Hammers, Nails, and War

The old saying about the guy who only has a hammer and thus sees all problems as nails is a story about psychology. He's let the available tool warp his vision. 

The same goes for people who see war, or more generally the state, as the only real tool. It warps their vision. We need not ascribe bad motives, just bad judgment, to such people. They may not be blood-thirsty, psychopathic warmongers, as some people describe them.

'Nuff Said

Recommended!

 

TGIF: Happy Halloween, Traders!

It's the Halloween season, the perfect occasion to introduce your young children and grandchildren to the wonders of the market economy. After all, the market is a process in which individuals strive to improve their situations through trade—that is, lucrative peaceful cooperation—with others. (Today we'll ignore all the ways politicians and bureaucrats get in the way.)

As a result of their trick-or-treating, children will bring home a vast quantity and variety of candies. Of course, not all kids (or adults) like the same kind of treats. While that could bring disappointment for some children as they survey their haul, it also brings opportunities.

But before we get to the opportunities, let's note that each child, being an individual, prefers some kinds of candy to others. Every child could rank candies from most to least favorite (including those disliked entirely), with rankings subject to change. No two children's rankings would be identical.

Moreover, value can't be measured like size and weight. Valuation is subjective, internal; thus no unit of value exists. We can say, for example, that one child prefers a Butterfinger to a Twix and another prefers a Twix to a Butterfinger, but we can't measure any of this. Money prices are not measurements, but exchange ratios. Someone prefers, say, a Mars bar to anything else he could spend his $1.99 on at a given moment. We're talking ordinal numbers, grading, here (1st, 2nd, 3rd), not the cardinal numbers required for measurement (1, 2, 3).

Given the randomness of trick-or-treat candy distribution, It's unlikely that any given child's bag will contain only his or her top-ranked candies. He or she may wish the bag had more Almond Joys and fewer Kit Kats, or vice versa. What's to be done?

People long ago discovered the answer: trade. Even kids who have never heard the word economics will quickly, if implicitly, comprehend the idea of gains from trade. Parents will not have to teach this. Even a fairly young child will quickly see opportunities for mutually beneficial exchange. I wouldn't call this a "propensity to truck, barter, and exchange," as Adam Smith did. Rather, like Carl Menger, I think the possibility of gains from trade is so obvious that nearly everyone sees it unassisted.

That doesn't mean parents have no role in the teaching moment that Halloween presents. On the contrary, they can supply simple concepts even to young children, making the implicit explicit. That knowledge will serve children well as they grow into adults because free exchange is pervasive in modern life.

Imagine two children, a sister and a brother. Let's call them Cruz, a 7-year-old girl, and Cass, a 5-year-old boy—by sheer coincidence, those are my grandchildren's names and ages. Full of excitement, they've just brought their candy bags home after a hard night of trick-or-treating. They empty their bags to reveal an impressive variety of sweets. Their eyes shine with delight, but as they look over their inventories, they each see some kinds they like "less" than other kinds. Chances are their preferences differ somewhat.

They see opportunities to trade. Let's say that Cruz has a Hershey's without almonds and Cass has a Hershey's with almonds. Let's also say that Cruz loves almonds, while Cass dislikes them. Being the alert, entrepreneurial kids they are, they realize they would each be better off, in his or her own opinion, if they traded. A simple change of possession and—voila!—they have climbed higher on their personal candy value scales. The number of candy bars did not change, only the ownership. It's a miracle!

That's the simplest example; things could get more complicated. Cass might be willing to trade two Hershey's with almonds for one without or any other arrangement that strikes his and Cruz's fancies. It's up to them. It depends on their values and their candy stocks.

They will realize that when they trade, they each are happy to give up something to get something else because they prefer it to the original something. In their views, the exchange looks worthwhile or they would not trade. Each makes a psychic profit. It's win-win! That's how trade works. (Alas, some early economists labored under the misconception that when people trade, they exchange equal, not unequal, values.)

True, after the trade occurs, one or both might feel regret. We all know that feeling. The world is uncertain, and our knowledge is always incomplete. When we say trade is mutually beneficial or it would not have occurred, we refer to the moment the trade is made. Error is always possible. Hopefully, learning follows.

Parents who want to take the lesson further could point out that what the kids are doing is engaging in barter, candy for candy, in contrast to what we do at a shop, where we trade money for goods. Checks, plastic cards, and apps are other, indirect ways to use money. We use money because barter is inconvenient. It requires a "double coincidence of wants." Two people hoping to trade must each want what the other is willing to trade. If they don't, they're out of luck. Thankfully, society found a way around barter inconvenience long ago:  money, a generally accepted medium of exchange, that is, a thing useful in its own right that everyone is willing to accept in trade, intending to trade it on, because everyone else is willing to accept it too. Kids can't learn about money too early.

When our children and grandchildren grow up, they will spend a good deal of time in the marketplace peacefully and beneficially cooperating, largely with strangers. How many understand that the division of labor and trade made civilization what it is and broadened circles of trust to encompass the entire world? Ludwig von Mises wrote in Human Action:

The fundamental facts that brought about cooperation, society, and civilization and transformed the animal man into a human being are the facts that work performed under the division of labor is more productive than isolated work and that man’s reason is capable of recognizing this truth. But for these facts men would have forever remained deadly foes of one another, irreconcilable rivals in their endeavors to secure a portion of the scarce supply of means of sustenance provided by nature.... No sympathy could possibly develop under such a state of affairs.

Our kids can make a good start in life by learning about trade this Halloween.

TGIF: Socialism Is War by Other Means

Readers may have wondered about a quote I used from Ludwig von Mises recently. In his book Liberalism Mises distinguished the (classical) liberal case against war from what he called the "humanitarian" case against war. To understand Mises, let's examine a "humanitarian" on the war question: philosopher, psychologist, and eugenicist William James (1842-1910). Is it relevant to the largely illiberal antiwar movement today? Let's see.

Whether Mises was thinking of James when the great economist wrote the "peace" section of Liberalism (1926), I cannot say. He may well have. James had given a lecture titled "The Moral Equivalent of War," which appeared in his book Memories and Studies (1911). It's an instructive lecture, and antiwar thinkers and activists should read it. James said:

The war against war is going to be no holiday excursion or camping party. The military feelings are too deeply grounded to abdicate their place among our ideals until better substitutes are offered than the glory and shame that come to nations as well as to individuals from the ups and downs of politics and the vicissitudes of trade. There is something highly paradoxical in the modern man's relation to war.

James believed that while no American would wish for another "war for our Union" (that is, war of secession), neither would anyone vote to have it "expunged from history, and the record of a peaceful transition to the present time substituted for that of its marches and battles." In other words, James said, modern Americans have a love-hate relationship with war. War's blood, death, and destruction were not enough to put them off its inherent bravery, heroism,  and discipline—virtues that men have celebrated for millennia. The war ethic is hardwired into us, James thought.

The question James raised was how society could have the glory without the gore.

Blaming Freedom

Freedom is nearly always blamed for the bad consequences of unfreedom, that is, of government intervention. Take immigration.

We hear these days that migrant gangs are killing, terrorizing, and stealing from Americans. Some immigrants without government papers have definitely committed heinous crimes. Opponents of immigration say that migrants join violent migrant gangs to pay off debts incurred in the process of traveling to the United States. If that's true, we can see that it's not freedom that leads to crime, but rather the black market. Black markets by definition are products of unfreedom, that is, of government prohibition of peaceful behavior. Freedom is not the culprit.

Because legal migration is next to impossible, desperately poor and oppressed people pay thousands of dollars to coyotes to get them from Latin America to the United States. If migrants can't repay the money, they might be forced to work off their debts by joining a migrant gang. Their creditors are likely nasty people because that's what prohibition does. It doesn't make an activity disappear; it simply turns the activity over to organized crime. Think of U.S. alcohol prohibition in the 1920s.

Just as repealing drug prohibition would break the backs of the drug cartels, repealing immigration prohibition would break the backs of the coyote and migrant gangs. Under legal immigration, people would apply at U.S. consulates, gain approval if they weren't violent criminals, buy their plane tickets for a few hundred dollars, and come to America. End of.

Pretending that free immigration causes crime is like thinking that Al Capone was a free-market entrepreneur.

The Soul of a Socialist

 From the pen of H. G. Wells (1908), socialist:

War is a collective concern; to turn one’s back upon it, to refuse to consider it as a possibility, is to leave it entirely to those who are least prepared to deal with it in a broad spirit. 

In many ways war is the most socialistic of all forces. In many ways military organization is the most peaceful of activities. When the contemporary man steps from the street, of clamorous insincere advertisement, push, adulteration, underselling and intermittent employment into the barrack-yard, he steps on to a higher social plane, into an atmosphere of service and cooperation and of infinitely more honorable emulations. Here at least men are not flung out of employment to degenerate because there is no immediate work for them to do. They are fed and drilled and trained for better services. Here at least a man is supposed to win promotion by self forgetfulness and not by self-seeking. And beside the feeble and irregular endowment of research by commercialism, its little shortsighted snatches at profit by innovation and scientific economy, see how remarkable is the steady and rapid development of method and appliances in naval and military affairs! Nothing is more striking than to compare the progress of civil conveniences which has been left almost entirely to the trader, to the progress in military apparatus during the last few decades. The house-appliances of to-day for example, are little better than they were fifty years ago. A house of to-day is still almost as ill-ventilated, badly heated by wasteful fires, clumsily arranged and furnished as the house of 1858. Houses a couple of hundred years old are still satisfactory places of residence, so little have our standards risen. But the rifle or battleship of fifty years ago was beyond all comparison inferior to those we possess; in power, in speed, in convenience alike. No one has a use now for such superannuated things.

TGIF: Full versus Shrunken Liberalism

Language, like the old common law and other customs, is a decentralized, undesigned, spontaneous institution. It serves humanity well. Nothing is perfect, of course, but no alternative—if one were conceivable—could hold a candle to it.

One of the downsides is that people may change how they use handy expressions; more wordy phrases may be needed to replace a "corrupted" one. Here's one: classical liberal. Liberal, of course, originally related to individual liberty and its conditions and consequences: private property, constraints on government power, and free markets. It still means something like this outside of America. (A few pioneering liberals, such as Gustave de Molinari, thought the free market could produce security better than the state could.)

Then "progressives" hijacked the word liberal in America and England. Perhaps they didn't want to be associated with socialism. Now it meant advocating the welfare state and government intervention in the market for the sake of so-called "social justice." Private property was pushed to the back burner. The commitment to free speech and other civil liberties continued, but "modern liberalism" had little else in common with original liberalism even in the matter of war and peace.

Because of this change, the qualifier classical became necessary to distinguish original liberals from the welfare/warfare-state, or mixed-economy, advocates. Later, classical liberals started using libertarian to ensure no one was confused. That word has the same root as liberty, and even though socialists of various stripes had used it, the word has nothing to do intrinsically with socialism, that is, the abolition of private property in the means of production. Since socialism must extinguish liberty, the word libertarian is supremely inappropriate for that philosophy.

Like free people and free markets, language never stands still. Lately, classical liberalism has come to mean not advocacy of individual liberty across the board; rather, it signifies a "modern liberal" (an opponent of laissez faire) who continues to believe in free speech. Today we have the spectacle of nonclassical classical liberals. Go figure.

Why did this happen? It seems this came about because in this century, many welfare-state liberals, Democrats for the most part, gave up on free speech. Their former heroes, such as Supreme Court Justices Hugo Black and William O. Douglas, stopped being heroes. Just recently Barack Obama, John Kerry, Hillary Clinton, and Democratic VP candidate Tim Walz have unambiguously opposed free speech and First Amendment protection on the internet and social media. Kerry summed up his side's case well: because all sorts of views and information are easy to come by these days, "it's really hard to govern today." Poor politicians. Meanwhile, Clinton, who favors repealing Section 230—which exempts social media companies from liability for what users post—says that if those companies do not monitor content as the government wishes, "We lose total control." Control of what? Us, you and me. Obama says government oversight is required, and Walz compared freedom of expression to shouting fire in a crowded theater. First Amendment? What's that? Pathetic, all of them.

These alleged liberals were delighted to see the government lay its heavy hand on social media to suppress information they did not like about COVID-19, Hunter Biden's laptop, and other matters. In some quarters, opposition to free speech combined with a rising interest in an anti-Western value system ("woke-ness") and cultural Marxism left over from the 1960s. Criticism of the Enlightenment grew more common.

Fortunately, this was too much for some "modern liberals." So those who remained committed to reason and free speech picked up the label classical liberal to distinguish themselves from their former colleagues.

The new classical liberals, of course, are not original classical liberals. They are modern welfare-state interventionist liberals, not advocates of individual liberty across the board, including the free market. I've heard some of these thinkers, whom I admire and have learned from, insist that they are still on the "left" and so are not "economic liberals." (I would not put original liberalism on the left-right spectrum, which is incoherent.)

Hence, I suggest we distinguish full liberalism from shrunken liberalism.

Shrunken liberalism espouses free speech, free press, abortion rights, and other civil liberties —but that is pretty much it. What's missing? Any direct reference to so-called economic liberty!

As I've explained before, I don't like the term economic liberty because full, original liberalism refused to carve the individual into personal and economic spheres. The a person is an integrated whole. Each pursues a variety of chosen ends, some involving money and some not, and adapts means best suited to his objectives. Economics is necessary for analyzing those pursuits and the social implications, but the ends are neither economic nor non-economic. They simply are personal ends. The marketplace for goods and services is a marketplace of ideas. The price system, which communicates information to us all, should be protected by the First Amendment.

That is why full liberals proudly did and do champion full-spectrum freedom: civil liberties, the free market, and peace, with its complementary opposition to imperialism and what Jefferson called "entangling alliances." It's as important today as it was in the time of Richard Cobden, John Bright, Lord Acton, Herbert Spencer, William Graham Sumner, and Ludwig von Mises.

It was Sumner who answered the charge of isolationism leveled against the opponents of the empire-building during the Spanish-American War (a charge made today against noninterventionists) with this:

When the others are all over ears in trouble, who would not be isolated in freedom from care? When the others are crushed under the burden of militarism, who would not be isolated in peace and industry? When the others are all struggling under debt and taxes, who would not be isolated in the enjoyment of his own earnings for the benefit of his own family? When the rest are all in a quiver of anxiety, lest at a day's notice they may be involved in a social cataclysm, who would not be isolated out of reach of the disaster? What we are doing is that we are abandoning this blessed isolation to run after a share in the trouble.

in his book 1927 book, Liberalism, laissez-faire advocate and intellectual destroyer of socialism Mises declared:

The liberal critique of the argument in favor of war is fundamentally different from that of the humanitarians [who sought a bloodless "moral equivalent of war"]. It starts from the premise that not war, but peace, is the father of all things. What alone enables mankind to advance and distinguishes man from the animals is social cooperation. It is labor alone that is productive: it creates wealth and therewith lays the outward foundations for the inward flowering of man. War only destroys; it cannot create. War, carnage, destruction, and devastation we have in common with the predatory beasts of the jungle; constructive labor is our distinctively human characteristic. The liberal abhors war, not, like the humanitarian, in spite of the fact that it has beneficial consequences, but because it has only harmful ones.

The list of full-liberal positions is not random. As Mises pointed out, war is antithetical to individual freedom, private property, the division of labor, and global free exchange, Altogether this constitutes social cooperation.

So we must point this out to the well-meaning shrunken liberals. Bravo on your continued commitment to free speech, other civil liberties, and reason! But don't stop there. Without full liberalism, we aren't fully free.

Interview on "Ideas Having Sex"

Chris Kaufman interviewed me about my book What Social Animals Owe to Each Other on his podcast Ideas Having Sex. Listen here or on your podcast platform.

TGIF: Tariffying Trade-Warmonger Trump

"The word tariff, properly used, is a beautiful word. One of the most beautiful words I’ve ever heard. It’s music to my ears." —Donald Trump

The once and possibly future president threatens to wage economic warfare against countries and companies everywhere if they don't knuckle under to his nationalist demands. He promises to impose tariffs on American firms that calculate that moving operations to Mexico or other foreign locations makes good business sense. He's also ready to strike at allied countries that irritate him by, say, slighting the dollar. (Watch or read his economic-policy speech.)

To his credit he promises to lower taxes on investment and to cut the regulatory burden. He also wants lower energy prices, which would be good all around, but exactly how matters. He's no laissez-faire advocate.

At any rate, Trump's determination to restore the American economy to what it was when much of the world lay in ruins after World War II suggests that, despite all the changes since then, he would much do more than de-tax and deregulate. For example, he promises to lure foreign companies here. Again, how? His government would no doubt play an active role in what should be private matters. He's already promising to make the taxpayers pay for business infrastructure projects. As he said about the audio industry, "It’ll be like it was 50 years ago." He won't be able to turn the clock back, but he can do much damage trying.

This is economic nationalism. He sees the world as an arena in which countries—as if they were companies—compete against one another: for one country to win, the others must lose. Powered by this worldview, Trump wants to be the CEO of the company known as the United States.

His vision is dangerously wrong. The world is not an arena in which countries compete with one another, where one nation's gain is the others' losses. That American manufacturers routinely buy foreign-made materials, tools, machines, and semi-finished products demonstrates this. We have a global division of labor in which capital, resources, and all kinds of goods have been able to move across national boundaries fairly freely as market forces require. As a result, world poverty has diminished unbelievably, and Americans are richer than ever. (The rough spots can be attributed to unabated domestic government intervention.) This progress has been in the making for about 80 years, but the liberalization responsible for it has been reversed recently—to the world's detriment.

Trump understands none of this, and he has no incentive to do so. Since entering politics, his demagogic promise has been to wreak vengeance on the world for, as he sees it, taking advantage of the United States. This is his aggrieved-nation shtick. The U.S. government has been the biggest bully since 1945, but Trump would have gotten nowhere politically had he promised to stop throwing America's weight around. Instead, he portrays the United States as a pitiful giant that has been everyone's chump. It's nonsense.

What's foreign to Trump's mentality is any notion of an unplanned, spontaneous market order built on individual freedom and choice, which is at the heart of sound economics. He must see himself as a hands-on CEO who can solve any problem. That's the last thing we need. He should read Leonard Read's "I, Pencil." (The video version is here.)

In a word, Trump is an economic warmonger, a not-too-distant cousin of a regular warmonger. As the old free traders said, "When goods can't cross borders, soldiers will."

It would be one thing if Trump were promising to shrink the government so much that businesses everywhere wanted to flock to these hospitable shores. But his "New American Industrialism" is an old-fashioned industrial policy in which he or his team of experts would pick winners to carry out his glorious vision. Which firms and industries get protected or subsidized and which don't? Those decisions would be made on a political, not an economic, basis. The problem is that Trump and his experts could not know what they would need to know to carry out their plan. Only the free market—through the unhampered price system—can produce that knowledge, which would be widely dispersed, often tacit, and therefore unavailable to a central bureaucracy. Even the great Donald Trump cannot defy the laws of economics.

What would Trump do if other countries tried to make their economies more hospitable to the world's businesses, say, through rigorous liberalization? Would he up the statist ante? The economic nationalist is not likely to back down.

No one should be surprised that Ludwig von Mises—the unparalleled champion of peace through full liberalism—had much to say about economic nationalism. In Human Action, he wrote: "Economic nationalism is incompatible with durable peace.... It is an illusion to believe that a nation would lastingly tolerate other nations’ policies which harm the vital interest of its own citizens."

Trump might endorse Mises's last sentence, but he'd be missing the point. Other countries would respond to Trump's program. If he responds in turn, he will hurt Americans for sure (and perhaps foreigners). Consumers will largely pay the tariffs and, along with import-using American manufacturers, face higher prices. That's the point!

Freedom in the economic sphere, as in all other spheres of life, is in the deepest interest of all citizens. Protectionism and other interference are not. One industry or firm may calculate that if it can win protection from the state, it will prosper even if others suffer. But protection granted to one interest will encourage others to ask for it too. Now the original gain begins to dissolve. As Mises put it in Socialism: An Economic and Sociological Analysis,

A system which protects the immediate interests of particular groups limits productivity in general and, in the end, injures everybody—even those whom it began by favouring.... The greater the protection afforded to particular interests, the greater the damage to the community as a whole, and to that extent the smaller the probability that single individuals gain thereby more than they lose....

[I]f all particular interests were equally protected, nobody would reap any advantage: the only result would be that all would feel the disadvantage of the curtailment of productivity equally. Only the hope of obtaining for himself a degree of protection, which will benefit him as compared with the less protected, makes protection attractive to the individual. It is always demanded by those who have the power to acquire and preserve especial privileges for themselves. [Emphasis added.]

Why would they all lose? Because, as we've known at least since David Ricardo formulated the law of comparative advantage (or what Mises called the law of association), the division of labor and free exchange bring specialization that yields immense gains to all—even when an individual, group, or nation is less efficient than others at producing a whole range of goods.

Trump displays the words Made in the USA onstage. The wiser course is to specialize and to trade with others rather than trying to produce everything. Market price signals, not Trump, should be our guide. If the frontiers were closed to foreign goods, Mises wrote in Socialism, "Capital and labour would have to be applied under relatively unfavourable conditions yielding a lower product than otherwise would have been obtained."

Thus Trump's blustering warfare would shrink incomes and risk conflict by disrupting the signals that channel productive energies to where consumers most want them.