TGIF: A New Washington Post?

If Jeff Bezos is as good as his word, the advocates of full liberty will owe him a standing ovation. As everyone knows by now, Amazon.com founder Bezos, one of the greatest entrepreneurs of all time—a man whose profit-making activities have benefitted mankind worldwide—has announced that the editorial page of his newspaper, the Washington Post, will be devoted to promoting the free market and personal liberty. Before Bezos bought the Post in 2013, it was a leading champion of government intervention throughout the economy, which means throughout our lives. If he consistently follows through, this will be quite a change.

As he put it in a memo to the staff, which was posted on X:

We are going to be writing every day in support and defense of two pillars: personal liberties and free markets. We’ll cover other topics too of course, but viewpoints opposing those pillars will be left to be published by others.

I'll get one of my pet peeves out of the way. Bezos's two pillars are one: individual liberty. Nothing is more personal than how we make and spend our money. My decision to earn my living as a plumber is a personal decision. When the government forbids me to do that without a license, that violates my personal liberty. An individual is an integrated whole.

Bezos continued:

There was a time when a newspaper, especially one that was a local monopoly, might have seen it as a service to bring to the reader’s doorstep every morning a broad-based opinion section that sought to cover all views. Today, the internet does that job.

He's got a point. Some people will be bothered that Bezos says "viewpoints opposing those pillars will be left to be published by others." That sounds like he won't let his op-ed editor publish regular or guest columnists who oppose freedom and free markets. (No columnist has resigned to my knowledge.) It's not just the unsigned editorials that will take up the cause. Isn't that narrow and intolerant? Bezos reasonably points out that through the internet, the full range of views is at everyone's fingertips. So why is every newspaper obliged to present a smorgasbord of opinion?

His next paragraph is excellent:

I am of America and for America, and proud to be so. Our country did not get here by being typical. And a big part of America’s success has been freedom in the economic realm and everywhere else. Freedom is ethical—it minimizes coercion—and practical—it drives creativity, invention, and prosperity.

How often do you hear it said that ethical ideals, particularly freedom, are practical? Not very. Libertarians have been saying that for a long time, but it hasn't sunk in. Many people believe that freedom is impractical and that the government must routinely override it to maintain order or other values. That's balderdash, but many people have been taken in by the self-serving line.

Bezos wrapped up:

I’m confident that free markets and personal liberties are right for America. I also believe these viewpoints are underserved in the current market of ideas and news opinion. I’m excited for us together to fill that void.

A couple of points: Bezos is accused of sucking up to Trump. But freedom and free enterprise—which means, among other things, unobstructed global trade and the free movement of people—are not pillars of Trumpism. Trumpism is the rule of Trump's autonomous whims, which may face few checks from other power centers. The ability of producers and consumers to plan long-term is at the mercy of his mood. (He might give company X an exemption from a tariff, but he might not.) It's what historian Robert Higgs calls "regime uncertainty," a highly destructive thing. It's not the free market. It's the opposite! We'll have to watch the Post's editorial page closely, but this announcement would be a funny way to win over the MAGA crowd.

I'm left wondering what the page will say about foreign policy. Contrary to popular impression, an interventionist foreign policy must violate freedom and free enterprise. How could it not? If Bezos's Post opposes Trumpian interventions in Ukraine and the Middle East, that will be significant. Full disengagement from those conflicts is imperative in the name of liberty. Trump's plan to build up the military is wrongheaded. As classical liberals (libertarians) have long understood, the warfare state is inimical to liberty.

Abolish Antitrust!

"That there is inequality of ability or monetary income on the free market should surprise no one. As we have seen above, men are not “equal” in their tastes, interests, abilities, or locations. Resources are not distributed “equally” over the earth.16 This inequality or diversity in abilities and distribution of resources insures inequality of income on the free market. And, since a man’s monetary assets are derived from his and his ancestors’ abilities in serving consumers on the market, it is not surprising that there is inequality of monetary wealth as well.

"The term 'free competition,' then, will prove misleading unless it is interpreted to mean free action, i.e., freedom to compete or not to compete as the individual wills.

"It should be clear from the foregoing discussion that there is nothing particularly reprehensible or destructive of consumer freedom in the establishment of a 'monopoly price' or in a cartel action. A cartel action, if it is a voluntary one, cannot injure freedom of competition and, if it proves profitable, benefits rather than injures the consumers. It is perfectly consonant with a free society, with individual self-sovereignty, and with the earning of money through serving consumers.

As Benjamin R. Tucker brilliantly concluded in dealing with the problem of cartels and competition:

'That the right to cooperate is as unquestionable as the right to compete; the right to compete involves the right to refrain from competition; cooperation is often a method of competition, and competition is always, in the larger view, a method of cooperation ... each is a legitimate, orderly, non-invasive exercise of the individual will under the social law of equal liberty....

'Viewed in the light of these irrefutable propositions, the trust, then, like every other industrial combination endeavoring to do collectively nothing but what each member of the combination might fully endeavor to do individually, is, per se, an unimpeachable institution. To assail or control or deny this form of cooperation on the ground that it is itself a denial of competition is an absurdity. It is an absurdity, because it proves too much. The trust is a denial of competition in no other sense than that in which competition itself is a denial of competition. (Italics ours.) The trust denies competition only by producing and selling more cheaply than those outside of the trust can produce and sell; but in that sense every successful individual competitor also denies competition.... The fact is that there is one denial of competition which is the right of all, and that there is another denial of competition which is the right of none. All of us, whether out of a trust or in it, have a right to deny competition by competing, but none of us, whether in a trust or out of it, have a right to deny competition by arbitrary decree, by interference with voluntary effort, by forcible suppression of initiative.'

"This is not to say, of course, that joint co-operation or combination is necessarily 'better than' competition among firms. We simply conclude that the relative extent of areas within or between firms on the free market will be precisely that proportion most conducive to the well-being of consumers and producers alike. This is the same as our previous conclusion that the size of a firm will tend to be established at the level most serviceable to the consumers."

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

TGIF: The H-1B Controversy

Does anyone still believe that the market process should set prices, including wages? Apparently not. Take the controversy surrounding the H-1B visa, the program that "permits" employers to hire highly educated and skilled foreign workers, such as hi-tech personnel.

Judging by the narrow range, everyone involved in the debate is a social engineer. Only three options are on the menu: continue the program, reform it to prevent its misuse, and end it. What's missing? The "let the market set wages" option Sorry, that's not on offer.

Let's start with how the U.S. Department of Labor describes the program:

The H-1B program applies to employers seeking to hire nonimmigrant aliens as workers in specialty occupations or as fashion models of distinguished merit and ability. A specialty occupation is one that requires the application of a body of highly specialized knowledge and the attainment of at least a bachelor’s degree or its equivalent. The intent of the H-1B provisions is to help employers who cannot otherwise obtain needed business skills and abilities from the U.S. workforce by authorizing the temporary employment of qualified individuals who are not otherwise authorized to work in the United States.

The law establishes certain standards in order to protect similarly employed U.S. workers from being adversely affected by the employment of the nonimmigrant workers, as well as to protect the H-1B nonimmigrant workers.

Of course, the government has something to say about wages:

Employers must attest to the Department of Labor that they will pay wages to the H-1B nonimmigrant workers that are at least equal to the actual wage paid by the employer to other workers with similar experience and qualifications for the job in question, or the prevailing wage for the occupation in the area of intended employment – whichever is greater.

Is anyone offended that in a country that thinks itself free, the government decrees that employers need permission to hire "nonimmigrant aliens" and can get it only if certain conditions apply? "Nonimmigrant aliens" are people, in case anyone needs reminding. How's that good for a country supposedly devoted to freedom and free enterprise?

The standard answer is that those jobs are American jobs. However, if capitalist entrepreneurs want the freedom to hire consenting workers living abroad, the jobs obviously are not American jobs. Who has the right to declare them otherwise? A job is a continuing transaction between an employer and an employee. It has no national label. To insist that it does have such a label because the employer operates on U.S. soil is to accept a premise that requires proof, namely, that the government or a majority of voters owns the country. That premise glaringly clashes with the principle of liberty. It makes freedom a delusion.

When left free, the market sets prices, including wages, through the process that emerges from countless choices by individuals collaborating to achieve their personal goals. These choices include selling, renting, and buying material resources and products. Supply and demand generate a vast money-price system that enables everyone to make plans using economic calculation, as Ludwig von Mises long ago spelled out. Without calculation we could not make more than the simplest plans or judge a project's success or failure—through profit or loss—afterward. Waste would abound In a world of scarcity, which would be a disaster. Poverty would rule.

Among other things, prices and wages signal to producers what consumers want most keenly. Again, in a world of scarcity, that's important. Since we can't have everything right now, we must make choices. Resources producing automobiles cannot be producing washing machines or computers. What to do? Let the price system work its magic—except that it is not magic. It is human action and its welfare-enhancing consequences. When the government prohibits the price system from doing its job, scarce resources are wasted as far as consumers are concerned. In a free and competitive economy, their choices shift resources to the purposes consumers most want to be fulfilled. The whole point of an economy is to serve consumers, remember?

This is no less true for labor. If high-tech companies can find satisfactory foreign software engineers who are willing to work for less than their American counterparts, that's a signal to be heeded. The Americans have asked too much. They have no right to those jobs or a higher wage. There's other work to be done—or would be if the government did not interfere. Consumers are never fully satisfied.

Those are the basics. What about H-1B? That is not a market institution. It's an intervention to somewhat ameliorate the predicament of employers who are denied the full freedom to hire whomever they want. It's no more than second-best, and it has downsides. For example, its restrictions enable employers to pay foreign workers less than those workers would have earned if they could work freely in America. To get a visa, foreign workers must have employer sponsors. If they wish to quit their jobs, they must find other qualifying jobs or be deported. That undoubtedly keeps visa holders in jobs they would prefer to quit. That's not right.

But beware those shedding tears over H-B1 "indentured servants." Those are crocodile tears because those opponents would not replace the visa program with open visas, that is, free immigration. They would shut down the program altogether. My hunch is that visa candidates would prefer the current program to closed borders. They wouldn't come here if the conditions were not superior to those at home. So let's hear no more sobbing from "left" and "right" statist populists like Steve Bannon and Batya Ungar-Sargon. These opponents of freedom should not be making economic policy.

Has the program been misused, that is, used contrary to its stated purpose? Undoubtedly. That's standard operating procedure. When the government hands out favors, political entrepreneurship will emerge on the part of those who don't want to be left out. This is purely the result of government violations of freedom. Get rid of the program and you get rid of the misuse.

It is certainly to be expected that if foreign workers can freely come to America, some wages will go down. That's supply and demand. On the other hand, other wages will go up. Immigrants buy consumer goods and start businesses, in some cases, highly successful businesses. Lower market-set wages, by the way, bring lower consumer prices, raising the standard of living. As noted, wage differences signal consumers' most highly valued wants.

Finally, some might say that we Americans could have the benefits of high-skilled foreign workers without importing them. How? Through trade with their countries. But hold on. The same people who want to shut down H-1B also want tariffs against foreign goods to "protect American jobs." Even if we have free trade, however, that is not a good answer. Foreigners are much more productive here than they are over there. Why? Because America has more capital and better management techniques than India and elsewhere. Because capital investment per worker is so high in America, any human being will be many times more productive here than anywhere else. That's good for the workers—and for consumers. Remember: everyone is a consumer.

This matter is not "just economics." Freedom itself is at stake.

TGIF: Efficient Bureaucracy?

With all the talk about government efficiency, it would be useful to remind ourselves why bureaucracies differ radically from for-profit businesses. Ludwig von Mises devoted a short but enlightening volume to this subject in 1944, Bureaucracy. Elon Musk and Vivek Ramaswamy, who will co-chair the nongovernmental Department of Government Efficiency, should do some homework by reading that book.

Mises, as an advocate of limited government, did not argue that bureaucracy has no place in a free society. In contrast to anarcho-capitalists, he thought government and therefore some bureaucracy was necessary to protect what he valued most: peaceful social cooperation through the division of labor—that is, the market economy. Violence against persons and property was clearly antithetical to the continuing welfare-enhancing collaboration we call the market process. But Mises did not want bureaucracies trying to do what free, private, and competitive enterprises could do better. Moreover, if the government went beyond its mere peacekeeping duties, it would undermine the market process and make us all less well off despite any good intentions.

Mises began by reminding readers (or perhaps teaching them from scratch) what the free market is and what it accomplishes. It's a great primer for those who lack the time to read his longer works. He wrote:

Capitalism or market economy is that system of social cooperation and division of labor that is based on private ownership of the means of production. The material factors of production are owned by individual citizens, the capitalists and the landowners. The plants and the farms are operated by the entrepreneurs and the farmers, that is, by individuals or associations of individuals who either themselves own the capital and the soil or have borrowed or rented them from the owners. Free enterprise is the characteristic feature of capitalism. The objective of every enterpriser—whether businessman or farmer—is to make profit.

The uninitiated might ask who runs things. He replied: "The capitalists, the enterprisers, and the farmers are instrumental in the conduct of economic affairs. They are at the helm and steer the ship."

However, let's not jump to conclusions about who really runs things, Mises advsed:

But [the capitalists, etc.] are not free to shape [the ship's] 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.

All the conventional controversy about bosses and workers overlooks the critical point:

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.

Capitalism is not a profit system, Mises taught. It is a profit-and-loss system. If the consumers give thumbs down to a product, the entrepreneur could lose everything. He may have to seek a job from a superior entrepreneur.

The performance of businesses, Mises wrote, can be appraised only because private property in the means of production, free exchange, and the resulting money prices permit economic calculation and thus planning by economizing individuals. This was Mises's pathbreaking demolition of the economic case for central planning—socialism in its national and international forms—over a century ago.

Economic calculation matters when comparing a business to a bureaucracy. As Mises wrote:

The manager of the whole [business] concern hands over an aggregate to the newly appointed branch manager and gives him one directive only: Make profits. This order, the observance of which is continuously checked by the accounts, is sufficient to make the branch a subservient part of the whole concern and to give to its manager’s action the direction aimed at by the central manager....

As success or failure to attain this end can be ascertained by accounting not only for the whole business concern but also for any of its parts, it is feasible to decentralize both management and accountability without jeopardizing the unity of operations and the attainment of their goal. Responsibility can be divided. There is no need to limit the discretion of subordinates by any rules or regulations other than that underlying all business activities, namely, to render their operations profitable.

What about a bureaucracy? The answer is implicit in what has already been stated. By nature a bureaucracy faces no profit-and-loss test. It has money expenses in a market-oriented society: it hires willing workers and buys equipment and supplies from willing vendors. However, it does not offer its output to potential consumers, that is, people who are free to say no and take their money elsewhere. Instead of consumers, a bureaucracy has taxpayers, who must pay whether they want the output or not. This disconnect must have far-ranging consequences. (Government services for which user fees are charged differ in this respect, but the government typically forbids competition.)

Instead of the business directive "Make profits," Mises wrote:

Bureaucratic management is management bound to comply with detailed rules and regulations fixed by the authority of a superior body. The task of the bureaucrat is to perform what these rules and regulations order him to do. His discretion to act according to his own best conviction is seriously restricted by them....

The absence of the seller-buyer relationship makes a big difference:

The objectives of public administration cannot be measured in monetary terms and cannot be checked by accountancy methods.... In public administration there is no connection between revenue and expenditure....

In public administration there is no market price for achievements....

Now we are in a position to provide a definition of bureaucratic management: Bureaucratic management is the method applied in the conduct of administrative affairs the result of which has no cash value on the market. Remember: We do not say that a successful handling of public affairs has no value, but that it has no price on the market, that its value cannot be realized in a market transaction and consequently cannot be expressed in terms of money....

Bureaucratic management is management of affairs which cannot be checked by economic calculation.

This would be a valuable lesson for Musk and Ramaswamy to take to heart. Their task should not be primarily to search for ways to make the bureaucracies more efficient. Rather their task ought to be to identify those current functions the government should not be performing, those that should be turned over to free, private, profit-motivated, and competitive enterprise. We ought to replace coercion with consent.

We must, in other words, revisit the question: what is the proper role of government, if any, in a society that aspires to be free?

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

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

TGIF: "You Didn't Build That"

Remember Barack Obama's profound 2012 campaign speech about success? Here's part of what he said:

There are a lot of wealthy, successful Americans who agree with me -- because they want to give something back. They know they didn’t -- look, if you’ve been successful, you didn’t get there on your own. You didn’t get there on your own. I’m always struck by people who think, well, it must be because I was just so smart. There are a lot of smart people out there. It must be because I worked harder than everybody else. Let me tell you something -- there are a whole bunch of hardworking people out there.

If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed [!] you to thrive.  Somebody invested in roads and bridges. If you’ve got a business—you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.

The point is, is that when we succeed, we succeed because of our individual initiative, but also because we do things together. There are some things, just like fighting fires, we don’t do on our own. I mean, imagine if everybody had their own fire service. That would be a hard way to organize fighting fires.

So we say to ourselves, ever since the founding of this country, you know what, there are some things we do better together.... We rise or fall together as one nation and as one people, and that’s the reason I’m running for President—because I still believe in that idea. You’re not on your own, we’re in this together.

Obama was no outlier. Plenty of people would be willing to give that speech today, maybe even Donald Trump.

Where to start? Obama said that he knows wealthy people who want to "give something back." Why? Presumably because of their wealth and success. That makes no sense. If these people made their wealth by producing attractive goods for consumers (which is how most wealthy people get wealthy), then what's to give back? We consumers did not give them money as a favor. We engaged in voluntary exchange. We gave up $X to get product Y because we prefer what we got to what we gave up. They benefitted and we benefitted. Double profit, double "thank you," as John Stossel says. That's how trade works when it's uncoerced. No debt; nothing to give back. End of.

Second, superstar entrepreneurs likely are smarter and more perceptive about the future state of the market than most other people. I doubt they go around bragging about it or minimizing the role of "good breaks." They surely know that things other than sheer intelligence figure into success. But let's not be unrealistically egalitarian about it. Some people are better suited to be entrepreneurs than others. Many of the outside factors that Obama named were also available to others. Why didn't those others succeed?

Next, what's this buncombe about all of us rising or falling together? When a business fails to satisfy us, it falls. Its owners, managers, and employees have to find other work. Its investors lose out. But the rest of us have not fallen. The failed businesses's material factors are now available to produce things we want. The discharged employees are now available to make other things we want. Where's the general failure? Obama spoke collectivist nonsense. Something does—or should—unite people, but it's not what Obama had in mind. They have a stake in a free society, that is, a society in which the government does not try to manage their lives and market relations.

The rest of the passage is Obama's elaboration of this thesis: "If you’ve been successful, you didn’t get there on your own." Was he so ignorant of the case for laissez faire that he thought this was news for defenders of the unmolested market economy? Was he having a laugh? Ludwig von Mises, one of the 20th century's premier champions of individual freedom considered calling his economic treatise "Social Cooperation." That is the second most common phrase in Human Action, right behind "division of labor," which Mises sometimes called the "social division of labor."

So Obama was tackling the scrawniest of strawmen. He was being a demagogue. No market advocate ever suggested that lucrative businesses were built in isolated shacks in rural Montana. Businesses were always described as embedded in the complex network we call the market economy.

I modestly suggest that Obama and every one of his ilk read I, Pencil. That's Leonard E. Read's 1958 essay explaining why no one person can make something as commonplace as a pencil. On the contrary, it takes incredibly complex worldwide cooperation, and it happens without a central authority. The price system, rooted in private property in the factors of production and in trade, directs the myriad self-interested activities that entrepreneurs, under no one's orders, combine to produce the pencil. No kidding. I. Pencil was written three years before Obama was born. Read, founder of the Foundation for Economic Education, had a different lesson in mind from Obama's ignorant message. The former president had a collectivist, interventionist message. Read's was an individualist, free-market message. Read for the win.

Obama named particular things, such as the internet, which got started or built under government auspices. But, as usual, he overlooks what is not seen. (Also see "I, Website.") Obama thinks that if the government does not do something, it does not get done. But if the government did not build roads, bridges, airports, ports, schools, and the internet, would those things never have come into being? That's beggars belief. We know it's not true. People privately built public infrastructure before the government did. It didn't happen "on its own." Profit-seeking individuals and their free associations made it happen.

Businesses that relied on the infrastructure paid for its services. "Take what you want, said God, and pay for it," the Spanish proverb says. That's the market; no need for coercion. Why the mystery? Obama ignored all of the amazing things that free and private enterprise has created over the centuries, not without any assistance, but without government assistance. If he knows better, he's a demagogue.

Here's how Ludwig von Mises addressed the issue in Human Action in 1949, long before Obama  was born (but the year I was born):

The interventionists and the socialists contend that all commodities are turned out by a social process of production. When this process comes to an end and its fruits ripen, a second social process, that of distribution of the yield, follows and allots a share to each. The characteristic feature of the capitalist order is that the shares allotted are unequal. Some people—the entrepreneurs, the capitalists, and the landowners—appropriate to themselves more than they should. Accordingly, the portions of other people are curtailed. Government should by rights expropriate the surplus of the privileged and distribute it among the underprivileged.

Now in the market economy this alleged dualism of two independent processes, that of production and that of distribution, does not exist. There is only one process going on. Goods are not first produced and then distributed. There is no such thing as an appropriation of portions out of a stock of ownerless goods. The products come into existence as somebody’s property. If one wants to distribute them, one must first confiscate them. It is certainly very easy for the governmental apparatus of compulsion and coercion to embark upon confiscation and expropriation. But this does not prove that a durable system of economic affairs can be built upon such confiscation and expropriation.

Before the interventionists dispense more advice, they might learn some economics.

 

TGIF: Who Cares about Inequality?

What accounts for the preoccupation with income and wealth inequality? We hear about it every day. Isn't our absolute living standard what matters and whether it is improving or deteriorating? I'll bet that's what regular people care about. However, the professional grievance mongers see things differently, They want you to resent those who are richer.

To start with the basics, we are not talking about inequality. We're talking about income and wealth differences. Substitution of the term inequality is an appeal to emotion, a cashing in on other senses of the word. "You oppose equality? Don't you believe that 'all men are created equal'?" That's demagoguery not argument.

In a market-oriented economy, most income is not distributed. There's no distribution to describe as equal or unequal, fair or unfair. (What the government does is another story.) As Ludwig von Mises, wrote 102 years ago in Socialism: An Economic and Sociological Analysis, "Under Capitalism incomes emerge as a result of market transactions which are indissolubly linked up with production." That's not distribution or allocation.

Mises continued:

We do not first produce things and afterwards distribute them. When products are supplied for use and consumption, incomes for the greater part have already been determined, since they arise during the process of production and are indeed derived from it. Workers, landowners, and capitalists and a large number of the entrepreneurs contributing to production have already received their share before the product is ready for consumption.

"[T]he concept of distribution is only figurative," Mises added. What people call "the income distribution" is not the outcome of a grand allocation plan. It's a snapshot of a dynamic, decentralized series of exchanges and is always subject to change.

People transact, trade, only when they expect to gain. Otherwise, they wouldn't bother. That's true for both parties to a transaction. It's win-win. Among the things people trade are labor services for money and vice versa. That people have to work so they can eat is not the fault of employers, who also have bosses to satisfy; they're called consumers. That's the nature of reality. But in a free and competitive market economy, few people are dependent on only one buyer or one seller. They are free to choose.

If no distribution occurs in a market economy, then no redistribution is possible. When the government taxes our incomes and gives the money to others—be they low-income people or military contractors—that's plain old distribution. And it's illegitimate.

Taxation and other forms of political manipulation are objectionable even if large-scale wealth and income differences do not result. So that cannot be the primary objection. Political manipulation is objectionable because it aggresses against nonaggressors and disrupts the process that best serves consumers. It would be odd to say, "I see inequality, so I wonder what government manipulation has brought that about." It would be reasonable to say instead, "I see government manipulation, so I wonder if, on top of all the other bad consequences, it also has disrupted the wealth-creation process."

Economic differences among individuals and groups are to be expected among free people and ought not to arouse suspicions of illegitimacy. To expect economic equality as the default is to commit the fallacy Thomas Sowell has exposed concerning all sorts of disparities among groups. Uniformity is found nowhere in the world.

Everyone knows that people's contributions to productive activities vary widely, with a relatively few people at the top and bottom and most in the middle. No mystery here. Individuals differ in intelligence, age, ability, disposition, upbringing, energy, alertness, patience, ambition, education, work habits, culture, risk tolerance, entrepreneurship, and much more. No one should be surprised that their contributions to wealth creation also differ vastly or that they change over time. Thus vast differences in income and wealth are to be expected. I couldn't have done what Bill Gates, Steve Jobs, Serge Brin, or Jeff Bezos, did—and, appropriately, my income reflects that.

Despite the seeming paradox, the huge economic differences that can result from innovation benefit everyone. Much would be lost without that possibility. Incentives matter. Moreover, the innovators' gains are minuscule compared to the total gains to consumers. A system designed to prevent or stamp out those rewards to innovation would impoverish us all. It would also put us on what F. A. Hayek called "the road to serfdom."

It should also be noted that the price system, of which income levels are a part, signals to producers what consumers want most. It's our way of telling producers where to put their efforts and scarce resources.

What indicates progress or regress in society is not the latest dubious measure of a gap between rich and nonrich, but how easily people of determination can climb the income ladder. If the government stays out of the way, the obstacles are minimized. Gaps don't matter. Think of an elevator that can expand like an accordion: the floor can rise even if the distance to the ceiling increases.

Most people don't envy wealthy innovators. They admire them. But anti-freedom politicians, intellectuals, and activists think you should resent anyone who is considerably wealthier. They're running a scam designed to obtain power. We need to call them out.

If you like gaps, check out the shrinking consumption gap, the product of the growing availability of resources worldwide thanks to the spread of economic liberalization and the liberation of human ingenuity and entrepreneurship.

 

TGIF: "We Are All Social Engineers Now"

I don't know if anyone has actually said, "We are all social engineers now," but someone might as well have. (The variation "We are all Keynesians now" was declared a long time ago, even by Milton Friedman, although see this.)

When I say "all," of course, I don't mean all. If you look hard enough, you'll find a few opponents of social engineering. But if you throw a dart into a crowd—don't try that at home—you'll most likely hit a social engineer. Most people think the government should do more than apprehend, try, and punish real criminals; maintain courts for peaceful dispute resolution; and keep a small defense force in the unlikely event of a military invasion. (The free market would most likely do those things better without coercion.) Today the government, to much public applause, goes far beyond Adam Smith's vision of "peace, easy taxes, and a tolerable administration of justice."

Large constituencies favor government management of Americans' education, trade with each other and the rest of the world, immigration, housing construction, land use, business, occupations and professions, industrial organization, finance, energy, medical services, income and wealth "distribution," product quality and safety, and culture itself, to name just a few. Did you hear a public outcry when the Republican presidential candidate promised to force the taxpayers and insurance companies to pay for in vitro fertilization? Money comes with strings.

What are the taxpayers not on the hook for these days?

Social engineering in recent years has notoriously been extended to matters involving speech and the written word. Disinformation, misinformation, and malinformation are the newest hobgoblins. Expression about climate change, COVID-19, and even elections has been targeted. We can be grateful this has been countered with a rousing defense of free speech, but caution is in order. Most advocates of free speech support social engineering in myriad other matters, ignoring that government managers will always look askance at expression that might undermine the consensus believed necessary to successful social engineering.

If you support social engineering in one area, what grounds do you have to oppose it in others? A politician who ran for high office promising to strip the national or state government of the power to manage society would surely be buried by his opponent on election day. People are addicted to government management.

That's the world we inhabit. What is the cost of living in such a world? I don't mean the dollar cost. It's easy to find the numbers corresponding to the budget, the deficit, the debt, the shrinking of purchasing power because of central-bank money creation, and so on.

I'm thinking of cost in a different way. What must we forgo because politicians and bureaucrats—no matter which major party is in office—manage so much of our lives? Social engineering is government planning. It may not be total central planning, though some may wish for that, but it does entail a significant degree of it. Many people think the president of the United States runs the country, not merely the executive branch of the government. He or she is regarded as the public's commander-in-chief and not merely the commander of the military, theoretically subordinate to Congress's constitutional war-declaration power. (That's not been a real thing since the 1950s.) No, the president is widely thought to be in charge of almost everything. Executive orders are more common than legislation, which is bad enough. The two major parties have a few differences over what the government should manage, but taken together, their programs encompass pretty much the whole kit and kaboodle.

Social engineering is a fancy term for politicians and bureaucrats telling us what we must and must not do. As Ludwig von Mises wrote: "Planning other peoples’ actions means to prevent them from planning for themselves, means to deprive them of their essentially human quality, means enslaving them."

So don't let it be said that our choice is between government planning and chaos. Wrong. It is between would-be dictators pushing us around and individual self-direction coordinated in the free market. It is between coercive bureaucracy and social cooperation—largely but not exclusively among strangers—guided by private property, contract, market prices, and entrepreneurship.

The 19th-century French liberal economists strove to explain how "Paris gets fed." Every day the shops offered meat, bread, eggs, milk, etc., yet no one ran things overall. Many people coordinated freely without commands. Those economists did not ask, "Does undesigned order exist?" They could see it. Rather, they asked, "How does it happen?" And they proceeded to explain the division of labor, enterprise, trade, market prices, and supply and demand.

That's what we lose to the extent the government interferes with social cooperation. Because of that interference, we've lost a lot since 1789. When the draft constitution was announced back then, many thoughtful people warned that it allowed too much power to the central government, which could be expected to grow from that baseline. Who would disagree with them today?

 

TGIF: Doing Good at a Profit

[P]eople started to believe that the bourgeoisie and its economic activities of trade and innovation were virtuous, or at least tolerable. In every successful lurch into modern riches from Holland in 1650 to the United States in 1900 to China in 2000, one sees a startling revaluation in how people thought about exchange and innovation.

"How the Bourgeois Deal Enriched the World"
Art Carden and Deirdre Nansen McCloskey

Perhaps it's time for another, similarly positive reevaluation of exchange and innovation. Heaven knows we need it. Our age features a distinct lack of appreciation of trade through the global division of labor, the innovation and prosperity it produces, and the signs of entrepreneurial success, namely, the wealth of innovators. We have witnessed a surge in good feelings toward socialism and various socialism-lites despite their unbroken record of death, oppression, and stagnation.

Could the varied opponents of market-liberalism—libertarianism in its purest form—suffer an allergy to what Adam Smith identified as a key feature of the "system of natural liberty"? In The Wealth of Nations Smith famously observed,

It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest.

Apparently, for people who dislike the market economy, producing even astounding benefits for others does not count if one does it at a profit. That is strange.

In 1900 about 80 percent of the world's population lived in extreme poverty. Today, less than 10 percent does. The reduction since the 1980s alone has been phenomenal. And during that time the world's population has grown dramatically —from under 2 billion in 1900 to 8 billion today!

Deirdre McCloskey and Art Carden write that since 1800 per-capita wealth has increased by 3,000 percent. Per capita! (They explain how and why in Leave Me Alone and I Will Make You Rich: How the Bourgeois Deal Enriched the World. Also see this.)

Malthus and Marx must be spinning in their graves. Paul Ehrlich, still alive, declared in the late 1960s that "the battle to feed all of humanity is over." About that prediction, Maxwell Smart would have said, "Missed it by that much." (Ehrlich still gets treated by the news media like an oracle.)

Do people know about this marken-driven progress? Did the establishment and alternative media report it? I must have missed it.

The eradication of poverty has many freedom-related reasons. Economic liberalization (marketization), that is, the freeing up of entrepreneurship and trade deserves much credit. But something else was also required. Economic historian McCloskey primarily credits a change in attitude toward the "bourgeois virtues," such as innovation. "In every successful lurch into modern riches from Holland in 1650 to the United States in 1900 to China in 2000," McCloskey and Art Carden write, "one sees a startling revaluation in how people thought about exchange and innovation." Envy and resentment at success diminished, freeing people to innovate, trade, and get rich while making consumers better off. Mass production emerged for the first time in history. Producers didn't work just for the political elite. How great was that?

Let's put it another way: poverty has been eradicated at a profit! Was that virtuous? Would it have been more virtuous had it been done by nonprofits? The antipoverty record of nonprofits, especially governments, is dismal.

Where is the praise for the market from all the usual antipoverty voices? I can find only one voice, however grudging: Rock star Bono, who said in 2022:

There’s a funny moment when you realize that as an activist: The off-ramp out of extreme poverty is, ugh, commerce, it’s entrepreneurial capitalism. I spend a lot of time in countries all over Africa, and they’re like, “Eh, we wouldn’t mind a little more globalization actually. I would point out that there has been a lot of progress over the years.” . . . Capitalism is a wild beast. We need to tame it. But globalization has brought more people out of poverty than any other -ism. If somebody comes to me with a better idea, I’ll sign up. I didn’t grow up to like the idea that we’ve made heroes out of businesspeople, but if you’re bringing jobs to a community and treating people well, then you are a hero.

As I said, grudging, but better than nothing. But did Bono's friends and fans become pro-market? I don't see it.

One might expect that in a world of scarcity, a system of political economy that harmonizes diverse interests and creates widespread wealth from those differences to win enthusiastic praise. But no. Enthusiasts for markets and economic success have been scarce throughout history because a relative few succeed fabulously as innovators while most others merely succeed as consumers—beyond their recent ancestors' wildest dreams.

"People before profits!" shout envious ignoramuses, who can't be bothered to figure out that businesses that fail to please people record losses, not profits, and go bankrupt. It's a profit-and-loss system (unless the government violates the system by intervening).

By the way, pure entrepreneurial profit emerges when a business can sell its goods for more than its costs, including wages. That is, an entrepreneur happens upon a discrepancy between the price (valuation) of inputs and the price buyers are willing to pay for the output. Hence my battle cry: Exploit price discrepancies, not people!

However, some find it more satisfying to look for exploitation in any encounter whether it is there or not. Sellers exploit buyers; employers exploit employees. It requires no proof because it is a sacred article of faith. The faithful are blind to the deep harmony of interests of sellers and buyers, of employers and employees. They need each other because the system of natural liberty, even when burdened by state intervention, makes all parties richer than they ever could be without the market, its prerequisites (respect for others and their property), and its consequences (the global division of labor).

Getting back to Adam Smith's point, what could be the objection to trade based on mutual benefit? Why should anyone expect the butcher, baker, and brewer to live for their customers? Like their customers, they have lives and families too. Are sellers wrong because they don't give away their wares? Do their customers give away their products and services? Then what's wrong with charging what "the market will bear," that is, what people are willing to pay?

We all agree that no one can own other people? If you want something that belongs to another person, you offer to trade. Just as you don't own other people—that's called slavery—you also don't own their belongings until they accept the terms of trade. Governments often seek to set the terms of trade, but it has no legitimate power to do so. Governments are usurpers. The terms are up to the parties because the parties are trading their property. (If they violate the rights of nonconsenting third parties, that's a matter for the courts.)

Smith didn't mean that buyers and sellers can't be friendly or care about one another. His point was that benevolence is not necessary for mutually beneficial exchanges. It would take place anyway. All that's required is the realization that trade is positive-sum. Each exchanges something less-preferred for something more-preferred. Person A gets what he wants by offering to Person B what he wants, and vice versa. One serves one's interests by figuring out what's in other people's interests. The pursuit of self-interest serves the interests of all. That's one fine arrangement.

Somebody once said that if America is worth saving, it's worth saving at a profit. That goes for the whole world.

TGIF: What Free Market in Health Care?

Federal Health-Care Industry Lobbying Leads the Pack

Contrary to a popular article of faith, America has no free market in health care—far from it. Consider this: the largest lobby in Washington, D.C., is—wait for it—the health care and health insurance industries. Last year, they spent 5.8 times the amount the "defense" contractors spent on lobbying: $800 million versus less than $200 million.

This may have many explanations, but the fact remains: a free market in health care would not see massive lobbying. Based on what Congress and regulatory agencies do, we can be sure that the health care and insurance industries are not by and large lobbying for less government. If so, they are doing a rotten job.

Michael F. Cannon, the Cato Institute's director of health policy studies, wrote a book last year showing just how much of a free market in health America does not have. To call our system a free market is a bad joke, not to mention cruelly dishonest. The details—in addition to the lobbying data—are eye-opening. It's like calling Sweden a socialist country. Wrong again, Bernie Sanders.

Cannon writes (PDF here):

In the United States ... countless state and federal laws block innovations that would improve health care access and quality. Without exception, lawmakers enact these laws in the hope of reducing costs and improving quality. Without exception, they do extraordinary and irreversible harm to patients.

This book explains how state governments prevent medical professionals and entrepreneurs from offering higher-quality, lower-cost care. It explains how Congress denies consumers both control of trillions of dollars of their own earnings and the right to make their own medical decisions. It explains how Congress makes health care increasingly less affordable, jeopardizes patient health by promoting low-quality care, and makes health insurance work against the sick.

Cannon’s work is more than a diagnosis of the sickly U.S. health care system. It's a regimen for moving America toward a "healthy" free market. The sooner we get started the better. For ages health care has been strangled by politicians, bureaucrats, regulators, and private-sector rent-seekers. They all need to be sent packing. We badly need entrepreneurship; free, flexible, private enterprise; and the profit motive—yes, the profit motive, the despised thing that has bestowed incredible wealth on so many people worldwide.

"In corners of the U.S. health sector where market forces have had room to breathe," Cannon writes, the American system has achieved astounding innovations in diagnostics, service delivery, drugs, treatments, devices, and even insurance. But it fails on many counts thanks to government preemption of private market-based efforts. A good part of the reason Americans pay more for health care than anyone else in the world is government intervention. No surprise there if you understand how governments and markets work.

Cannon writes:

Among advanced nations, the United States ranks near the top in terms of government control of health spending. The Organisation for Economic Cooperation and Development (OECD) collects data on 38 economically advanced nations. The OECD reports that in the average member country, 76 percent of health spending is compulsory. That is, rather than allow consumer preferences to allocate those funds, government requires residents to allocate those funds according to the government's preferences or face penalties. In the United States, government controls a significantly larger share of health spending than the OECD average: 85 percent of U.S. health spending is compulsory.

The OECD country with the highest percentage of compulsory spending, the Czech Republic, beats the United States by only three points.

Government controls a larger share of health spending in the United States than in 30 other advanced nations, including Canada (75 percent) and the United Kingdom (83 percent), which have explicitly socialized health systems.

Some free market! Government dictates how 85 cents of every health care dollar is spent.

"Control over health spending and government-imposed barriers to accessing medication," he goes on, "are just two ways government blocks the market forces of individual choice, innovation, and competition that would otherwise make health care better, more affordable, and more secure."

Not all action is at the national level, of course. State governments heavily regulate health care and insurance. All these regulations, including licensing and the tax exclusion for employer-sponsored medical insurance, must go if Americans are to have a world-class free market in health care. Patients must be placed at the center so they can exercise what Ludwig von Mises called "consumer sovereignty."

"Day after day," Cannon concludes, "U.S. patients suffer the consequences of a century of mounting government failures. American health care is worse, more dangerous, more expensive, and less secure than what a market system would deliver." People have to rethink their moral and aesthetic biases against profit-motivated, mutually beneficial market relations. It really is a matter of life and death.

Democracy and Free Stuff

Democracy: the matching up of people who want free stuff with politicians who promise free stuff. Problem: free stuff as they all imagine it does not exist. 

However, it does exist in the market, as explained by Frédéric Bastiat in Economic Harmonies, chapter 8, "Private Property and Common Wealth." See my discussion of that chapter.

Economics in One Other Lesson

"The number one principle of economics...: the secret of mass consumption is mass production.... What about distribution? Here's what we know from all of human history, all of economic history. Any large increase in production is widely shared. There's no such thing as a large increase in production that only benefits a small fraction of the population. The Industrial Revolution did not just benefit factory owners. The internet did not just benefit computer programmers. Vaccines do not just benefit pharmaceutical companies.... You really should not just focus on distribution; [you should] focus on production." --Bryan Caplan

I will presumptuously comment that Caplan uses the word distribution in the statistical sense and not in any overall active sense. In a market economy, no one distributes income. The income configuration in a market economy is a snapshot result of countless voluntary exchanges, agreements, and contracts. Because this is so, we should not say that governments try to redistribute income. Rather, we should say they try to distribute it. That is, they try to move from a society of persuasion and consent -- freedom -- to a society of command and force -- serfdom.

TGIF: The Nonsense of Statist Political Economy

In the video "How Capitalism Makes You Less Free," self-described Marxist Grace Blakeley, author of Vulture Capitalism: Corporate Crimes, Backdoor Bailouts and the Death of Freedom, boldly asserts that all societies must have some kind of economic planning. That's hardly news in 2024. Free-market liberals, or libertarians, have long taught that the issue is not planning versus no planning but who plans: free profit-motivated, consumer-oriented individuals independent of the state and other coercion or force-wielding centralized bureaucrats and their cronies, with or without democratic window-dressing. 

Blakeley rejects independent planning in favor of democratic planning. But that means coercion must be in the picture. For all her concern about freedom, she doesn't use the word as everyone else does.

Blakeley, a 30-year-old commentator on political economy with two books now under her belt, seems confused. She's worth discussing because her views would be well-received on American college campuses.

Her answer to the great social question is a complex system of multi-layered purportedly democratic planning and accountability. Worker-managed entities and other democratic bodies would check one another to keep them in line. Any other form of planning, ranging from business owners running their own firms in competitive markets to the centralized "fusion between public and private power" would be forbidden. Her argument heavily relies on horror stories involving profit-seeking businesses. Of course, democratic people's republics have never committed atrocities. The collectives she envisions would always serve the public interest because of "democratic oversight."

Need I point out that this is oversimplified and that some distinctions are required? Fully private profit-and-loss decision-making -- independent of the state -- is what authentic liberalism, or libertarianism, calls for. It requires no state whatsoever because entrepreneurs can produce law and rights protection. On the other hand, the "fusion between public and private power" is fascism, the negation of free private consensual enterprise. Like all fascism, Nazism was socialism with a thin veneer of private ownership.

Blakeley would have us believe that a bonafide free market is not an option. (She doesn't regret that. But why not?) So let's stop talking about it. We must choose between coercive planning for the rich and coercive planning for all.

"Capitalism requires a certain amount of centralized planning to function," she says. It is a "central part of the way the capitalist system works":

In the [pre-World War II] laissez-faire period [Henry] Ford does whatever he wants; the state does what he says. In the postwar period Ford has to manage his relationship with workers and he has to manage his relationship with the state and all three of these parties had to come together and try to decide what happens next. What changes in the neoliberal period [beginning in the 1980s] ... the decision-making power is basically returned solely to capitalists and their allies within the state.

Now hang on. What laissez-faire period? She told us laissez faire was impossible. So how did the impossible exist?

She has more problems. If the state did what Ford told it to do, why does she call that laissez faire? This is basic stuff that she can't get right.

After the war we got a sort of fascism, but Blakeley won't call it that. The federal government (gun in hand) tried to orchestrate cooperation between business and labor. (Ayn Rand properly labeled John Kennedy's New Frontier "the new fascism.") But then when Reagan (and Thatcher) came to power, we returned to the impossible laissez faire that can't exist. Confused? So am I, and apparently so is she.

Here's another gem. "Individualism is hampering any kind of change because it's hampering our ability to organize collectively." Never mind that for centuries, individuals have voluntarily joined together in formal and informal markets to accomplish what one could not do alone. Blakeley poses as a champion of workers, but she's an elitist. She knows better: what we need are coercively organized "democratic" collectives for everything. She condemns the "gig economy" because it does not have real employment. It's elitism in populist clothing.

And here's another doozy:

I harken back to this Marxist socialist idea of freedom, which looks at -- yes, individual freedom and autonomy, but also your freedom as a member of a group to shape the conditions that affect your life and your existence.

Where is room left for individual freedom and autonomy?

Even in this mixed economy, people -- thanks to the coordination that market exchange and prices make possible -- substantially shape their lives. Of course, they would have even more control if the government would get out of the way by abolishing housing and land-use restrictions, occupational licensing, business-permit requirements, central bank fiat money (that causes inflation and recessions), theft-by-taxation, immigration barriers, victimless crimes, intellectual "property," surveillance, and other impositions. To the extent workers are unfree, it's because politicians and bureaucrats have the power to privilege themselves and their cronies at everyone else's expense.

Democracy, of course, is majority rule. What's so great about forcing everyone, Rousseau-style, to obey the majority? Should the majority prevail on everything? If not, what's beyond its reach? How is that line drawn, by vote? What keeps the majority from crossing the line it establishes? What happens to the individual, the smallest minority?

Democracy settles nothing. It simply shifts problems from the realm of consent, where problems are manageable thanks to the profit incentive and price coordination, to the realm of coercion, one-size-fits-all answers, perverse incentives, one-vote impotence, and the mirage of accountability. (Compare a consumer who, without notice, switches products to a citizen who wants to switch democratic rulers.) 

Blakeley should read Benjamin Constant's classic essay, "The Liberty of the Ancients Compared with that of the Moderns." She is an ancient -- and in this context, that's no compliment.

Even with hampered markets, general living standards in the West and other places have been dramatically rising for hundreds of years because of the Industrial Revolution and global liberalization. Consumption inequality has fallen. The labor-time price of all goods has dropped. The division of labor and trade have created broad-based wealth. Global poverty has plummeted. Despite government interference, rich and poor get richer. We need more freedom, not less.

Finally, though much more could be said, Blakeley and her fellow socialists must come to terms with Ludwig von Mises's proof that socialism, democratic or otherwise, cannot produce high living standards for a modern society. For that, we need real prices, exchange ratios, for producer and consumer goods; otherwise no one can rationally calculate the best way to produce what we want in a world of scarcity and uncertainty. But you can't have real communicative prices without markets, and you can't have markets without free trade in labor services and goods and resources. That requires self-ownership and private property. Abolishing private property, Marx's chief hope, would destroy our ability to increase prosperity for all.

That is the century-old Mises-Hayek argument against socialism. The socialists lost. Someone should do Grace Blakeley a favor: send her a copy of one-time British Marxist David Ramsay Steele's From Marx to Mises: Post-Capitalist Society and the Challenge of Economic Calculation.

TGIF: Beware Elitists in Populist Clothing

We're led to believe that today's political struggles are largely a contest between populists and elitists. But something besides libertarians is missing from that simple tale: the elitists in populist clothing, or elitist populists. We have no better example than a conversation the other day between the leading "right" populist Tucker Carlson and the leading "left" populist Glenn Greenwald. (The quotation marks are to indicate that these tribal labels are seriously problematic.)

To their credit, Carlson and Greenwald consistently defend a noninterventionist foreign policy and free speech. However, advocates of full individual liberty should take care because these pundits voice positions that seriously trash individual liberty. See their views on the free movement of people and goods across national boundaries. Voluntary exchange is not a priority for Carlson and Greenwald.

Even knowing this, I was unprepared for what they would say. Carlson offered this (at 28;10):

I think a lot of people have awakened to the now-demonstrable fact that libertarian economics was a scam perpetrated by the beneficiaries of the economic system that they were defending. So they created this whole intellectual framework to justify the private-equity culture that's hollowed out the country.... I think you need to ask, Does this economic system produce a lot of Dollar Stores? And if it does, it's not a system that you want because it degrades people and it makes their lives worse and it increases exponentially the amount of ugliness in your society. And anything that increases ugliness is evil. Let's just start there. So if it's such a good system, why do we have all these Dollar Stores?... If you have a Dollar Store, you're degraded. And any town that has a Dollar Store does not get better. It gets worse. And the people who live there lead lives that are worse. The counterargument, to the extent there is one, oh they buy cheaper stuff. Great. But they become more unhappy.... [The Dollar Store] is also a metaphor for your total lack of control over where you live and over the imposition of aggressively in-you-face ugly structures that send one message to you: which is you mean nothing; you are a consumer, not a human being or a citizen."

There you have it. The market is an exploitative scam, and the Dollar Store, which many of us regard as a godsend, is an ugly, degrading, and dehumanizing snare. Who knew?

Where to start? Libertarian -- in other words, consistent free-market -- economics is a self-serving scam? Really? Got proof? Were Menger, Böhm-Bawerk, Mises, Hayek, Friedman, Kirzner, Sowell, Williams, Buchanan, Rothbard, etc. actually members of a cabal that was getting rich at our expense? Is Carlson having a laugh?

He would have been on firmer ground if had said that libertarian economics is used as a cover for elitist government interventions. But libertarians have said this roughly forever.

"So they created this whole intellectual framework to justify the private-equity culture that's hollowed out the country." This is pretentious rubbish. We must always distinguish market institutions in themselves from the distorted monstrosities created by social engineers through government control. The market for private equity -- otherwise known as private property in the means of production -- is not the problem. It's indispensable for raising the living standards of eight billion people. The problem is privilege: goodies and influence bestowed by the state. How could Carlson not know that?

Now we get to that alleged symbol of ugly American modernity and degradation: the Dollar Store. This is too silly to require an answer. He doesn't the stores are just physically unsightly. Actually, they're not. He means that the very idea is ugly and destructive of good things. Has he asked people who shop there? Do they see it as symbolic of a lack of control? He would have had a point had he lamented that such stores are valued because the government central bank sucks the purchasing power out of the dollar by printing money. Or he might have noted that without the Federal Reserve, more stuff would cost only a dollar. (HT: Bob Murphy.)

Lest you think that Carlson's complaint is about 21st century America, understand that the first "five and dime" store -- officially, F.W. "Woolworth's Great Five Cent Store" -- opened in Utica, New York, in 1879. Children of the 1950s like me fondly remember the Woolworth as a cheerful fixture on the avenue. I don't recall being treated as a "mere consumer," whatever that means. (The Woolworth lunch counter in the Jim Crow South was a different story, but that's not what Carlson has in mind.) Woolworth soon had competitors, such as W.T. Grant.

Carlson's elitism is undisguised when he expresses his disdain for the Dollar Store and the people who welcome them. I'm quite sure he and his fellow millionaires don't shop there.

If you expected some pushback from Greenwald, you would have been disappointed. He laughingly recalled how he got into trouble for suggesting that Carlson and Donald Trump's one-time gray eminence Steve Bannon "are a lot more socialist in a certain limited sense than a lot of people who claim that title." He's right. That's because, he added, "you [Carlson] are focused so much on the welfare of ordinary people." I'm not seeing much focus on ordinary people.

As to Carlson's point about ugliness, Greenwald elaborated:

You go to anywhere in the world. You go to Western Europe and you see these structures that people spent 200 years building just for the sheer beauty of it and you go into nature and you see beauty like it never exists. And you go to developing countries and you see a kind of dedication to buildings even that are designed to be inspiring to stimulate things in the human soul. And then you go to places in the United States where our infrastructure is falling apart, where our new structures are designed to be as ugly as possible. And it's a very difficult thing to do to communicate the spiritual components of our politics.

Has it occurred to Greenwald that those beautiful old European structures were built by ordinary people for the government-privileged aristocracy? (HT: David Henderson) Greenwald apparently sees no beauty in the fact that the market-oriented West (despite abundant government intervention for its cronies) brought the first mass production for ordinary people in history. The upper classes of the not-too-distant past would envy the middle and lower classes over what they consume every day. You might expect that to thrill a populist -- but not these delusional champions of ordinary people.

Finally, Greenwald writes that "ultimately politics does have no purpose other than to elevate the happiness of our citizenry." But he doesn't lift a finger to defend this position, which is fraught with difficulties not least because of human differences and the universal need for individual freedom. To name just one, since the state is founded on aggressive force, what does Greenwald have planned for those of us whose happiness requires that the politicians and bureaucrats stop stealing from us and stop trying to manage society? Wouldn't it be better for the government to stay out of the happiness business and to respect freedom of association? 

No doubt Carlson and Greenwald favor a foreign policy of nonintervention for some good reasons that libertarians also embrace. But they favor it for a bad reason as well. Instead of favoring the taxpayers keeping their own money, Carlson and Greenwald want to spend the Pentagon's huge budget on a gigantic, compulsory, inflationary, wealth-destroying, coldly bureaucratic, intrusive, and condescending welfare state if not outright government ownership and control. 

Individual liberty? What's that?

TGIF: Cooperation versus Bigotry

We who value individualism, freedom, and social cooperation as essential to flourishing should be distressed by the hostile bigotry that has lately reared its ugly head, to some uncertain extent, on the streets and campuses of America and abroad. This is not new. In America we've seen it intermittently in both directions on racial issues just in this century. It seems related to an intolerant, zero-nuance, take-no-prisoners, and glib attitude among many contenders over racial, religious, and ethnic controversies.

Now it is showing itself in ugly group chants and more personal communication calling for violence against Jews and Arabs, and perhaps even direct harassment and assault.  A couple of people have died. Anti-Semitism and anti-Arabism should be off-limits. Regardless of the target, the unrestrained hostility is frightening on many counts, not least of which is its ominous implications for spontaneous social /market cooperation..

I couldn't possibly know whether these clashes are common or just fringe opportunism -- let's hope the latter. In the heat of a controversy it is possible to misread innocent events and words. The principle of charitable interpretation ought to apply unless solid evidence to the contrary revokes it. We should also be aware that government officials and the news media, for obvious reasons, might be inclined to exaggerate. 

The point is that much could be at stake if impressions are not exaggerated -- including the trust and cooperation that characterize market-oriented societies. Social strife can have severe consequences. Even public demonstrations can create rippling animosity.

I am not suggesting, of course, that limits on free speech and the press would be in order in the name of social cooperation. That would make no sense. For one thing, hate-speech prohibitions and the like would bolster state power with vague statutes: governments have been major disrupters of cooperation, market and otherwise, throughout history. Contrary to what we teach our children, words can hurt, but it's not the kind of hurt that justifies retaliatory force. Threatened and initiated force, though, is another story.

Similarly, restrictions on immigration and the internet, along with enhanced government monitoring and data collection, would be ludicrously ironic since those are the means of interfering with cooperation.

The right and wrong of foreign conflicts, and U.S. government complicity in them, is separate from my point. Strong convictions and feelings are entirely understandable and proper. But when become collectivist bigotry, civil peace can be put at risk. That should worry anyone who grasps the relationship among social cooperation, markets, and general well-being.

Champions of individualism reject the divisive collectivism displayed in ethnic, racial, and religious hostility. Such feeling flows from the tribalism that is a vestige of a primitive, pre-individualist distant past. A person's natal or otherwise unchosen "membership" in a group says nothing about his or her character, moral principles, or position on controversies. The right to be free of coercion is an individual-based, not group-based principle. Persons can think for themselves. That's individualism, both ethical and methodological. We abandon it at great risk.

As the economist Ludwig von Mises explained in Human Action, which he considered calling "Social Cooperation," civilization began to dawn when the earliest perceptive people realized that strangers could represent not existential threats but potential gains from trade. There lay the road to mutual self-interest and prosperity. It was long ago, but some people haven't yet learned. Samuel Johnson was onto something when he said, "There are few ways in which a man can be more innocently employed than in getting money."

I'll give Mises the final word on the link between free cooperation and prosperity, and by implication the danger from overwrought polarization (from Human Action, chapter 24, "Harmony and Conflicts of Interest", section 3, "The Harmony of the "Rightly Understood" Interests):

[N]ature does not generate peace and good will.... What makes friendly relations between human beings possible is the higher productivity of the division of labor. It removes the natural conflict of interests. For where there is division of labor, there is no longer question of the distribution of a supply not capable of enlargement. Thanks to the higher productivity of labor performed under the division of tasks, the supply of goods multiplies. A pre-eminent common interest, the preservation and further intensification of social cooperation, becomes paramount and obliterates all essential collisions. Catallactic competition is substituted for biological competition. It makes for harmony of the interests of all members of society. The very condition from which the irreconcilable conflicts of biological competition arise--viz., the fact that all people by and large strive after the same things--is transformed into a factor making for harmony of interests. Because many people or even all people want bread, clothes, shoes, and cars, large-scale production of these goods becomes feasible and reduces the costs of production to such an extent that they are accessible at low prices. The fact that my fellow man wants to acquire shoes as I do, does not make it harder for me to get shoes, but easier.

Let's not have our mutual interest get lost in the heat of controversy.

TGIF: Extend Tolerance to Commerce

Perhaps you've noticed that we live in intolerant times. Many people claim to be endangered by the mere spoken or written expression of views on a range of issues. This has led to direct action to disrupt speakers on college campuses and elsewhere and to indirect government efforts to censor users of social media, which so far the courts have frowned on.

Believe it or not, this has had a silver lining. It's elicited articulate renewed defenses of free speech and tolerance -- long taken for granted.

But the tolerance movement should go further to include what the late philosopher Harvard Robert Nozick called "capitalist acts between consenting adults." Those are also known in sum as the free market, an unfortunately unnoticed option these days. When it comes to human action, we find wide and increasing support for a host of government measures that interfere with the freedom of individuals to trade with one another on their own terms. Those who have become disillusioned with the intolerant so-called left seem to think the free-market alternative is unworthy of consideration. This may also be true of those who are disillusioned with the intolerant so-called right. They may embrace freedom of conscience, but they draw a line at freedom of exchange, as if conscience had no part in that.

This line seems arbitrary. A product innovator or builder of an enterprise is a creator who may well be as passionate about this chosen life purpose as a writer or an artist. (Ayn Rand stressed this.) The creator offers the product to consumers (or downstream producers), who are free to decide if what's offered on given terms will serve their purposes. They are of course also free to decide that they do not want the offering and to go their own ways. Freedom of conscience permeates life in the marketplace, make no mistake about that.

Why should the work of people who dedicate their lives to such creations rank lower in our estimation than the work of artists? Is it because their products improve "only" material well-being and not spiritual well-being? That's not a good reason. We are not ghosts.

More pertinent, why should the government interfere in consensual transactions deemed merely "economic"? You can see the discrimination in the matter of free speech. Generally, freedom of speech, at least until recently, has been sacrosanct. The First Amendment says it must be. But commercial speech can be and has been regulated and even banned in various ways. It gets no respect.

The courts have long distinguished between so-called fundamental liberties and non-fundamental liberties, a distinction for which no support exists anywhere. What we think of as economic liberties are in the second category and so are deemed less worthy of protection from the government. That means politicians and bureaucrats can put themselves between consenting parties and either forbid or regulate transactions without even the semblance of a compelling reason. They just need to tell the judge that a decree is aimed at some articulated objective. Those who are interfered with may not tell the meddlers, "Mind your own business. If you think you have a better way of doing things, start your own business." That would get them heavily fined at the least. The consequences could be more severe.

Let's look at some common examples, so common they are taken for granted. We have minimum product standards (outlawing less-expensive options), the minimum wage (creating unemployment), price controls such as rent control and so-called gouging bans (creating shortages), housing regulations and zoning (ditto), restrictions and taxes on trade with foreigners (creating higher prices), immigration control (preventing the free exchange of labor, etc.), occupational licensing (barring the choice of one's work), industrial policy (picking winners), and drug and other "vice" prohibition (including the drinking of raw milk!). More could be added. In each case peaceful individuals are prevented from peacefully dealing with each other on mutually agreeable terms. Their freedom of conscience is intruded on by politicians and bureaucrats. Contracts are acts of conscience.

I object to the widely accepted distinction between personal liberty and economic liberty. As Thomas Sowell has pointed out, people select means to achieve all kinds of ends. Economics is a method of understanding the means-ends framework, but it does not provide grounds for distinguishing among ends. All ends are important to those who pursue them or else they would do something else. There is no personal and economic liberty. There is only liberty, which each person has a right to exercise in the pursuit of happiness.

If you believe people should respect each other, then you logically must extend that respect to freedom of commerce.

TGIF: The Knowledge that Only Free Markets Disclose

As a follow-up to my recent article about F. A. Hayek's classic article "The Use of Knowledge in Society" (1945), I thought it worth extending Hayek's exploration of this area of social theory. In 1968 the Nobel laureate-economist delivered a lecture in German known in English as "Competition as a Discovery Procedure." It's an alluring title, and anyone concerned with what makes for a good and prosperous society should be familiar with Hayek's basic point.

Hayek gets right to it. He notes that standard macroeconomists are guilty of having "investigated competition primarily under assumptions which, if they were actually true, would make competition completely useless and uninteresting." By that, he meant, "If anyone actually knew everything that economic theory designated as 'data,' competition would indeed be a highly wasteful method of securing adjustment to these facts."

In other words, if all the "data" were actually accessible data, solving society's scarcity problem would be a piece of cake, at least if the government's computer was powerful enough. (I'm led to understand that, fortunately, many economists have advanced since he gave this lecture, probably in part because of his challenge.)

"Hence," Hayek went on,

it is also not surprising that some authors have concluded that we can either completely renounce the market, or that its outcomes are to be considered at most a first step toward creating a social product that we can then manipulate, correct, or redistribute in any way we please.

Unfortunately, lots of such people are still around today.

Hayek (like his teacher Ludwig von Mises) knew that he needed to show that Adam Smith's "system of natural liberty" performed a critical service to mankind that could not be otherwise performed: the production of knowledge that is needed in a changing world of scarcity in which each individual must make plans but also be ready to adjust his or her plans in light of what other free individuals are doing. And that's what Hayek did, building on Mises and others. Hayek made contributions to the economic, or "practical," case for freedom that have been woefully unappreciated. The Austrian school of economics that Hayek was part of needs to be discussed more than ever.

Just as any sort of contest would be pointless if we infallibly knew the outcome in advance, Hayek wrote, so would marketplace competition. He considered "competition systematically as a procedure for discovering facts which, if the procedure did not exist, would remain unknown or at least would not be used." (Emphasis added.)

(Although, Hayek's German title, Der Wettbewerb als Entdeckungsverfahrenh, has been translated as "competition as a discovery procedure." I regard the word process as more appropriate because, unlike procedure, it suggests improvisation, spontaneity, and serendipity. Hayek's work overflows with an understanding of what he called spontaneous, or unplanned, order.)

Hayek reiterated his theme from "The Use of Knowledge in Society" even as he extended it. He wanted to know how can we even identify goods apart from what the market discloses over time through free producer and consumer action.

Which goods are scarce, however, or which things are goods, or how scarce or valuable they are, is precisely one of the conditions that competition should discover: in each case it is the preliminary outcomes of the market process that inform individuals where it is worthwhile to search. Utilizing the widely diffused knowledge in a society with an advanced division of labor cannot be based on the condition that individuals know all the concrete uses that can be made of the objects in their environment. Their attention will be directed by the prices the market offers for various goods and services.

Bottom line: government administrators may be able to give orders, but they cannot benefit the population. The Soviet Union no doubt used up resources making things that few people wanted. Hayek went on:

This means, among other things, that each individual’s particular combination of skills and abilities—which in many regards is always unique—will not only (and not even primarily) be skills that the person in question can recite in detail or report to a government agency. Rather, the knowledge of which I am speaking consists to a great extent of the ability to detect certain conditions—an ability that individuals can use effectively only when the market tells them what kinds of goods and services are demanded, and how urgently.

It's not magic that produces the knowledge that makes abundance possible for everyone. It's freedom of action, contract, and private property in a legal-political environment in which people peacefully and cooperatively pursue their happiness. The discoveries Hayek was talking about can take place only when people can 1) freely produce and offer products and services to others and 2) freely buy or not buy according to their own judgment. This includes labor services. Without that freedom, which is limited if not precluded by central planning and less-comprehensive regulation, an economy cannot be expected to benefit a large population.

The full case for a free society obviously has a rights-based, or justice-based, component, We are reasoning social beings who seek happiness. And the also has an important epistemic component, which Mises, Hayek, and others have laid out. We want justice for all individuals, and we want them to flourish. In a world of scarcity and dispersed and tacit knowledge, the free market is required. The moral is also practical.