial fiasco and the solutions to avoiding future crises lay within a text or texts about, miracles, magic incantations, and an angel who gives a message to an illiterate merchant in the desert about the commands of an all powerful sky-spirit!?! You’d think anyone who believed this was a sucker, a dupe. Well, this very argument is being hawked now by Islamic financiers and their cohorts. The lesson here is simple: gutter finance is no antidote to gutter finance.

Socio-economic issues always magnetize people of faith as opportunities to advance their agendas, whether its abortion, or “climate change,” or terrorism. Economics is no different. Islamic finance, the sum of all financial activity that conforms to the commandments of the religion of Islam, especially Sharia law, as espoused by Allah, is gaining popularity.

According to Faiza Saleh Ambah of the Washington Post,

“As big Western financial institutions have teetered one after the other in the crisis of recent weeks, another financial sector is gaining new confidence: Islamic banking.

Proponents of the ancient practice, which looks to sharia law for guidance and bans interest and trading in debt, have been promoting Islamic finance as a cure for the global financial meltdown.” Mr. Saleh goes on to say that,

“Though the trillion-dollar Islamic banking industry faces challenges with the slump in real estate and stock prices, advocates say the system has built-in protection from the kind of runaway collapse that has afflicted so many institutions. For one thing, the use of financial instruments such as derivatives, blamed for the downfall of banking, insurance and investment giants, is banned. So is excessive risk-taking.”

The reasoning here, among these “advocates,” is pitiable. Lauding the fact that one has hedged against derivative-related risk by banning derivatives is akin to praising a decline in the number of car accidents by banning automobiles. That because an economic good can be misused is no reason to prohibit it.

Islam, however, does an awful lot of prohibiting. Riba, the Islamic transliteration of usury, is the practice of exchanging goods in the present for a claim to goods in the future plus interest and is strictly banned by Allah. Debts can only be sold at face-value. Verses [2:278-279] of the Koran state that “O ye who believe! Fear Allah, and give up what remains of your demand for usury, if ye are Indeed believers.” It should be noted that interest-based lending per se is banned under Islam, not simply lending at “excessive” interest. According to Dr. Mahmoud Amin El-Gamal, under Islam “both an increase or a decrease of the amount returned relative to the amount lent would be considered injustice.” Dr El-Gamal also remarks that there are many hadiths or sayings of the prophet Mohammed that condemn the practice of riba, of which, according to Mohammed, there are 73 types.

Under Islam, gharar or risky transactions/sales, are proscribed as well. Dr. Mustafa Al-Zarqa’ defines gharar as “the sale of probable items whose existence or characteristics are not certain, due to the risky nature which makes the trade similar to gambling.” While identifying riba is relatively easy, recognizing transactions as gharar is far more difficult due to the ambiguous nature of the word “risky,” the duty of which to define is up to Koranic scholars.

It is proclaimed however by Koranic authorities that gharar includes the sale of insurance goods and financial derivatives. It is argued by these authorities that since under insurance contracts either the insurer or the insured can end up with more money than the other, such contracts fall into the category of gharar and are therefore immoral. Futures contracts, forward contracts, options contracts and assorted other derivative instruments are not kosher under Islam either as they are gharar too because, according to Dr. El-Gamal, “the object of the sale [under these contracts] may not exist at the time the trade is to be executed.” The good doctor notes that exceptions exist - but generally, derivatives get a “no-go” from Allah.

Lastly, Mr. Ambah of the Post notes that “Sharia-compliant institutions also cannot invest in alcohol, pornography, weapons, gambling, tobacco or pork.”

The problem with such a method for discriminating between good and bad financial instruments should be apparent by now. It’s faith-based!

Why exactly should we begin banning interest-based lending and “risky” contracts? Ask a genuine Muslim this and he or she must respond with a sincere “because the Koran and the Hadiths demand it.” An appropriate subsequent question would be: "Well why should I be concerned with what the Koran says?" Again, your Muslim friend would have to respond with: “Because Allah wills it.” Only one more request is necessary in this reductio ad ridiculum: “Prove Allah exists.” The authentic Muslim would have to respond as follows: “I haven’t got the necessity of proving Allah exists – Allah demands belief in him without evidence.”

There we have it. The whole of Islamic finance is contingent upon pure mysticism. Mysticism is the methodology of religion. Mysticism is the acceptance of claims, propositions, allegations, assertions etc., without evidence or in defiance of evidence. This is commonly known as faith. When the religious implore you to believe in God, the implication is that you should believe in his existence in the complete absence of evidence suggesting his existence. Propositions proclaimed without evidence are arbitrary. Why should anyone believe in a claim if no evidence is presented to prove the truth of the claim in question? Evidence, combined with logic, are those tools necessary for the public demonstration that a claim is in fact true. That “Socrates is a mortal” is easily proven by appealing to the evidential propositions “Socrates is a man” and “All men are mortal” and by subsequently illustrating that Socrates, through deductive logic, therefore must be mortal.

Faith is governed by chance. The best it can do is lead us to true assertions by accident. If the legitimacy of Allah's commands are dependent upon arbitrary premises, than his commands are subsequently arbitrary. The Koran never seeks to prove Allah's existence by observation and logical inference. The method of Islam is epistemologically unsound. How do we know truly that Allah exists and that his regulations should be observed? Mysticism cannot answer this question because we cannot know through faith - faith involves belief, not knowledge. This is the fundamental problem of faith: it is useless in the quest for knowledge and information. That a proposition corresponds with the facts of reality can only be discerned by viewing reality and forming a logical conclusion. Mysticism prohibits this, for reality is simply a massive sum of evidence.

Islam takes the existence of Allah as a given. It is not a conclusion – it is a premise, and a specious one at that because facts necessary to begin proving his existence are “not in attendance.” Thus, the whole of Islamic finance regarding riba and gharar is based upon impulsive notions regarding a divine consciousness and his instructions. This is not something to acclaim. When put into rational perspective, it rather resembles a mark of shame, a humiliating truth. Finance guided solely by faith-based "principles" can, by definition, provide zero assurance of success. Every once of added faith reduces rationality. Muslims are lucky Allah didn't ban toilet paper or camel-transportation.

We are in the midst of a global bear market unleashed by another faith-based philosophy: Keynesian economics. We do not need more devotion to unproven statements. We need rational commerce based upon a rational methodology. I need not even further mention the destructiveness of banning insurance and derivatives.

On G-20 Dementia

Leave it to environmentalists, Marxists, socialists, trade unionists, interventionists, and other drek to flamboyantly misidentify our economic problems and the economic solutions.

Watching NBC this morning report on the G-20 summit, a congregation of the world's most powerful dim-wits, I witnessed a large crowd of protesters. These summits are always magnets for angry hippies and people who consider the Communist Manifesto as the most informative book they've ever read. And again, not surprisingly, the common enemy among these "people" has become capitalism.

While filming the protest, an NBC camera panned down to a large rectangular banner with the statement "Capitalism isn't working" emblazoned on the front. Nauseating.

Capitalism has been the scapegoat for virtually every socio-economic problem, from the business cycle to AIDs to poverty to "alienation." The antagonism of the general population towards capitalism is a fashionable mentality that has existed alongside capitalism since its inception. Ludwig von Mises captures this error-ridden sentiment in a brilliant quote of his where he states:

"Nothing is more unpopular today than the free market economy, i.e., capitalism. Everything that is considered unsatisfactory in present-day conditions is charged to capitalism. The atheists make capitalism responsible for the survival of Christianity. But the papal encyclicals blame capitalism for the spread of irreligion and the sins of our contemporaries, and the Protestant churches and sects are no less vigorous in their indictment of capitalist greed. Friends of peace consider our wars as an offshoot of capitalist imperialism. But the adamant nationalist warmongers of Germany and Italy indicted capitalism for its "bourgeois" pacifism, contrary to human nature and to the inescapable laws of history. Sermonizers accuse capitalism of disrupting the family and fostering licentiousness. But the "progressives" blame capitalism for the preservation of allegedly outdated rules of sexual restraint. Almost all men agree that poverty is an outcome of capitalism. On the other hand many deplore the fact that capitalism, in catering lavishly to the wishes of people intent upon getting more amenities and a better living, promotes a crass materialism. These contradictory accusations of capitalism cancel one another. But the fact remains that there are few people left who would not condemn capitalism altogether."

Of all the myths propagated by economic illiterates in universities, pushed by the news media, and accepted faithfully by blitheringly naïve and easily impressed students, the faith-claim that capitalism is the cause of our socio-economic woes is among the most aggravating to encounter - aggravating because of its wild nonsensicality.

I say that the assertion that "capitalism is the cause of our socio-economic woes" is a "faith-claim" because it is an assertion made in the complete absence of evidence; it is a declarative statement without supporting evidence.

First of all, the claim is made without a knowledge of the definition of capitalism. Capitalism is a social system based upon the inextricably linked rights of liberty and private property, where all production goods and consumption goods are owned by private individuals and where all goods that are distributed between people are done so in the market. The market refers to the network of voluntary exchanges of goods; the market refers to free trade. Production goods refer to those means that indirectly satisfy ends by assisting in the creation of consumption goods and further production goods. Consumption goods refer to those means which direct satisfy ends.

The implications of this definition are massive. If under capitalism, all production and consumption goods are privately owned, than it certainly cannot be said that what Americans dwell under can be designated as pure capitalism. The allegedly private and independent Federal Reserve system, a creature brought to life by the Federal Reserve Act of 1913, is a series of central banks governed by one super-central bank in Washington with a congressionally granted monopoly on the authority to issue banknotes - U.S. dollars, money that is declared "legal tender" by the government, meaning no creditors may refuse payment in such "money" by debtors. The Fed, run by a Princeton economist by the name of Benjamin Bernanke, possesses the exclusive power to determine the size of the money supply. Concomitantly, the Fed has the exclusive power to set certain interest rates and enforce those rates over the entire nation. In addition to this, the Fed circumscribes assets of participating financial institutions and intermediaries and surveys commercial banks within the Federal Reserve system.

This simply could not be under true capitalism. Under capitalism not only would legal tender laws be illegal and money chosen by the market (most likely a parallel standard of gold and silver), no single institution would have solitary mastery over determining the size of the money supply. Private minters supplied by private miners would determine the size of the money supply. And interest rates would be established by both the market demand for loanable funds and the market supply of loanable funds, not by State decree.

So as it just so happens, the means of producing money in this country are nationalized; the Federal Reserve is a socialist enterprise. Central banking is a socialist "business."

A catalog of coercive regulatory agencies supervise and harrass our financial system, including the Securities and Exchange Commission, the Commodities Futures Trading Commission, the Office of the Comptroller of the Currency, the Federal Deposit Insurance Corporation, the Office of Thrift Supervision, the National Credit Union Administration, and assorted state banking and insurance commissions. Coercive regulation here means intervention based upon preventive law aimed at enforcing rules of social conduct that, in the course of execution, unavoidably impinge upon the liberty/private property rights and contracts of those who are the object of such involuntary scrutiny. Liberty rights refer to freedom from bodily harm to guide one's own life by one's own judgment. Private property rights refer to the freedom to legally possess and physically control the product of one's mind. Contracts refer to those voluntary agreements made between two or more parties.

Private property is clearly violated by government regulation. Such regulation may respect the legal possession of private property (and often does) but it, by definition, trangresses upon the physical control of private property. To physically control property means to be able to direct the use of that property or dispose of that property without any outside human obstruction, as long as one does not violate the rights of others. Coercive regulations impose involuntary guidelines on how private property owners may dispose of their property. For example, people may not sell "controlled substances" such as Xanax without a government issued license. Such regulations, not coincidentally, violate contracts as well; they illegalize certain agreements even though all parties within these agreements participate voluntarily. And such regulations violate liberty because non-compliance is ultimately punishable by imprisonment.

The SEC supervises trading in organized exchanges as well as demands information disclosure and financial markets. The CFTC establishes rules guiding trading in futures markets. The OCC restricts assets possessed by commercial institutions and banks that are federally chartered and further scrutinizes and charters banks that are federally chartered. The FDIC offers taxpayer-funded insurance services to bank depositors (like you and me) and probes banks that are insured. The OTS delimits assets possessed by savings and loan associations and analyzes savings and loan associations. Finally, the NCUA restricts assets possessed by credit unions and charters as well as examines credit unions that are federally chartered.

Can we, after all this, continue to hear ourselves further say that capitalist liberalism is the catalyst for our problems? The American financial system, the center of the global economic fiasco, is a corporatist/interventionist mess, an array of private enterprises and government agencies inextricably linked by corporate welfare and regulatory statutes. Say what you'd like, but you may not say that capitalist liberalism is at fault for introducing our global bear market to us.

On Market Regulation and the Airlines

Want to minimize plane crashes? Let the market regulate the airline industry.The idea that the government should supervise and regulate the airline industry is taken as a given by most people. According to popular belief, without federal intervention, private airplanes would fall from the sky. Economic theory says otherwise.

That the market, as a network of voluntary exchanges to mutual benefit, can regulate itself is a truism that has been demonstrated time and time again. Insurance companies are among the best private institutions that engage in intra-market regulation. Insurance companies are businesses that provide risk-reduction services in exchange for regular cash payments called premiums. Risk is the degree of uncertainty regarding the profitability of venture. The airline sector naturally is exposed to a high degree of expensive risk. Airplane crashes trigger massive lawsuits and remuneration payouts, legal claims that eviscerate profits into pure losses. As a result, all airlines purchase risk-reduction services from insurance companies. From these win-win transactions, airlines benefit from reduced financial risk and insurance companies earn premium-based profits.

In order to be eligible to pay reduced premiums, airline companies agree to allow their insurers to regulate and inspect their operations. Insurers may demand that, in exchange for cheaper premiums, their airline-clients pass objective safety tests and evaluations, that their pilots be trained only by reputable flight schools, and that their passenger aircraft are purchased only from reputable manufacturers like Boeing (after all, insurers don’t want to have to pay their clients). This way, airline companies pay less for insurance services, the safety of air travel is enhanced for the public, and insurance companies reduce their own risk by decreasing the uncertainty of airline profitability, the object that the insurance companies are insuring in the first place. Government regulation, as extra-market regulation, operates far less effectively.

The reason why government regulation is less effective than market regulation is because market regulators like insurance companies are bound by the profit-loss system. Private insurers have a stake in the solvency of those business-clients that they insure. If businesses engage in too much risky behavior and, as a result, incur too many losses, their appeal to the insurance money offered by their insurers may very well bankrupt their insurers. The solvency of private insurers is contingent upon their business performance.

Our government is bound by no such profit-loss concerns. If a plane crashes, the FAA doesn't go out of business. In such situations, it is usually appropriated more money and regulatory authority! As long as governments can cope with their wasteful and imprudent methods by engaging in taxation and printing money, they have no incentive to properly regulate private enterprises. Indeed, it’s often the case, as in public schools, that the incentive among government institutions is to perform poorly in order to attract additional funding.

Such is the case with all government regulatory agencies that enforce preventive laws. The FDA, the EPA, the FCC and all the other myriad Soviet-style government bureaucracies charged with regulating the marketplace are not guided by profit-loss considerations. Once we realize that effective regulation finds its source in intra-market agencies and not extra-market agencies, our economy will begin to prosper again and safety will be ensured.

On the Populism Smear

Lately, the news media has become content with labeling the growing opposition towards Obama's fiscal and monetary destructionism as populism. The concept, much more a term of derision than anything else, has been used to smear those who reject Obama's inflationism, albeit subtlely.

The term populism refers to any grass roots, meaning layman originated movement to achieve certain politico-economic goals, marked often by public displays of social disgruntlement. Dictionary.com defines populism as "any of various, often antiestablishment or anti-intellectual political movements or philosophies that offer unorthodox solutions or policies and appeal to the common person rather than according with traditional party or partisan ideologies."

The problem with the term "populism" as used today is that it connotes a sense of reactionary emotionalism and grafts it onto opposition to Obama's economic policies. It denotes all those who admonish Obama for his political ends and means, from socialists to nationalists to market purists, effectively lumping the opposition into one group and treats this opposition collectively as if it where somehow intellectually mistaken. I resent being treated as a member of a group that includes collectivists and other economic illiterati. Do you mean to tell me that those who participated in the recent Tea Party demonstrations share the same convictions as those who cordially harrassed recipients of AIG retention contracts and demanded the confiscation of the pay promised under those voluntary agreements? Please.

Profound distinctions exist between market liberals such as myself and others who reject Obamanomics. I criticize Obama for advancing the cause of statism. Socialists show the same vitriole but only because of his willingness to curb his statism to a certain degree. True free-market opposition to Obama's Keynesianism has its origins in Objectivist morality and economics, especially Misesian economics. Socialist opposition to the same Keynesianism comes from mere quibbling over degrees of statism, not between statism is individualism, the essential distinction between capitalism and everything else.

Populism substitutes common fury for intellectual expression. It thus cannot denote any genuine advocate of liberty and private property.

On Marginal Utility and Marginal Intelligence

The classical economists such as Adam Smith, David Ricardo, Frederic Bastiat, and Jean-Baptist Say provided an economic foundation for and defense of the rapid, 19th century mechanization of the Western economies, also known as the Industrial Revolution. These individuals, through painstaking reasoning or ratiocination as economist von Mises would say, the classicals demonstrated the social benefits of personal selfish behavior, the rationality of market adjustments, and the deleterious effects of coercion, especially state coercion, on social utility. The classicals' utilitarian arguments reflected the effect of the growing recognition and respect of the rights of man, namely liberty and property. They were, by no means, marginally intelligent.

However, in addition to a few other shortcomings, the classicals failed to solve the paradox of value. The paradox of value is embodied in the following intellectual dilemma. The utility or usefulness in want-satisfaction of "water" is normally considered far higher than that of "diamonds." Water is an imperative, life-sustaining consumption and production good. Diamonds have some physical utility such as being excellent mediums for dentist drill bits. But the need for diamonds is far lower than the need for water. The paradox of the situation is that even though water is more useful than diamonds, the price of diamonds is far higher than the price of water, reflecting the fact that the demand for diamonds is higher than the demand for water. How can the price of diamonds be higher than the price of water if the latter is more useful than the former? Are we ethically corrupt in our pricing system?

The solution to this paradox is the law of marginal utility.

The problem in the thinking of the classical economists is their approach. Notice in deliberating on the paradox the goods in question were initially flanked with quotation marks. This reflects the essential problem of the classical approach: the classicals did not realize that the objects of human acquisition and abandonment were distinct, finite quantities of goods, not abstract notions of "goods." When choosing between water and diamonds, we are choosing between a definite quantity of water and a definite quantity of diamonds. When water and diamonds are bought and sold, only distinct, limited quantities of water and diamonds are actually involved in the transaction, not all of the existing water and all of the existing diamonds. "Water" refers to water as a class of matter. "Water for sale" refers to a definite quantity of water offered at a price. People acquire and relinquish definite quantities of goods, not abstract concepts. Units of goods enter into human action, not abstract notions of goods. A unit is a member of a group of similars. A supply is a group of homogeneous, interchangeable units of goods that each possess the same specific want-satisfaction capacity.

The articulation of this solution to the value paradox was reached simultaneously by the economists Carl Menger, William Stanley Jevons, and Leon Walras, independently of each other. Carl Menger's contribution was the most important in my opinion however because he grounded the law of marginal utility in deduction. He deduced marginal utility from the undeniable empirical fact of human action. Most economists, notably neoclassicals, empiricists, and behaviorists hold that the law of marginal utility is the product of psychology. Such a conclusion is at best superfluous.

The moral conclusion of the value paradox is false. Human evaluations of water and diamonds are not corrupt and ill-advised. What Menger recognized was that definite quantities of goods were either acquired or abandoned in accordance with existing supplies of the goods in question. Definite quantities of water and diamonds are either acquired or abandoned in reference to the existing supplies of water and diamonds. We seek or relinquish units of goods based upon the existing supply of such goods.

We use units of goods to satisfy our wants or preferences. Our personal preferences exist on a single ordinal scale that ranks our preferences from highest to lowest. All action is an exchange. Humans act to remove felt uneasiness as von Mises holds. Action is an attempt to exchange a less satisfactory state for a more satisfactory state. It is an inexorable manifestation of human will. Our preferences on our preference scales represent our ends that we want to achieve. These ends are states that we believe we should assume. The means we need to achieve these prefered states are called goods. Consumption goods are goods that directly satisfy our wants. Production goods are goods that indirectly satisfy our wants by enabling us to produce either consumption goods or further production goods. We must acquire these goods using human action in order to cater to our preference scales.

As we acquire goods and form a supply, the determinant of whether we continue to acquire an additional unit of the same good or not is the marginal utility of the next unit to be acquired. The marginal utility is the satisfaction yielded by the consumption of a unit of a good. The next unit to be acquired or relinquished is called the marginal unit.

As units are acquired, they are reserved to the fulfillment of wants on our preference scales. We always seek to fulfill our most urgent wants first - this proposition is a tautology. Our most urgent wants exist at the top of our ordinal preference scales. As we fulfill are most urgent wants at the top, we proceed down our scales steadily fulfilling our less urgent wants. As we acquire more units, we satisfy lesser and lesser urgent wants. Thus, as the supply of our goods increases, the utility of each additional acquired unit (marginal utility), or the marginal unit, decreases. The utility of each additional marginal unit decreases because as our supply of goods increases, each new marginal unit logically can only satisfy a want correspondingly lower on one's preference scale. As stated earlier, it is tautological to assume that the most urgents wants are satisfied first.

Again, as the supply of a good increases, the utility of each successive marginal unit decreases.

The same applies to a decreasing supply of goods. As the supply of a good decreases, the utility of each successive marginal unit relinquished increases. This too follows from the tautological proposition that the most urgent wants are satisfied first. As one's supply decreases, one has less and less units with which to satisfy one's wants. Obviously, if one must relinquish a marginal unit, the unit to be relinquished will be the one reserved for satisfying the lowest or least valued end on one's preference scale. This follows logically and tautologically from the fact of want-satisfaction. Whatever unit one abandons, the end that that unit served must be the least valued end to the valuer. If not, that particular unit would not have been relinquished in the first place.

Do not confuse marginal utility with total utility. Marginal utility is agent-relative while total utility is objective. The total utility of air conditioner service is its scientific cooling ability which can be measured in British Thermal Units. The marginal utility of the marginal unit of air conditioner service is immeasurable. Remember, marginal utility refers to the satisfaction yielded by consuming one unit of a good. There is no unit of satisfaction therefore no possibility of satisfaction measurement. Satisfaction is a psychic phenomenon. By contrast, total utility is an objective quality. If the supply of good x is n, the total utility of n must be greater than the total utility of n-1. The unit of measurement here is simply the number of good-units.

So - the utility of the next unit to be acquired or abandoned, the marginal unit, moves inversely with the size of the supply.

The law of marginal utility, once understood, is a brilliant tool for discovering mistaken economic assumptions. One such asumption, shared by many economic interventionists, is the alleged incoherence of income between CEOs and, say, teachers. The lamentation of the discrepancy between CEO pay and teacher pay usually takes this form: "What kind of nation are we where teachers, obvious human assets, are paid absymally low compared to CEOs, individuals who don't prepare our children for the future." It is indeed inconcievable for a society to have CEOs but no teachers. By contrast, a society with teachers and no CEOs is concievable.

No, our economic system is not suffering from dementia (not in this regard). The reason why CEOs receive far greater salaries (aside from entrepreneurial profit which is different) that teachers is that, to the market, the marginal utility of the next marginal unit of CEO labour to be acquired is far higher than the marginal utility of the next marginal unit of teacher labour to be acquired. The quantity and quality of the want-satisfaction produced by consuming a unit of CEO labour is far higher than the quantity and quality of the want satisfaction produced by consuming a unit of teacher labour. Why does the market prefer the next marginal unit to be CEO labour over teacher labour? Because,:

- the supply of teachers is very high relative to the supply of CEOs
- the marginal unit of CEO labour is far more productive than the marginal unit of teacher labour

On the truth of the latter, see my On the Purpose and Productiveness of Entrepreneurship to understand the necessity of entrepreneurship. Remember, the law of marginal utility describes the relationship between supply and want-satisfaction. Teachers are a dime-a-dozen and it is relatively cheap to produce them. CEOs are a part of a much smaller supply. Relative to supply and want-satisfaction, CEOs wipe the floor compared to teachers, period.

On How I Loathe Michael Parenti

Many people irk me but few possess the ability to disgust me the way the verminous Michael Parenti does. I had the displeasure of using his hideously unreadable tirade, Democracy for the Few, in political science class and would love to share my view of it with my readers.

Democracy for the Few, first and foremost, is a logician’s nightmare, a vain attempt at indoctrination via historical revisionism. The book is flooded with so many false causes, non sequitors, straw men, mischaracterizations, sleight-of-hand tricks and outright lies that it baffles the mind. Let’s take an economic perspective.

Parenti is a socialist apologist and his writing speaks for itself. In one passage Parent writes, “Wealth and poverty are not just juxtaposed, they are in a close dynamic relationship. Wealth creates poverty and relies on it for its own continued existence.”(Italics Mine) Perhaps if Parenti had paid attention, he would have known that poverty is defined as the absence of wealth, which would make Parenti’s proposition read as: “Wealth creates the absence of wealth...” This zero-sum thinking permeates the book as Parenti cannot understand that free, voluntary exchange is positive-sum, otherwise exchanges would not occur. If wealth creates poverty, then wealth-creation is poverty-creation. Parenti's flirtation with contradictions are legion.

Parenti doesn’t intend to be objective in Democracy. He preps his captive audience in the beginning when he writes that the “study of politics is itself a political act, containing little that is neutral.” This is used to warn readers that since objectivity is allegedly near impossible, a political position will be taken in the book. And take a political position he does as Parenti writes that “Our goal should be an egalitarian, communitarian, environmentally conscious, democratic socialism…,” and that we should denounce the “plunder, poverty, prostitution, and pornography of the free-market paradise.”Of course – the socialist slavepens of the 20th century were just a fluke….

Indeed, Parenti downplays the “crimes of the communist societies” by charging that they provided “a guaranteed right to a job, no hunger or homelessness, free medical care and free education to the highest level of one’s ability, subsidized utilities and transportation, free cultural events, and a guaranteed pension after retirement.” Ask Eastern Europeans if they received these things for free under the USSR. They paid with misery.

Parenti writes that “A common problem of modern capitalism is inflation.” To “prove” his conclusion, Parenti cites U.S. inflation data on housing, food, gas, and health care prices. First of all, capitalism is not what we possess. Under capitalism, the factors of production are for private sale and the market allocates resources free from government coercion. We have corporatism, where businesses collaborate with government for corporate welfare (see bailouts). Such pitiable logic is to be expected from a non-economic demagogue. Parenti cannot even distinguish between the free market and the regulated market (this inability inundates the entire text).

Parenti’s treatment of corporations is as asinine. In arguing against corporations, Parenti writes, “The Constitution makes no mention of corporations.” So? An explicit defense of state/church separation and the right to seek an abortion are absent from the Constitution as well. Are they not imperative to civilized society? Parenti exclaims, “While corporations are often called “producers,” the truth is they produce nothing. They are organizational devices for the exploitation of labor and the accumulation of capital.” What is this but unabashed deceit? If corporations did not produce anything, the goods and resources presently available in the U.S. would not exist.

Think I’m exaggerating? Regarding the earlier editions, Dr. Alexander J. Groth, professor emeritus of political science at the University of California writes, “In the three editions of Democracy for the Few, there are so many grotesque misrepresentations that a careful and detailed review of them would doubtless require nothing short of a “counterbook.””

Democracy for the Few is nothing more than a propagandist invective sleazily aimed at appealing to impressionable students (and adults).