"Mature Capitalism" Ain't Capitalism

"It would be correct to describe this state of affairs in this way: Today many or some groups of business are no longer liberal; they do not advocate a pure market economy and free enterprise, but, on the contrary, are asking for various measures of government interference with business. But it is entirely misleading to say that the meaning of the concept of capitalism has changed and that 'mature capitalism'—as the American Institutionalists call it—or 'late 'capitalism'—as the Marxians call it—is characterized by restrictive policies to protect the vested interests of wage earners, farmers, shopkeepers, artisans, and sometimes also of capitalists and entrepreneurs. The concept of capitalism is as an economic concept immutable; if it means anything, it means the market economy. One deprives oneself of the semantic tools to deal adequately with the problems of contemporary history and economic policies if one acquiesces in a different terminology. This faulty nomenclature becomes understandable only if we realize that the pseudo-economists and the politicians who apply it want to prevent people from knowing what the market economy really is. They want to make people believe that all the repulsive manifestations of restrictive government policies are produced by 'capitalism.'”

—Ludwig von Mises, Human Action

TGIF: Social Cooperation Versus Violence

The chilling photo of a hooded man cold-bloodedly executing a health-insurance CEO on a busy New York City street should make any decent person pause and reflect. Anyone who even glimpses the role of social cooperation in making life better and longer felt sickened, or should have. Nothing can justify what the perpetrator did. That so many people see him as a vengeful hero acting in defense of the downtrodden is appalling. One can only hope they will soon come to their senses.

At the risk of taking our eye off the crime, it's worth pointing out that all departures from the market economy—laissez-faire capitalism—are steps toward social disintegration. That infamous, unsurpassingly ugly photo is the perfect image of anti-cooperation, anti-capitalism, and anti-human welfare.

The choice we face is between social cooperation and social disintegration. No person of goodwill harbors doubt about the right choice. The question is how to achieve social cooperation: the state, that is, aggressive force, or the market. The theoretical and historical evidence is unmistakable: the market economy is unequivocally the only way to achieve maximum social cooperation. The state destroys social cooperation.

The widely held belief that social cooperation through the market market will not work with health care is balderdash for which no one has adduced evidence. Where markets are left significantly unmolested by politicians and bureaucrats, it achieves reasonable prices and supplies and—this is important—virtually universal coverage. Even those we call poor in this society have refrigerators, HVACs, automobiles, microwave ovens, mobile phones, flat-screen TVs, and so on. Why not affordable universal health services, including insurance?

The reason is that variously motivated politicians and bureaucrats—urged on by "Baptists and bootleggers"—have for over a hundred years tried to combine insurance and welfare in one system, despite their incompatibilities. When that happens, socially harmful results follow; perverse incentives proliferate. Government measures have suppressed supply and boosted demand, a volatile combination. Falsely proclaiming that health care is a right matter not a whit. That the resulting Rube Goldberg "system" of partly spontaneous disorder works as well as it does is a tribute to what's left of the entrepreneurial market and the profit motive. A little market goes a long way. (As they used to say about the Timex watch: 'It takes a licking and keeps on ticking.")

However, the distortions caused by interference with the practice of medicine and the provision of medical insurance have eroded social cooperation, imposed hardship, and created animosity. For that reason alone we need free markets for those services and products

Ludwig von Mises, the premier advocate of full classical liberalism in the 20th century, spent his life demonstrating the indispensability of private property and free trade—capitalism—to social cooperation. He wrote almost titled his economics treatise, Human Action (1949), Social Cooperation. His subtitle might have been: A Treatise on the Economics of Social Cooperation.

The social cooperation of the market economy is often used interchangeably with the term individualism. Isn't that a paradox? Mises resolved the paradox:

Individual man is born into a socially organized environment. In this sense alone we may accept the saying that society is--logically or historically--antecedent to the individual. In every other sense this dictum is either empty or nonsensical. The individual lives and acts within society. But society is nothing but the combination of individuals for cooperative effort. It exists nowhere else than in the actions of individual men. It is a delusion to search for it outside the actions of individuals. To speak of a society’s autonomous and independent existence, of its life, its soul, and its actions is a metaphor which can easily lead to crass errors.

The questions whether society or the individual is to be considered as the ultimate end, and whether the interests of society should be subordinated to those of the individuals or the interests of the individuals to those of society are fruitless. Action is always action of individual men....

The postliberals of "left" and "right"—the illiberals—who fret that in the market all relationships are reduced to cash get it wrong:

Within the frame of social cooperation there can emerge between members of society feelings of sympathy and friendship and a sense of belonging together. These feelings are the source of man’s most delightful and most sublime experiences. They are the most precious adornment of life; they lift the animal species man to the heights of a really human existence. However, they are not, as some have asserted, the agents that have brought about social relationships. They are fruits of social cooperation, they thrive only within its frame; they did not precede the establishment of social relations and are not the seed from which they spring.

Then what are the agents of social relationships?

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. Each man would have been forced to view all other men as his enemies; his craving for the satisfaction of his own appetites would have brought him into an implacable conflict with all his neighbors. No sympathy could possibly develop under such a state of affairs.

So we have the division of labor, increased productivity, and trade to thank for civilization. The postliberals are wrong. Very wrong. We should yearn for neither the Rousseauian state of nature nor the Hobbesian Leviathan. Mises:

Man appeared on the scene of earthly events as a social being. The isolated asocial man is a fictitious construction....

The idea that anybody would have fared better under an asocial state of mankind and is wronged by the very existence of society is absurd. Thanks to the higher productivity of social cooperation the human species has multiplied far beyond the margin of subsistence offered by the conditions prevailing in ages with a rudimentary degree of the division of labor. Each man enjoys a standard of living much higher than that of his savage ancestors. The natural condition of man is extreme poverty and insecurity. It is romantic nonsense to lament the passing of the happy days of primitive barbarism.

Mises laid out more clearly than anyone how the market process creates general prosperity. He wrote:

The market economy is the social system of the division of labor under private ownership of the means of production. Everybody acts on his own behalf; but everybody’s actions aim at the satisfaction of other people’s needs as well as at the satisfaction of his own. Everybody in acting serves his fellow citizens. Everybody, on the other hand, is served by his fellow citizens. Everybody is both a means and an end in himself, an ultimate end for himself and a means to other people in their endeavors to attain their own ends.

This system is steered by the market. The market directs the individual’s activities into those channels in which he best serves the wants of his fellow men. There is in the operation of the market no compulsion and coercion....

The market process is the adjustment of the individual actions of the various members of the market society to the requirements of mutual cooperation.

The dislocations and distortions we rightly criticize in the medical sector are produced by government interference with this market process rooted in social cooperation. But people widely attribute those distortions to the market itself. How could they make such a fundamental mistake? Part of the reason is that private property in the profit-and-loss environment has not been completely eradicated. Rather, it has been denatured; the shell has been maintained, but its essence has been changed almost beyond recognition. The politicians' and bureaucrats' fingerprints are over it.

Mises noted:

In searching for remedies against poverty, inequality, and insecurity, [the present-day welfare propagandists] come step by step to endorse all the fallacies of the older schools of socialism and interventionism. They become more and more entangled in contradictions and absurdities. Finally they cannot help catching at the straw at which all earlier “unorthodox” reformers tried to grasp—the superior wisdom of perfect rulers. Their last word is always state, government, society, or other cleverly designed synonyms for the superhuman dictator.

The welfare school ... [has] published many thousands of volumes stuffed with punctiliously documented information about unsatisfactory conditions. In their opinion the collected materials clearly illustrate the shortcomings of capitalism. In truth they merely illustrate the fact that human wants are practically unlimited and that there is an immense field open for further improvements. They certainly do not prove any of the statements of the welfare doctrine.

In Mises's day the socialialists and interventionists promised that their alternatives to the market would outperform a social system based on private property. However, that promise changed when the anti-market forces could no longer evade statism's obvious inferiority in delivering the goods. Undeterred, they discovered the "age of limits" and criticized "consumerism." Now statism's superiority lies in its lack of productivity. But as I say, Mises had to contend with the opposite claims.

There is no need to tell us that an ampler supply of various commodities would be welcome to all people. The question is whether there is any means of achieving a greater supply other than by increasing the productivity of human effort by the investment of additional capital. All the babble of the welfare propagandists aims only at one end, namely, obscuring this point, the point that alone matters.,,, Thus they are the harbingers of economic retrogression, preaching a philosophy of decay and social disintegration. A society arranged according to their precepts may appear to some people as fair from the point of view of an arbitrary standard of social justice. But it will certainly be a society of progressing poverty for all its members....

The truth is that capitalism has not only multiplied population figures but at the same time improved the people’s standard of living in an unprecedented way. Neither economic thinking nor historical experience suggest that any other social system could be as beneficial to the masses as capitalism. The results speak for themselves. The market economy needs no apologists and propagandists. It can apply to itself the words of Sir Christopher Wren’s epitaph in St. Paul’s: Si monumentum requiris, circumspice. [If you seek his monument, look around.]

Our very lives depend on reviving the public's understanding of what the free market has bestowed in so short a time.

Protecting Vested Interests

"There were and there will always be people whose selfish ambitions demand protection for vested interests and who hope to derive advantage from measures restricting competition. Entrepreneurs grown old and tired and the decadent heirs of people who succeeded in the past dislike the agile parvenus who challenge their wealth and their eminent social position. Whether or not their desire to make economic conditions rigid and to hinder improvements can be realized, depends on the climate of public opinion. The ideological structure of the nineteenth century, as fashioned by the prestige of the teachings of the liberal economists, rendered such wishes vain. When the technological improvements of the age of liberalism revolutionized the traditional methods of production, transportation, and marketing, those whose vested interests were hurt did not ask for protection because it would have been a hopeless venture. But today it is deemed a legitimate task of government to prevent an efficient man from competing with the less efficient. Public opinion sympathizes with the demands of powerful pressure groups to stop progress. The butter producers are with considerable success fighting against margarine and the musicians against recorded music. The labor unions are deadly foes of every new machine. It is not amazing that in such an environment less efficient businessmen aim at protection against more efficient competitors."

—Ludwig von Mises, Human Action

From Savagery to Civilization

"The market economy is a man-made mode of acting under the division of labor. But this does not imply that it is something accidental or artificial and could be replaced by another mode. The market economy is the product of a long evolutionary process. It is the outcome of man’s endeavors to adjust his action in the best possible way to the given conditions of his environment that he cannot alter. It is the strategy, as it were, by the application of which man has triumphantly progressed from savagery to civilization."

—Ludwig von Mises, Human Action

What Corporatism Actually Is

"The fundamental idea both of guild socialism and of corporativism is that every branch of business forms a monopolistic body, the guild or corporazione. This entity enjoys full autonomy; it is free to settle all its internal affairs without interference of external factors and of people who are not themselves members of the guild. The mutual relations between the various guilds are settled by direct bargaining from guild to guild or by the decisions of a general assembly of the delegates of all guilds. In the regular course of affairs the government does not interfere at all. Only in exceptional cases, when an agreement between the various guilds cannot be attained, is the state called in.

"[The guild socialists ... aimed at self-government of each branch of industry; they wanted, as the Webbs put it, “the right of self-determination for each vocation.”  ...[T]he guild alone should have jurisdiction over its internal affairs and the government should restrict its interference to those things which the guilds themselves cannot settle.

"However, within a system of social cooperation under the division of labor [i.e., the market economy] there are no such things as matters of concern only to those engaged in a special plant, enterprise, or branch of industry and of no concern to outsiders. There are no internal affairs of any guild or corporazione the arrangement of which does not affect the whole nation. A branch of business does not serve only those who are occupied in it; it serves everybody. If within any branch of business there is inefficiency, a squandering of scarce factors of production, or a reluctance to adopt the most appropriate methods of production, everybody’s material interests are hurt.... In the market economy the entrepreneur in making ... decisions is unconditionally subject to the law of the market. He is responsible to the consumers. If he were to defy the orders of the consumers, he would suffer losses and would very soon forfeit his entrepreneurial position. But the monopolistic guild does not need to fear competition. It enjoys the inalienable right of exclusively covering its field of production. It is, if left alone and autonomous, not the servant of the consumers, but their master. It is free to resort to practices which favor its members at the expense of the rest of the people."

—Ludwig von Mises, Human Action

Good Plan Means My Plan

"All this passionate praise of the supereminence of government action is but a poor disguise for the individual interventionist’s self-deification. The great god State is a great god only because it is expected to do exclusively what the individual advocate of interventionism wants to see achieved. Only that plan is genuine which the individual planner fully approves. All other plans are simply counterfeit. In saying 'plan' what the author of a book on the benefits of planning has in mind is, of course, his own plan alone. He does not take into account the possibility that the plan which the government puts into practice may differ from his own plan. The various planners agree only with regard to their rejection of laissez faire, i.e., the individuals’ discretion to choose and to act. They entirely disagree with regard to the choice of the unique plan to be adopted. To every exposure of the manifest and incontestable defects of interventionist policies the champions of interventionism react in the same way. These faults, they say, were the results of spurious interventionism; what we are advocating is good interventionism, not bad interventionism. And, of course, good interventionism is the professor’s own brand.

"Laissez faire means: Let the common man choose and act; do not force him to yield to a dictator."

—Ludwig von Mises, Human Action

Who Needs What?

"[I]t is evident ... that the man, who first made himself clothes and built himself a cabin, supplied himself with things which he did not much want, since he had lived without them till then; and why should he not have been able to support in his riper years, the same kind of life, which he had supported from his infancy?"

—Jean-Jacques Rousseau, Discourse on Equality

"Under laissez faire, says the planner, it is not those goods which people 'really' need that are produced, but those goods from the sale of which the highest returns are expected. It is the objective of planning to direct production toward the satisfaction of the 'true' needs. But who is to decide what the 'true' needs are?"

—Ludwig von Mises, Human Action

Whose Plan?

"The alternative is not plan or no plan. The question is whose planning? Should each member of society plan for himself, or should a benevolent government alone plan for them all? The issue is not automatism versus conscious action; it is autonomous action of each individual versus the exclusive action of the government. It is freedom versus government omnipotence.

"Laissez faire does not mean: Let soulless mechanical forces operate. It means: Let each individual choose how he wants to cooperate in the social division of labor; let the consumers determine what the entrepreneurs should produce. Planning means: Let the government alone choose and enforce its rulings by the apparatus of coercion and compulsion."

—Ludwig von Mises, Human Action

What Full Liberalism Is Not About

"Liberalism is a doctrine directed entirely towards the conduct of men in this world. In the last analysis, it has nothing else in view than the advancement of their outward, material welfare and does not concern itself directly with their inner, spiritual and metaphysical needs. It does not promise men happiness and contentment, but only the most abundant possible satisfaction of all those desires that can be satisfied by the things of the outer world."

"Liberalism has often been reproached for this purely external and materialistic attitude toward what is earthly and transitory. The life of man, it is said, does not consist in eating and drinking. There are higher and more important needs than food and drink, shelter and clothing. Even the greatest earthly riches cannot give man happiness; they leave his inner self, his soul, unsatisfied and empty. The most serious error of liberalism has been that it has had nothing to offer man’s deeper and nobler aspirations.

"But the critics who speak in this vein show only that they have a very imperfect and materialistic conception of these higher and nobler needs. Social policy, with the means that are at its disposal, can make men rich or poor, but it can never succeed in making them happy or in satisfying their inmost yearnings. Here all external expedients fail. All that social policy can do is to remove the outer causes of pain and suffering; it can further a system that feeds the hungry, clothes the naked, and houses the homeless. Happiness and contentment do not depend on food, clothing, and shelter, but, above all, on what a man cherishes within himself. It is not from a disdain of spiritual goods that liberalism concerns itself exclusively with man’s material well-being, but from a conviction that what is highest and deepest in man cannot be touched by any outward regulation. It seeks to produce only outer well-being because it knows that inner, spiritual riches cannot come to man from without, but only from within his own heart."

—Ludwig von Mises, Liberalism: The Classical Tradition

 

TGIF: The Unfortunately Forgotten Sumner

Some things haven't changed since 1883. In that year Yale University professor William Graham Sumner, the anti-imperialist laissez-faire liberal and pioneer of American sociology, noticed that "we are told every day that great social problems stand before us and demand a solution, and we are assailed by oracles, threats, and warnings in reference to those problems." Then, as now, self-styled progressives announced that the sky would fall unless the problem that had most recently caught their fancy was addressed once by the government. Adam Smith's observation that "there is a great deal of ruin in a nation" was too complacent for these world-savers.

In What Social Classes Owe to Each Other, Sumner continued his description: "There is a school of writers who are playing quite a rôle as the heralds of the coming duty and the coming woe. They assume to speak for a large, but vague and undefined, constituency, who set the task, exact a fulfilment, and threaten punishment for default." Sumner thought it was about time someone asked some penetrating questions:

After reading and listening to a great deal of this sort of assertion I find that the question forms itself with more and more distinctness in my mind: Who are those who assume to put hard questions to other people and to demand a solution of them? How did they acquire the right to demand that others should solve their world-problems for them? Who are they who are held to consider and solve all questions, and how did they fall under this duty?

Who indeed? What did his searches unearth?

So far as I can find out what the classes are who are respectively endowed with the rights and duties of posing and solving social problems, they are as follows: Those who are bound to solve the problems are the rich, comfortable, prosperous, virtuous, respectable, educated, and healthy; those whose right it is to set the problems are those who have been less fortunate or less successful in the struggle for existence. 

The Welfare-State Paradox

"Whether ... a system of social security is a good or a bad policy is essentially a political problem. One may try to justify it by declaring that the wage earners lack the insight and the moral strength to provide spontaneously for their own future. But then it is not easy to silence the voices of those who ask whether it is not paradoxical to entrust the nation’s welfare to the decisions of voters whom the law itself considers incapable of managing their own affairs; whether it is not absurd to make those people supreme in the conduct of government who are manifestly in need of a guardian to prevent them from spending their own income foolishly. Is it reasonable to assign to wards the right to elect their guardians? It is no accident that Germany, the country that inaugurated the social security system, was the cradle of both varieties of modern disparagement of democracy, the Marxian as well as the non-Marxian."

—Ludwig von Mises, Human Action

The Steady Rise in Living Standards

"The history of capitalism as it has operated in the last two hundred years in the realm of Western civilization is the record of a steady rise in the wage earners’ standard of living. The inherent mark of capitalism is that it is mass production for mass consumption directed by the most energetic and far-sighted individuals, unflaggingly aiming at improvement. Its driving force is the profit-motive the instrumentality of which forces the businessman constantly to provide the consumers with more, better, and cheaper amenities. An excess of profits over losses can appear only in a progressing economy and only to the extent to which the masses’ standard of living improves. Thus capitalism is the system under which the keenest and most agile minds are driven to promote to the best of their abilities the welfare of the laggard many."

—Ludwig von Mises, Human Action

Mises on Wages under Capitalism

"While daily experience taught impressively that under capitalism real wage rates and the wage earners’ standard of living were steadily rising, while it became from day to day more obvious that the traditional walls separating the various strata of the population could no longer be preserved because the social improvement in the conditions of the industrial workers demolished the vested ideas of social rank and dignity, ... doctrinaires announced that old customs and social convention determine the height of wage rates. Only people blinded by preconceived prejudices and party bias could resort to such an explanation in an age in which industry supplies the consumption of the masses again and again with new commodities hitherto unknown and makes accessible to the average worker satisfactions of which no king could dream in the past."

—Ludwig von Mises, Human Action

Economics Is about Individual Choice

"The light which the economic theorist can throw on an economic process, or on the outcome of such a process, is viewed as deriving from his ability to relate back the process to the individual acts of choice of which the process is made up. Through the theorist’s understanding of the decisions made by individuals, and of the way in which these decisions have mutual impact upon one another, and become mutually adjusted to one another, he is able to 'explain' the course of economic events, and to understand the probable results that will follow from given exogenous changes operating on the system." (Emphasis added.)

Israel M. Kirzner, An Essay on Capital, 1966

How Far We've Come

"The conditions under which modern man of the capitalist West must act are different from those under which his primitive ancestors lived and acted. As a result of the providential care of our forebears we have at our disposal an ample stock of intermediate products (capital goods or produced factors of production) and of consumers’ goods. Our activities are designed for a longer period of provision because we are the lucky heirs of a past which has lengthened, step by step, the period of provision and has bequeathed to us the means to expand the waiting period. In acting we are concerned with longer periods and are aiming at an even satisfaction in all parts of the period chosen as the period of provision. We are in a position to rely upon a continuing influx of consumers’ goods and have at our disposal not only stocks of goods ready for consumption but also stocks of producers’ goods out of which our continuous efforts again and again make new consumers’ goods mature."

—Ludwig von Mises, Human Action

The Vulnerable Capitalist

"Popular literature attributes enormous 'power' to the capitalist and considers his owning a mass of capital goods as of enormous significance, giving him a great advantage over other people in the economy. We see, however, that this is far from the case; indeed, the opposite may well be true. For the capitalist has already saved from possible consumption and hired the services of factors to produce his capital goods. The owners of these factors have the money already for which they otherwise would have had to save and wait (and bear uncertainty), while the capitalist has only a mass of capital goods, a mass that will prove worthless to him unless it can be further worked on and the product sold to the consumers....

"[C]apital goods are not independently productive. They are the imputable creatures of land and labor (and time). Therefore, capital goods generate no interest income. We have seen above, in keeping with this analysis, that no income accrues to the owners of capital goods as such."

--Murray N. Rothbard, Man, Economy, and State, Chap. 5, secs. 6 & 7, 1962

TGIF: "Corporate" Is Not a Four-Letter Word

I rise today to protest the widespread and malicious use of the adjective corporate as a synonym for evil, corrupt, exploitative, or any number of other pejoratives. As a descriptor, corporate merely says that an association that makes or sells goods for profit is publicly registered as a corporation. (Nonprofits can be corporations too.) This distinguishes the association from sole proprietorships and partnerships. That in turn means the participants in the association have agreed contractually to do business and raise capital in particular ways. Its ownership shares are readily tradeable; it may pay dividends to shareholders; it has a board of directors that hires officers and managers who may not be shareholders, etc.

That's it! That this form of free association should be so despised by "left" and "right" is rooted in misunderstanding, illiberalism, or both.

Incorporation carries no privileges or special obligations under the law. It is a free arrangement arising from a contract and the efficiency-enhancing division of labor between owners and managers. As an association of individuals who have the rights to life, liberty, and lawfully acquired property, the corporation is properly subject to the same laws as anyone else, no more or less. Corporations are (groups of) people. It's as simple as that. (Thus the decision in Citizens United v. FEC was a no-brainer.)

More Mises on the Market

"The capitalists, the enterprisers, and the farmers are instrumental in the conduct of economic affairs. They are at the helm and steer the ship. But they are not free to shape its course. They are not supreme, they are steersmen only, bound to obey unconditionally the captain’s orders. The captain is the consumer.

"Neither the capitalists nor the entrepreneurs nor the farmers determine what has to be produced. The consumers do that. The producers do not produce for their own consumption but for the market. They are intent on selling their products. If the consumers do not buy the goods offered to them, the businessman cannot recover the outlays made. He loses his money. If he fails to adjust his procedure to the wishes of the consumers, he will very soon be removed from his eminent position at the helm. Other men who did better in satisfying the demand of the consumers replace him.

"The real bosses, in the capitalist system of market economy, are the consumers. They, by their buying and by their abstention from buying, decide who should own the capital and run the plants. They determine what should be produced and in what quantity and quality. Their attitudes result either in profit or in loss for the enterpriser. They make poor men rich and rich men poor. They are no easy bosses. They are full of whims and fancies, changeable and unpredictable. They do not care a whit for past merit. As soon as something is offered to them that they like better or that is cheaper, they desert their old purveyors. With them nothing counts more than their own satisfaction. They bother neither about the vested interests of capitalists nor about the fate of the workers who lose their jobs if as consumers they no longer buy what they used to buy."

—Ludwig von Mises, Bureaucracy, 1944

Natural Economic Law Can't Be Repealed

If the government restricts supply and subsidizes demand, out-of-control prices, resource shortages, and unpleasant ad hoc coping restrictions will follow. That is the natural (economic) law. The government cannot repeal it. But it can stop its attempt to plan.

The Health-Care Nirvana Fallacy

Someone explain how coercive centralized bureaucratic control of medical decision-making and the purse can beat the decentralized free market with its undistorted price system. The government has many things besides medical care it wants to spend tax money on, and seemingly free medical care leads to unlimited, unmanageable consumer demand for services. What then? Will the bureaucrats never say NO to many people who need or say they need care? Where will the money come from? Will there not be intolerably long and life-threatening queues for exams, tests, and surgeries? Will doctors work for low reimbursements or be drafted? Aren't resources and labor limited and consumer demand unlimited? Someone square the circle for me.

Many people imagine a perfect medical system in which everyone can have everything he or she wants for the asking and without inconvenience. Nothing can compare to perfection, so case closed. This is the Nirvana Fallacy, judging the possible against the perfectly impossible. The government has steadily made the medical system worse, culminating in the Affordable Care Act (Obamacare) and its distorting mandates, regulations, and subsidies.

In contrast, the competitive, profit-motivated free market would expand the number of practitioners (now limited by government rules) and improve the quality and variety of services. It would create consumer price sensitivity (services would no longer appear to be free) while cutting prices through competition and increased services. As the price of medical care came down, so would the price of medical insurance, which would also be unencumbered by political mandates for coverage whether people want it or not. People would find it worthwhile to reserve insurance for catastrophic events only, covering predictable routine matters through their savings. 

This is as good as it can get in a world of scarce resources and unlimited consumer wants.

Time to Separate Medicine and State

The "progressive" coverage of United Healthcare CEO Brian Thompson's murder has an unspoken premise: namely, that we could have had a system in which medical care was instantly superabundant and free for everyone. There is no such system. We live in a world of scarcity. Socialized medical systems limit or deny care because of resource and government-budgetary constraints, and they impose high and even lethal costs through long waits for tests, surgeries, etc. Our government-saturated system is a nightmare, to be sure, but more government control would make things even worse, as Obamacare demonstrates.

It's time for the free market.

No Need for DOGE

We don't need a Department (sic) of Government Efficiency. (It's a nongovernment thing.) We need a "Department" of What the Hell Should the Government Be Doing in the First Place? Efficiency implies that you know the objective of a course of action and want to avoid or minimize waste in achieving it. What is the objective of government? We can't judge its efficiency if we don't know its objective.

We Can't Consume Our Way to Prosperity

Once upon a time, John Stuart Mill could write these words truthfully ("Of the Influence of Consumption on Production," 1844):

It is no longer supposed that you benefit the producer by taking his money, provided you give it to him again in exchange for his goods.

He was talking, of course, about government tax-transfer programs intended to stimulate employment by subsidizing consumption. We cannot say this today.

Anyone Can Be a Capitalist, part 2

"It might be argued that only the 'rich' can afford to be capitalists, i.e., those who have a greater amount of money stock. This argument has superficial plausibility, since ... for any given individual and a given time-preference schedule, a greater money stock will lead to a greater supply of savings, and a lesser money stock to a lesser supply of savings.... We cannot, however, assume that a man with (post-income) assets of 10,000 ounces of gold will necessarily save more than a man with 100 ounces of gold. We cannot compare time preferences interpersonally, any more than we can formulate interpersonal laws for any other type of utilities. What we can assert as an economic law for one person we cannot assert in comparing two or more persons. Each person has his own time-preference schedule, apart from the specific size of his monetary stock. Each person’s time-preference schedule, as with any other element in his value scale, is entirely of his own making. All of us have heard of the proverbially thrifty French peasant, compared with the rich playboy who is always running into debt. The common-sense observation that it is generally the rich who save more may be an interesting historical judgment, but it furnishes us with no scientific economic law whatever, and the purpose of economic science is to furnish us with such laws. As long as a person has any money at all, and he must have some money if he participates in the market society to any extent, he can be a capitalist.

—Murray Rothbard, Man, Economy, and State

Anyone Can Be a Capitalist, part 1

"[A]ny man can be a capitalist if only he wants to be. He can derive his funds solely from the fruits of previous capitalist investment or from past 'hoarded' cash balances or solely from his income as a laborer or a landowner. He can, of course, derive his funds from several of these sources. The only thing that stops a man from being a capitalist is his own high time-preference scale, in other words, his stronger desire to consume goods in the present. Marxists and others who postulate a rigid stratification—a virtual caste structure in society—are in grave error. The same person can be at once a laborer, a landowner, and a capitalist, in the same period of time."

—Murray N. Rothbard, Man, Economy, and State

TGIF: Supply Precedes Demand

"Consumption is the sole end and purpose of all production." —Adam Smith, The Wealth of Nations, 1776

"In the market economy the consumers are supreme. Their buying and their abstention from buying ultimately determine what the entrepreneurs produce and in what quantity and quality." —Ludwig von Mises, Planned Chaos, 1947

If the ultimate purpose of economic activity is consumer welfare, you might think that government measures to increase consumption ought to be taken seriously. But that would be hasty. Even though many smart people, even economists, do so, there's a simple reason it's mistaken: consumption cannot precede production, and increased consumption cannot precede increased production. That would seem to be logically unexceptionable. You cannot eat what is not on your plate. Consumption is the purpose of but not the stimulus to production.

An ever-present and permanent necessity of life, consumption does not make production possible; it does not improve production over current conditions. What does? Deferred consumption—that is, saving.

Robinson Crusoe wanted to consume the moment he landed on that naturally stingy island. However, his desire to consume did not create consumer goods, and he could not consume what was unavailable. His unaided labor allowed a low, literally hand-to-mouth, perhaps subsistent level of production and consumption, but greater consumption required savings, which required the diversion of time, energy, and resources from consumption to production. Consuming less in the present, he accumulated fish, berries, or coconuts so he could consume them later on while he was making, say, a fishing net, which would deliver more fish than his bare hands could deliver.

This all makes perfect sense once the point is examined, but many important people don't get it. That's why American presidential administrations have pushed "stimulus" bills—massive government spending ostensibly to goose the economy and create prosperity. The government is widely seen as the spender of last resort. (Government spending is consumption not production because it is not the outcome of the market process but rather the reflection of the preferences of politicians spending other people's money without their consent.)

Market-guided economic growth—higher living standards for all—requires increased investment aimed at better buildings, machines, tools, production and management methods, research and development, etc. Investment is the complement of saving. Even simply maintaining the capital structure as it is requires savings. When people live below their means—save—they directly or indirectly put their surplus income to work. This can happen in many time-consuming ways, the details of which we need not discuss here. (A good portion of Mises's Human Action and Murray Rothbard's Man, Economy, and State is devoted to explaining this process.) 

When people save, they of course do not renounce all consumption for all time. They save because they want to consume even more in the future than they could consume in the present. The returns on saving and investment (entrepreneurial profit, interest, dividends, capital gains, etc.) make that possible.

In contrast, when the government tries to stimulate economic growth by directly increasing consumption, it defies logic or attempts to. (So what else is new?) Where does the government get the money it then spends or hands out? I can think of three typical ways: 1) it can tax people; 2) it can borrow money from willing lenders; and 3) it can create money through its central bank, the Federal Reserve. (Nos. 2 and 3 are linked when the Fed buys, or monetizes, government bonds from the original lenders. A fourth revenue option, selling government-"owned" land and buildings, raises a question: by what right do politicians sell assets their predecessors acquired through theft (eminent domain) and interference with private appropriation of unowned land through homesteading?

How can government spending and transfers promote consumer demand? Taxation simply moves money—at the point of a gun—from some people to others. Where's the gain? (In fact, it's a loss because the money might be moved from savers to nonsavers.) If it borrows, the government again transfers money from some to others, promising to tax people in the future to pay off the loan plus interest. So while borrowing appears voluntary, it actually rests on the threat of physical force later on. Finally, if the government creates money through the Federal Reserve, monetary inflation indirectly transfers purchasing power from some to others because some people will get the watered-down, price-increasing fiat currency sooner than others. (Monetary inflation also distorts the structure of production.)

Thus the government's attempt to increase production through increased consumer spending is a losing proposition. People will always want and need to consume. So the government need not manage consumption, just as it need not manage the law of gravity. What it needs to do is keep clear of saving and investing. It can do this by abolishing all taxes on those activities. It's not only good sense, it's a matter of justice because taxing savings and investments constitutes double and triple taxation. That's just not fair. (Not that single taxation is fair, but let that go today.)

Finally, to bring this all home, let's recall one of the great insights of the early classical liberal political economists, Jean-Baptiste Say. Say's Law of Markets, or Say's Law, has been misconstrued in an effort to discredit the free market. Say answered the old saw that economies slump because of underconsumption (or overproduction of everything). Say told his readers that in a money economy, production and consumption were two sides of the same coin. (Pun intended.) People produce goods for the market so they can "buy" money with which to purchase, sooner or later, consumer goods produced by others.

As Mises wrote:

Commodities, says Say, are ultimately paid for not by money, but by other commodities. Money is merely the commonly used medium of exchange; it plays only an intermediary role. What the seller wants ultimately to receive in exchange for the commodities sold is other commodities.

Every commodity produced is therefore a price, as it were, for other commodities produced. The situation of the producer of any commodity is improved by any increase in the production of other commodities.

John Stuart Mill noted:

What supports and employs productive labour, is the capital expended in setting it to work, and not the demand of purchasers for the produce of the labour when completed. Demand for commodities is not demand for labour. The demand for commodities determines in what particular branch of production the labour and capital shall be employed; it determines the direction of the labour; but not the more or less of the labour itself, or of the maintenance or payment of the labour. These depend on the amount of the capital, or other funds directly devoted to the sustenance and remuneration of labour.

Despite this long understanding, many people think that the key to prosperity lies in consumer spending. Much is made of the fact that consumer spending is close to 70 percent of GDP. Google's Gemini AI Overview echoes the popular view that "consumer spending is the largest component of GDP and is a major driver of the economy. It's a key factor in determining whether the US economy is growing or shrinking." (Emphasis added.)

That sort of thinking has led to much mischief. Yet Murray Rothbard wrote in Chapter 6 of Man, Economy, and State:

A common fallacy ... holds that the important category of expenditures in the production system is consumers’ spending. Many writers have gone so far as to relate business prosperity directly to consumers’ spending, and depressions of business to declines in consumers’ spending.... [B]ut it is clear that there is little or no relationship between prosperity and consumers’ spending; indeed almost the reverse is true.

What makes an economy better for everyone is the prospect of a return to producers' time-consuming and risky efforts; this depends on the difference between what capitalists pay upfront—to workers, landowners, and other factor owners—and what they reap later through the sale of partially finished producer and completed consumer goods—if their market forecasts were accurate. "It is not the total quantity of money spent on consumption that is relevant to capitalists’ returns," Rothbard wrote, "but the margins, the spreads, between the product prices and the sum of factor prices at the various stages." (Emphasis in original.)

A prosperous economy for all features long and time-consuming chains of production. And time entails the risk of failure and loss, as well as the prospect of profit. Also, machines, tools, etc. wear out. "[W]ith production divided into stages, it is not true that consumption spending is sufficient to provide for the maintenance of the capital structure." That requires capitalist-entrepreneurs to save and invest persistently rather than consume. Rothbard: "[W]e must realize that there is nothing automatic about this investment. There is no natural law that they must reinvest this amount."

And if they consume instead?

It is evident that the entire market-born production structure would be destroyed..... [C]ivilization advances by virtue of additional capital, which lengthens production processes. Greater quantities of goods are made possible only through the employment of more capital in longer processes. Should capitalists shift from saving-investment to consumption, all these processes would be necessarily abandoned, and the economy would revert to barbarism, with the employment of only the shortest and most primitive production processes. The standard of living, the quantity and variety of goods produced, would fall catastrophically to the primitive level.

As Rothbard sums it up: "There is, in fact, never any need to worry about the maintenance of consumer spending. There must always be consumption." (Emphasis in original.)

(On the misunderstanding of the role of consumer spending, by all means, see John Papola's (of Dad Saves America) two excellent videos here and here.)