Credit-Card Deform

Beware the unintended consequences of the "Credit Card Holders' Bill of Rights," which could pass the House this week. Even assuming the best of intentions, the proposed restrictions (like usury laws) would make it harder for lower-income people or those with weak credit records to use credit cards. This wouldn't reduce their debt; it would only encourage a switch to inferior forms of debt. I hate defending the banks since they are not free-market firms but rather part of a state-banking cartel. But this is no way to address whatever credit-card problems exist. Even in the current context, banks compete for credit-card customers, and people shop around aggressively. (I've transferred balances at zero-interest often in the past.) The alleged obligations attached to TARP money are irrelevant if the new regulations would harm people.

Torture

Of course those who ordered and carried out torture should be prosecuted for criminal wrongdoing. Enough said.

TGIF: Boomerang: Government and Systemic Risk

If you’re not careful when throwing a boomerang, it could come around and hit you in the back of the neck. Politicians and bureaucrats should learn the same lesson when touting their supposedly indispensable role in safeguarding the country’s economic security. If you look closely, you find that they are the biggest source of the very dangers they presume to protect us from.

Read the rest of TGIF here.

Do They Get to Change Their Votes

The top U.S. trade official said it isn't necessary to renegotiate the North American Free Trade Agreement, despite a campaign promise by President Barack Obama to strengthen the pact's labor and environmental provisions.

--Wall Street Journal

I didn't like Barack Obama's protectionist appeals during the campaign, but shouldn't those who did get to change their votes? Oh, that's right. Unlike in the market, there are no refunds or exchanges in the democratic realm.

End the Cuban Embargo!

Barack Obama and Cuban President Raul Castro have nothing to talk about. While they do their diplomatic dance, the Cuban people are suffering because of the American trade embargo. It should end forthwith. The idea that trade between Americans and Cubans must await an American president’s say-so is an insult to anyone who aspires to be free.

The rest of the op-ed is here.

Keynesian Cons

My latest article in The American Conservative is here. A teaser:

Indeed, you would be hard-pressed to find a conservative who admits to being an orthodox Keynesian, conservatives having joined the Church of the Supply Side many years ago. But though Keynesianism tends to be associated with big-government “liberalism”—in its original form, liberalism stood for small government in all realms—many who take Keynes’s approach to economics are nevertheless self-identified conservatives. In practice, “conservative Keynesian” is not a contradiction in terms.

The Real Debate

The foreign-policy debate shouldn't be unilateralism vs. multilateralism, but interventionism vs. noninterventionism.

Government Spending Is No Cure for Recession

Mario Rizzo debunks the claim that government spending is as good economically as private spending here. Definitely worth reading.

What Is to Be Done?

From FEE on Vimeo. Western New England College, March 2009

Taxation with Misrepresentation

It’s tax season. Consider what that means. It’s the time of year when you must account for yourself to the government. You must report every dime you earned last year, and if you believe any of it should be beyond the state’s grasp, you’d better have the proof. If the government withheld more of your money than (you think) the rules require, it is your burden to prove that. You then must submit the official paperwork by a certain time. If the authorities are not satisfied with what you submit, they will demand that you prove you’ve done it right. If you can’t, you’ll have to do it their way and pay more. Should you refuse to comply with any of these requirements — and a lot more no one understands — the government has the power to make your life hell and impose additional financial burdens. It can even imprison you.

And all in a country most people would swear is free.

See the rest of my op-ed here.

TGIF: Bad Regulation Drives Out Good

In 1969 economist Harold Demsetz identified an important flaw in much public policy analysis, the “Nirvana Fallacy.” We would do well to keep it in mind as we think about solutions to the current economic problems.

The rest of TGIF is here.

Executive Privilege

I see Barack Obama has one-upped George W. Bush in his defense of executive autocracy by invoking both state secrets and sovereign immunity against people suing the government over Bush's warrantless wiretapping. Well, what's the point of being president if you're not going to have all those cool executive powers Bush accumulated?

Kevin Carson has a good comment here.

Beware Systemic Threats

The current push for a regulatory dictatorship over the financial industry is based on the principle that we must keep on a tight leash any organization whose activities are so pervasive and consequential that its potential for misjudgment stands as a “systemic threat.”

Isn’t that the case for strictly limiting the government?

The G(rasping)-20

We expected little of sense to come out of the G-20 summit, and it met our expectations with flying colors.

The rest of TGIF is here.

The Freeman, April 2009

On the Glenn Beck Show Today

Topic: Is it Fascism or Socialism?

Walmart: Yea or Nay?

Good discussion about Walmart going on over at Austro-Athenian Empire, one of my favorite places to hang out on the Net. Have a look. We don't know exactly how things would be in a laissez-faire economy, but I tend to think big companies like Walmart have a corporate-state advantage over smaller and yet-to-be-founded companies. I don't care that Walmart might look the same in a free(d) market. What matters is why it is in its current state. If a billionaire made his money through state advantage, no libertarian would say, "It doesn't matter because a guy that smart would be a billionaire in the free market anyway."

Appearance on Arkansas Public TV

I appeared on AETN's Unconventional Wisdom, hosted by David Sanders, on March 27, 2009. The topic of discussion was the banking crisis.

Which Politician Came Up with the Idea that Dying for Your Country Is a Good Thing?

Watched Clint Eastwood's two excellent Iwo Jima movies, "Flags of Our Fathers" and "Letters from Iwo Jima," this weekend. Moral: the world would be a better place if no one thought his country was something to fight or die for. That's also the moral of "The Americanization of Emily." I highly recommend all three movies.

Cross-posted at Liberty & Power.

What the Drug Warriors Have Given Us

Violence among Mexico’s drug cartels and government has spilled over the U.S. border and beyond. Does anyone still think the “war on drugs” is a good idea?

The rest of this week's TGIF, "What the Drug Warriors Have Given Us," is at the Foundation for Economic Foundation website.

China: Don't Buy Government Bonds!

An urgent message to the people of China: Don’t lend the U.S. government another dime.

The rest of this week's op-ed, "China: Don't Buy Government Bonds!," is at the The Future of Freedom Foundation website.

They Don't Read the Bills

Rep. Maxine Waters of California admits that members of Congress don't read the bills they vote on. (Of course, we already knew this.) She made the confession during an interview Friday with Norah O'Donnell on MSNBC. The subject of the interview was the provision in "stimulus" bill that prohibited interference with contractual bonuses at bailed-out companies. O'Donnell pressed Waters to say if she realized that prohibition was in the bill she voted for, and Waters admitted she did not. O'Donnell vented frustration that members of Congress are ignorant about contents of legislation. Waters explained that she and other members read the "important" parts and are mainly concerned with the amount being spent and the beneficiaries. She said they rely on staff to feed them information. When O'Donnell questioned that procedure, Waters misdirected the interview by asking O'Donnell if she reads every word of the newspaper. (As though that were relevant.) Then she asked O'Donnell if she read every word of her mortgage. Unfortunately, O'Donnell let the interview wind down instead of going in for the kill. She could have pointed out that when a person fails to read her own mortgage, she may harm herself, but congressmen vote on things that affect everyone, using money extracted forcibly by taxation, and that no one is permitted to opt out. Congressmen are largely unaccountable because any single voter's "clout" is negligible.

As Mario Rizzo has wondered, if our alleged representatives don't know what is in the laws they pass, in what sense can we be said to have consented to be governed by them?

Watch the interview for yourself:

Crocodile Tears over AIG

If politicians spill any more crocodile tears over AIG, the EPA might have to declare Washington, D.C., a protected wetland. Sweep aside the phony expressions of “outrage” over AIG’s government-financed $165 million in bonuses (the information was in black and white) and ask yourself this: Who supplied the money?

The rest of this week's TGIF, "Crocodile Tears over AIG," is at the Foundation for Economic Education website.

No More Something for Nothing

Barack Obama says we shouldn't expect something for nothing. Fine -- many of us don't want the "something" anyway. Now when can we put an end to nothing for something?

Cross-posted at Anything Peaceful.

The Stimulus is Working!

Stimulus has cities securing lobbyists
Race is on to get bit of $787 billion

Headline in today's Arkansas Democrat-Gazette (subscription site)

The Therapeutic State

From the Associated Press:

EASTON, Pa. - A man accused of driving drunk said Pennsylvania courts have no jurisdiction over him because he’s his own country. After seeing the paperwork that 44-year-old Scott Allan Witmer filed with the court claiming sovereignty, a Northampton County judge said Tuesday he cannot be released from jail until he gets a mental exam. [Emphasis added.]

Reminds me of how psychiatry was used in the old Soviet Union.

Cross-posted at Anything Peaceful.

Crisis and Opportunity

“You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before.” –Rahm Emanuel

Has President Obama’s chief of staff read Robert Higgs’s Crisis and Leviathan?

The rest of this week’s TGIF, “Crisis and Opportunity,” is at the Foundation for Economic Education website.

That's Politics for You

I found this interesting tidbit in Wikipedia's entry on the Gramm-Leach-Bliley Act:

Democrats agreed to support the bill after Republicans agreed to strengthen provisions of the anti-redlining Community Reinvestment Act...

G-L-B, the last significant bank deregulation that occurred in the U.S., repealed the part of the New Deal's Glass-Steagall Act that forbade a single institution from engaging in both commercial and investment banking. G-L-B was passed by the Republican-controlled Congress in 1999 and signed by Democratic President Clinton. His treasury secretary at the time was Larry Summers, now President Obama's top economic adviser. It's important to remember this when people say that banking deregulation during the Bush years created the economic mess. The Bush administration didn't deregulate anything of importance. G-L-B in no way contributed to the financial turmoil.

What's important about the quote is that it shows that the Republicans acquiesced in the strengthening of the Community Reinvestment Act, which is partially at fault for the mortgage meltdown. This is the law that compelled banks to increase their mortgage lending to people with low incomes and poor credit histories.

As we've long noted, both parties are guilty of creating the house of cards that has fallen.

Cross-posted at Anything Peaceful.

Free to Consume, Or Not

As someone who is rather less eager to consume than previously, I feel harassed by the government, mainstream economists, and news media. You may feel the same way. Apparently, we aren’t consuming enough to suit them. At least that’s what they want us to think. More than that, they want us to feel guilty and do something about it–such as going into debt. Hence the Fed and Treasury’s program to make it easier for us to borrow.

The rest of the latest TGIF, "Free to Consume, Or Not," is at the Foundation for Economic Education website.

New-Boss Watch

[Corrected]

Barack Obama had an opportunity to break with the usurpations of the Bush regime by agreeing to have the Supreme Court hear Ali al-Marri's challenge to the U.S. government's alleged authority to hold legal U.S. residents without charge as "enemy combatants."

Obama blew it. His Justice Department asked for a dismissal, and that's what it got.

Al-Marri had been held without charge in a military brig since 2003 after the administration's initial abortive attempt to proceed in the civilian courts. (The married Illinois graduate student was suspected of being an al-Qaeda sleeper agent. Details here.) In 2007 a panel of the Fourth U.S. Circuit Court of Appeals said this violated al-Marri's rights. But the full court reversed that ruling and sided with the Bush administration. The case was headed for the Supreme Court, but then the Obama administration decided to transfer al-Marri to the civilian courts. That is a good thing because he will have the usual protections accorded criminal suspects. But there's one hitch: Al-Marri's lawyers wanted the Supreme Court to hear the case anyway, claiming the administration "does not repudiate the possibility that al-Marri will be returned to military custody and detained without charge." Obama's Justice Department does not rule this out. Indeed, as things now stand, al-Marri could be acquitted but again be held as an enemy combatant.

One bright note: in dismissing the case the Supreme Court vacated the Fourth Circuit's pro-Bush ruling. It's as if it had never been issued.

This was a big test for Obama on the civil liberties front. He could have asked the Supreme Court to rule once and for all -- which would have blocked future presidents from such monstrous conduct. He didn't do it.

He can make up for it to some extent by clearly repudiating the Bush "enemy combatant" doctrine. But so far, we have no reason to expect this.

Glenn Greenwald has more detail here. Bruce Fein has an excellent analysis here, including the critical point that terrorism is crime not warfare.

Obama's Uninformed Optimism

President Obama is optimistic that “We will rebuild, we will recover, and the United States of America will emerge stronger than before.” That and $5 will get you coffee at Starbucks — until inflation kicks in.

In his appearance before Congress, Obama demonstrated he can give a speech. Big deal. We already knew that. Theatrics aside, why does it matter that the president is optimistic? He shows no sign of understanding economics. He’s the one, after all, who proposes to borrow $800 billion in the credit market so he can “inject” it into the economy where he found it. That doesn’t show much understanding. So on what does he base his optimism?

The rest of my latest op-ed, "Obama's Uninformed Optimism," is at The Future of Freedom Foundation website.

All About Greed

It comes down to greed. That’s what the economic turmoil is all about for many people. Too many of us were greedy, and now everyone is paying the price. Luckily this belief is wrong, because if it were right we’d be up the creek.

The rest of this week's TGIF, "All About Greed," is here.

Mr. Obama, What About Tomorrow?

The Obama administration’s $275 billion bailout for mortgage lenders and troubled borrowers once again shows that “tomorrow-be-damned” thinking still rules the White House. President Obama has clearly dumped the Clinton administration’s theme song, “Don’t Stop Thinking about Tomorrow.” (Not that Clinton or his successor took the lyric to heart.)

The rest of this week's op-ed, "Mr. Obama, What about Tomorrow?" is at The Future of Freedom Foundation website.

Less than Nothing

The story is told that Ludwig von Mises was once asked, "Do you mean to say that the government should have done nothing during the Great Depression?" Mises responded, "I mean to say it should have started doing nothing long before that." I hope the story is not apocryphal, because it perfectly sums up the government’s proper role in managing the economy: none.

The rest of this week's TGIF, "Less than Nothing," is here.

Cross-posted at Anything Peaceful.

Shame

Obama flunks a big civil liberties/foreign policy test, according to the incomparable Glenn Greenwald. Read it here.

What to Fear

The only thing to fear ... is ... government itself.

Belatedly

Happy Birthday, Charles Darwin!

Keynes Returns

Keynes is all the rage these days. Our House of Commons and Lords — sorry, House of Representatives and Senate — are brimming with Keynesians, and more than one news commentator has boldly declared (as we’ve heard before), "We’re all Keynesians now." In light of the resurrection of the at least twice-interred Keynes , I decided to revisit some of the gentleman’s writings.

The rest of this week's TGIF, "Keynes Returns," is here.

Proving Too Much?

• “The legitimate object of government is to do for the people what needs to be done, but which they can not, by individual effort, do at all, or do so well, by themselves.” –Barack Obama, quoting Abraham Lincoln
• “[N]ot a single person on the face of this earth knows how to make [a pencil].” –Leonard Read, “I, Pencil”
• Therefore, making pencils — and, by implication, everything else — is a legitimate object of government.

What’s wrong with this argument?

Cross-posted at Anything Peaceful.

Lincoln

My friend Jeffrey Rogers Hummel, a Civil War scholar as well as an economist and economic historian, has written a spot-on op-ed about Abraham Lincoln in the Chicago Tribune. I highly recommend it.

The Perverse Genius of Politics

Barack Obama held another town meeting today, this one in Fort Myers, Fla. People in the audience stood up and directly told the President of the United States they are hurting because of the recession. Obama listened sympathetically and explained how he will help them. It was all captured on television.

It takes some understanding of economics — which most people lack — to comprehend what’s wrong with that picture. Those people are victims of the state’s misguided interventionist economic policies — after all, the central government has been the steward of the U.S. economy for generations. Yet Obama, the latest chief executive of this economy-wrecking organization, stood before them as their salvation. The news media reinforced that narrative at every step.

This is why it is so difficult for economic sense to make headway.

Syllogism

• Government takes over regulation of an economic activity from the market process.
• Government regulation fails to prevent the bad it was intended to prevent.
• Ergo, the market is incapable of regulating itself, requiring more government regulation

Addendum: This, of course, can be made more general:

• Government assumes responsibility for the economy as a whole (the Fed, fiscal controls, housing policy, etc.)
• The economy goes through bouts of inflation and recession, and sometimes both at once.
• Ergo, since the market process cannot be relied on for self-generated stability, full employment, etc., more comprehensive government control is required.

Cross-posted at Anything Peaceful.

A Nobel Prize in Economics for Maddow?

I know she's way too easy a target to bother with really, but check out what passes for economic argument on cable television. It's from Rachel Maddow of MSNBC; an excerpt selected by a sympathizer who found it "especially compelling." (I won't inflict the video on you, but it's here.)

Cutting food-stamp funding to attract Republican support is proof-positive that the Republicans are not trying to come up with an effective stimulus here. If your house is on fire, and you call your fire department, and your fire department tells you to pour gasoline on the flames, they're not actually making a good-faith effort to help you put out the fire. They're not a good fire department.

If you're working up policy to fix an economic crisis, which is characterized by there being no spending in the economy, and someone in that debate says, 'OK, but cut the spending out of the rescue plan,' they're bad at making policy.

And you know what? It matters when you're wrong. A whopping proportion of the Republican rhetoric about stimulus is wrong.... It's just wrong. The time is now to take the radical step, as Americans -- as civic-minded Americans concerned about our future -- it's time to take the radical step of privileging correct information over incorrect information....

If you are wrong, from here on out, you should lose the argument and you should lose your political potency. Form a flat-earthers club or something, where you talk enthusiastically to each other about your made-up economic ideas that aren't based in reality. But get out of the way of the people who are actually trying to save the country.

Let's play Find the Fallacies. (A better game might be "Find the Argument.") Here's one to begin with: Just because Republicans are hypocrites about deficit spending doesn't mean they are wrong. It may only mean they should have practiced what they now preach when they were in power.

Cross-posted at Anything Peaceful.

Remember the Broken Window!

The debate over what kind of government spending will "stimulate" or not "stimulate" the economy is beside the point. As Bastiat taught us, and Henry Hazlitt reminded us, you have to consider what is "not seen"--what will not happen if the government borrows and spends scarce resources. That is all that really matters in this discussion. If some Keynesian replies that those resources will remain idle otherwise, ask why he or she is not inquiring into the government policies that make and keep productive resources idle. That would be a better use of time than lobbying for a bogus stimulus bill.

Cross-posted at Anything Peaceful.

Silver Lining on the "Stimulus" Bill

Update: The Senate bill is now $827 billion, so the following item has been overtake by events. Hopefully the outcome alluded to below will still take place.

Breaking news from CNN:

Democratic and Republican Senate negotiators reached a tentative agreement for a $780 billion economic stimulus package, according to two Democratic sources and a GOP negotiator. Senate Majority Leader Harry Reid took the list of cuts to the nearly $900 billion Senate bill to fellow Democrats, and the Senate continued the debate into the evening.

Below $800 billion! Well, look at the bright side. Maybe it will drive Paul Krugman crazy.

Republican Albatross II

Why does every Republican in Congress (with the obvious exception) begin his or her statement about the pending "stimulus" bill by saying, "Of course we need a stimulus bill..."?

Bye Bye, Daschle

Former Sen. Tom Daschle is gone. He's taken himself out of nomination as Obama's health and human services secretary because of his failure to pay taxes on perks he "earned" as a consultant providing corporations access to the government power he once held. He was to be the architect of the brave new medical system that is to replace our wild, dog-eat-dog, frontier free-market system. (When are we going to see the first government involvement in the system?)

Whenever someone like Daschle bites the dust in this way, all of Washington, including the so-called opposition party and the news media, get downright teary: How tragic that this good, talented, dedicated, hardworking, nice man won't be able to serve his country. Is anything more indicative of the class conflict inherent in the system? It truly is them against us.

There's nothing tragic about Daschle's fall, of course. It's one fewer parasite to feed overtly off the taxpaying hosts. (He'll have to go covert again.) The tragedy is that there are dozens eager to take his place.

Republican Albatross

I'm glad the House Republicans voted unanimously against Obama's spending bill, but still, I'm slightly embarrassed to be agreeing with them. After the last eight years of government expansion, the Republicans are rightly perceived as hypocrites, which discredits anything they say about reducing government power, spending, borrowing, etc. Their opposition looks like pure politics (not to mention protection of their wing of the corporate state), enabling economist Brad DeLong to dismiss even academic economists who oppose the bogus stimulus spending as "ethics-free Republican hacks."

As I've said before, the Republican Party is a massive negative externality for the radical free-market movement.

The More Things Change...

It didn't take long for Obama to become a killer.

Missiles fired from suspected US drones killed at least 15 people inside Pakistan today, the first such strikes since Barack Obama became president and a clear sign that the controversial military policy begun by George W Bush has not changed.

Security officials said the strikes, which saw up to five missiles slam into houses in separate villages, killed seven "foreigners" -- a term that usually means al-Qaeda -- but locals also said that three children lost their lives.

--TimesOnline, Jan. 23

Hat tip: Roderick T. Long

Question

If people can't be trusted with freedom, how can they be trusted with power?

Bottom Line

[T]here is no way for government macroeconomic policy to correct an incorrect perception of how [savings/consumption] plans have changed. There is no way for government to acquire the knowledge necessary to be able to coordinate individual plans. Such information simply does not exist. If it is going to ever exist it will be generated by the market process as the results of plan changes and the individual responses they provoke unfold. Any attempt by government to manipulate things will almost certainly make them worse because it is based on woefully incomplete information. It is not that the market prevents any disappointment or even crises. The market is not Utopia. The market works through feedbacks from mistakes as well as feedback from successes. it is just that the market is the best mechanism we have for resolving conflicting or miscommunicated plans. Keynes asked the right questions, but he gave the wrong answers and in the process sent economics off on a very costly detour.

–Peter Lewin, “Commentary,” Austrian Economics: Perspectives on the Past and Prospects for the Future (1991, Richard M. Ebeling, ed.)

Cross-posted at Anything Peaceful.

Against Intellectual Monoply

I've neglected to note--and praise--the publication of Against Intellectual Monopoly, a multidisciplinary case against patents and copyrights by Michele Boldrin and David K. Levine, two pro-market, pro-property economists. If you are interested in the subject, this is the book to read.

Make sure, also, to read their recent Freeman article, co-written with Alessandro Nuvolari, on how the steam-engine patents delayed rather than encouraged innovation.

Boon or Doggle?

Even if government spending in theory could “stimulate the economy” in a genuine, sustainable way, it would not follow that politicians and bureaucrats would know how to spend the money intelligently. The pressures to do something now and the perverse incentives facing those in charge of the money guarantee there would be more doggle than boon.

The rest of this week's TGIF, "Boon or Doggle," is at the Foundation for Economic Education website.

Krugman Flunks Capital Theory

Paul Krugman is said to have beat up on George Will during this joint appearance on ABC's "This Week" back in November. But all Krugman really did was show that he, like Keynes, holds an unrealistic Play-Doh model of capital, as opposed to the heterogeneous, multistage, intertemporal structure-of-production model of the Austrian school. When Will notes that there was negative net investment during the 1930s, Krugman responds that, of course, there was negative net investment: "Because when . . . all the factories are standing idle, who wants to build a new one?"

Point for Krugman? Wrong.

If Krugman took the Mises-Hayek trade cycle theory seriously he'd realize that the idle factories in the 1930s represented malinvestment induced by Federal Reserve credit expansion in the 1920s. This policy, by lowering the interest rate and falsely signaling an increase in real saving (i.e., a preference for future over present goods), shifted resources from later stages of production (closer to the consumer) to earlier stages of production. Unfortunately, those who think of capital as a heap of homogeneous, monochrome Play-Doh aren't sensitive to this point. Capital is capital is capital. That's why Krugman can't understand why someone would want to invest when factories stand idle.

When the inflationary boom ended, as it had to because it was artificially induced and there weren't enough resources for both the early stages and the later stages (where consumers wanted them), the malinvestments had to be liquidated. But since capital consists not of Play-Doh but of discrete things -- buildings, machinery, tools materials -- with particular characteristics, those that were the products of malivestment were not necessarily suitable for other purposes. They couldn't simply, costlessly, and instantly be moved and employed in later stages of production. Hence, the idle factories. This was wasted capital brought about by the credit expansion. This was the depression.

If the economy was to recover, new investment consistent with consumers' actual preferences had to be undertaken. But that required time and saving, i.e., deferred consumption. It also required a stable political environment in which investors could be confident that their property was safe from the government. Unfortunately, thanks to tax increases, unending interventionist programs, and threatening antibusiness rhetoric, FDR's government failed to provide that environment.

Krugman's flip remark to Will is a perfect illustration of what is wrong with Keynesian economics.

Cross-posted at Anything Peaceful.

Setting the Bar Awfully Low

The news media are saturated with paeans to the peaceful transition of presidential power that takes place today. Aside from the fact that this is a preoccupation with the superficial (see below), it is also an awfully low setting for the bar. So the great American achievement is that no one will be killed or jailed as power passes from Bush to Obama? Amazing! But last I checked, peaceful transitions have been occurring for years in Canada, Australia, Britain, France, Germany, Japan, and a long list of other places.

Isn't this pushing American exceptionalism to absurd lengths?

The Peaceful Transfer of Violent Power

At the risk of raining on the parade, I suggest that the inaugural festivities are not what they appear. Barack Obama says the pomp and circumstance are not about him but are a celebration of democracy. “For the forty-third time, we will execute the peaceful transfer of power from one president to the next,” he said.

He’s right, but not quite as he meant it. The peaceful transition from the Bush to the Obama regime is indeed the occasion, but let’s focus on exactly what is being transferred. Despite the oratory about hope, change, and renewal, government — as someone, perhaps George Washington, said — “is not reason; it is not eloquence; it is force.” If that is right — and I contend it is — then in the inauguration we have the irony of a peaceful transfer of something that is anything but peaceful: the legal power to use physical force.

This is something to celebrate?

The rest of my op-ed, "The Peaceful Transfer of Violent Power," is at The Future of Freedom Foundation website.

Meet the New Boss...

It is clear that Barack Obama will not be making any essential changes to U.S. Middle East policy, particularly when it comes to the Israeli government's abominable treatment of the Palestinians. (And watch for an intensification of the Afghan quagmire.) There may be some conciliatory rhetoric, but it will mean nothing. We've heard it before. Every incoming administration does the same thing. Nothing will change. Politics, undergirded by economic special interest, will assure that. As a result, the Israeli government will regularly substitute open warfare for beneath-the-radar oppression, as it has lately. The ratio of Palestinian to Israel casualties will remain huge, but the media will lead Americans to believe the Israelis are the primary victims. Americans will also be shielded from the fact that behind the violent outbursts lies the routine dehumanizing treatment of the Palestinians in the Gaza Strip. (In that connection, see this and this.)

Stimulating Consumption Won't Help the Economy

Ask yourself: can you consume your way to prosperity? Of course not. So how can a society do so? Greater consumption is the effect not the cause of economic growth, yet this is so contrary to conventional wisdom that you can read newspapers and watch news programs for months without seeing this truth expressed.

To say the recession was caused by diminished demand is to say that the recession was caused by the recession. The fact is, people are holding on to their cash because the economy is in recession and they are uncertain about the future. As we’ll see, it is exactly under these circumstances that people should be saving.

The rest of this week's op-ed, "Stimulating Consumption Won't Help the Economy," is at The Future of Freedom Foundation website.

"I, Pencil" Revisited

Leonard Read’s classic essay, "I, Pencil," which is now 50 years old, is justly celebrated as the best short introduction to the division of labor and undesigned order ever written. Read saw an "extraordinary miracle … [in the] the configuration of creative human energies—millions of tiny know-hows configurating naturally and spontaneously in response to human necessity and desire and in the absence of any human master-minding!" His subject and its relation to freedom and prosperity were certainly worth capturing in such a clever, pleasing, and illuminating essay, which is why it is one of the best-known works in the popular free-market literature. But there’s another lesson in "I, Pencil" that has been largely overlooked, perhaps by Read himself. "I, Pencil" is also an excellent primer in the Austrian approach to capital theory. It’s worth looking at Read’s essay in that light.

The rest of this week's TGIF, "I, Pencil" Revisited," is at the Foundation for Economic Education website.

Government Can't Stimulate the Economy

The money sluices are about to open wide on Capitol Hill. With a new Congress convened and a new president about to take office, we are likely to see record-shattering government expenditures. All inhibitions about deficit spending, as weak as they have been in recent years, are now dissolved. The motto among those in control is: Spend now!

Why? To “stimulate the economy.” Well, that’s a lousy reason. The economy doesn’t need stimulation. It needs freedom. More precisely, we need freedom — to pursue our ends through production and trade unmolested by know-nothing politicians in Washington and the 50 state capitals.

The rest of this week's op-ed, "Government Can't Stimulate the Economy," is at The Future of Freedom website.

Blowback

From UPI, June 18, 2002:

Israel and Hamas may currently be locked in deadly combat, but, according to several current and former U.S. intelligence officials, beginning in the late 1970s, Tel Aviv gave direct and indirect financial aid to Hamas over a period of years.

Israel "aided Hamas directly -- the Israelis wanted to use it as a counterbalance to the PLO (Palestinian Liberation Organization)," said Tony Cordesman, Middle East analyst for the Center for Strategic Studies.

Israel's support for Hamas "was a direct attempt to divide and dilute support for a strong, secular PLO by using a competing religious alternative," said a former senior CIA official.

According to documents United Press International obtained from the Israel-based Institute for Counter Terrorism, Hamas evolved from cells of the Muslim Brotherhood, founded in Egypt in 1928. Islamic movements in Israel and Palestine were "weak and dormant" until after the 1967 Six Day War in which Israel scored a stunning victory over its Arab enemies.

After 1967, a great part of the success of the Hamas/Muslim Brotherhood was due to their activities among the refugees of the Gaza Strip. The cornerstone of the Islamic movements success was an impressive social, religious, educational and cultural infrastructure, called Da'wah, that worked to ease the hardship of large numbers of Palestinian refugees, confined to camps, and many who were living on the edge.

"Social influence grew into political influence," first in the Gaza Strip, then on the West Bank, said an administration official who spoke on condition of anonymity.

According to ICT papers, Hamas was legally registered in Israel in 1978 by Sheikh Ahmed Yassin, the movement's spiritual leader, as an Islamic Association by the name Al-Mujamma al Islami, which widened its base of supporters and sympathizers by religious propaganda and social work.

According to U.S. administration officials, funds for the movement came from the oil-producing states and directly and indirectly from Israel. The PLO was secular and leftist and promoted Palestinian nationalism. Hamas wanted to set up a transnational state under the rule of Islam, much like Khomeini's Iran.

What took Israeli leaders by surprise was the way the Islamic movements began to surge after the Iranian revolution, after armed resistance to Israel sprang up in southern Lebanon vis-a-vis the Hezbollah, backed by Iran, these sources said.

"Nothing provides the energy for imitation as much as success," commented one administration expert.

A further factor of Hamas' growth was the fact the PLO moved its base of operations to Beirut in the '80s, leaving the Islamic organization to grow in influence in the Occupied Territories "as the court of last resort," he said.

When the intifada began, Israeli leadership was surprised when Islamic groups began to surge in membership and strength. Hamas immediately grew in numbers and violence. The group had always embraced the doctrine of armed struggle, but the doctrine had not been practiced and Islamic groups had not been subjected to suppression the way groups like Fatah had been, according to U.S. government officials.

But with the triumph of the Khomeini revolution in Iran, with the birth of Iranian-backed Hezbollah terrorism in Lebanon, Hamas began to gain in strength in Gaza and then in the West Bank, relying on terror to resist the Israeli occupation.

Israel was certainly funding the group at that time. One U.S. intelligence source who asked not to be named said that not only was Hamas being funded as a "counterweight" to the PLO, Israeli aid had another purpose: "To help identify and channel towards Israeli agents Hamas members who were dangerous terrorists."

In addition, by infiltrating Hamas, Israeli informers could only listen to debates on policy and identify Hamas members who "were dangerous hard-liners," the official said.

In the end, as Hamas set up a very comprehensive counterintelligence system, many collaborators with Israel were weeded out and shot. Violent acts of terrorism became the central tenet, and Hamas, unlike the PLO, was unwilling to compromise in any way with Israel, refusing to acquiesce in its very existence.

But even then, some in Israel saw some benefits to be had in trying to continue to give Hamas support: "The thinking on the part of some of the right-wing Israeli establishment was that Hamas and the others, if they gained control, would refuse to have any part of the peace process and would torpedo any agreements put in place," said a U.S. government official who asked not to be named.

"Israel would still be the only democracy in the region for the United States to deal with," he said.

All of which disgusts some former U.S. intelligence officials.

"The thing wrong with so many Israeli operations is that they try to be too sexy," said former CIA official Vincent Cannestraro.

According to former State Department counter-terrorism official Larry Johnson, "the Israelis are their own worst enemies when it comes to fighting terrorism."

"The Israelis are like a guy who sets fire to his hair and then tries to put it out by hitting it with a hammer."

"They do more to incite and sustain terrorism than curb it," he said.

Aid to Hamas may have looked clever, "but it was hardly designed to help smooth the waters," he said. "An operation like that gives weight to President George Bush's remark about there being a crisis in education."

Cordesman said that a similar attempt by Egyptian intelligence to fund Egypt's fundamentalists had also come to grief because of "misreading of the complexities."

An Israeli defense official was asked if Israel had given aid to Hamas said, "I am not able to answer that question. I was in Lebanon commanding a unit at the time, besides it is not my field of interest."

Asked to confirm a report by U.S. officials that Brig. Gen. Yithaq Segev, the military governor of Gaza, had told U.S. officials he had helped fund "Islamic movements as a counterweight to the PLO and communists," the official said he could confirm only that he believed Segev had served back in 1986.

The Israeli Embassy press office referred UPI to its Web site when asked to comment.

A textbook case of blowback if ever there was one.

The Freeman Online

In case you haven't noticed, The Freeman now has its own website: TheFreemanOnline.org. Visit today!

Inflation as Income Distribution

The Federal Reserve has been pumping hundreds of billions of newly created dollars into “the economy.” Much of that money has been sent to Wall Street to bailout large, struggling firms. But that’s just the beginning. President-elect Obama says that since he needs to “stimulate the economy” we can look forward to trillion-dollar budget deficits for years to come. Even before the financial turmoil began, the deficit had approached $500 billion. (Not to worry, though–Obama says deficit spending will impose “fiscal discipline” in the future.) Of course, when the federal government spends more than it taxes, it has to get the extra money somewhere. Therein lies the treachery.

The rest of this week's TGIF, "Inflation as Income Distribution," is at the Foundation for Economic Education website.

Shame on You, Paul Krugman

We are certainly used to the fallacious Keynesian "economics" that pours forth from most of Paul Krugman's New York Times columns. That's bad enough. But dishonesty too? What's the excuse for that? In a recent column called "Fifty Hebert Hoovers," Krugman expressed fear that the nation's governors would follow in the footsteps of Hoover, with devastating consequences for the economy. And what did Hoover do that has Krugman so concerned? He writes:

No modern American president would repeat the fiscal mistake of 1932, in which the federal government tried to balance its budget in the face of a severe recession....

But even as Washington tries to rescue the economy, the nation will be reeling from the actions of 50 Herbert Hoovers — state governors who are slashing spending in a time of recession.... [Emphasis added.]

Krugman here leads his readers to believe that Hoover tried to balance the budget by slashing spending. In fact, Hoover did not reduce spending. On the contrary, he increased it. If he aimed at balancing the budget, it was through tax increases not spending cuts. For example, the top marginal income-tax rate jumped from 24 to 63 percent. Anyway, he actually ran large budget deficits. In this, as in many other areas, Hoover anticipated Franklin Roosevelt. (See my article, "Bad Deal," in The American Conservative, Jan. 12.)

Does anyone believe that Krugman is unaware of that fact?

Cross-posted at Anything Peaceful.

Thank You, Pete Boettke

With humility and honor I acknowledge this post from Pete Boettke at the always-worth-reading Austrian Economists blog. Thank you, Pete.

Keynes the Jokester?

I spent much of my recent vacation reading Henry Hazlitt's chapter-by-chapter demolition of Keynes's The General Theory of Employment, Interest, and Money (1936), The Failure of the "New Economics" (1959). I didn't expect to read the book cover to cover, but after only a few pages I had to keep going. It is that well-written and interesting. I'm now a few pages from the end.

The more I read the more I thought: Keynes was surely joking. No one in his position could really be that confused, contradictory, and ignorant of economic logic. It had to be a gag on the economics profession, an emperor-with-no-clothes experiment.

Thus I smiled when I got to Hazlitt's statement in chapter XXV, "Did Keynes Recant?" (p. 398):

Keynes was a brilliant man. Much of what he wrote he wrote in tongue-in-cheek, for the pleasure of paradox, to épater le bourgois [shock the middle class], in the spirit of Wilde, Shaw, and the Bloomsbury circle. Perhaps the whole of the General Theory was intended as a huge (400-page) joke, and Keynes was appalled to find disciples who took it all literally.

If it was a joke, Keynes helped inflict much misery and oppression on innocent people just for a laugh. I guess for the elitist Keynes, the well-being of the masses can't be allowed to impede his bold and daring lifestyle. It is for people like him that secularists like me wish there was a place of fire and brimstone.

At any rate, I highly recommend Hazlitt's book. Don Boudreaux says that Richard Dawkins's The Blind Watchmaker proves that any subject, no matter how complex, can be written about clearly and accessibly. I say the same about The Failure of the "New Economics."

Cross-posted at Anything Peaceful and Liberty and Power.

Gore in Gaza Again

Until the Israeli government decides to treat the Palestinians as human beings with rights, the violence we see happening in Gaza will continue to break out periodically. Should Palestinians indiscriminately shell southern Israel? No. Should the Israeli armed forces indiscriminately attack Gaza? No. The only way to break the cycle is for the Israeli government to change its attitude toward the Palestinians. They have been treated badly for more than a century. Those who acquiesced when the regime was imposed on them were treated like junior citizens. Those in the occupied territories have been treated like animals. Expecting peace under those circumstances is absurd.

More on the Madoff Case

The New York Times yesterday reported that stock-fraud prosecutions have gone down the last several years, implying that the Bush administration's lax attitude toward regulation of Wall Street let the Madoff scam go on for so long. Whether FBI and SEC fraud investigations are really down, I can't say, but let's accept that they are. This hardly makes the case for regulation. Why? Laws against fraud are not the same thing as regulation. Fraud is theft of property by deception. Thus a law against it is a law protecting property. In contrast, regulation is an imposition by government unrelated to any specific wrongdoing; it violates property. Repealing laws against fraud (or the refusal to investigate and prosecute it) is not deregulation. If it were, so would repeal of the law against armed robbery be deregulation. No one talks that way -- for a good reason. There is a big difference between regulation and prohibitions on depriving people of their property. Anti-market people like to conflate the two categories to score points for the regulatory state.

By the way, if the government were to vigorously investigate fraud, it might indict everyone who keeps Social Security going.

Cross-posted at Anything Peaceful.

Madoff Scandal Exposes Government Failure

The common reaction to the Bernard Madoff $50 billion financial scam was wholly expected. As Los Angeles Times columnist Tim Rutten wrote, “The lesson is one that becomes clearer with each excruciating turn of the Wall Street screw. The long, bipartisan experiment with financial deregulation has failed utterly. The argument that a return to rigorous oversight will somehow stifle Wall Street’s ‘creativity’ is no longer convincing. Whatever its theoretical costs, regulation is dramatically cheaper than intervention. And absolutist insistence on the superiority of ‘individual choice’ and ‘free markets’ now is exposed as so much vacant rhetoric. Any system that permits a scam artist like Madoff to deceive not just widows and orphans but also sophisticated investors, like Fairfield Greenwich Group’s Walter Noel and Hollywood’s Jeffrey Katzenberg, isn’t a market at all; it’s a shooting gallery.”

The last sentence is a tipoff that something is wrong with this outlook. Financial regulation is usually proposed to protect the unsophisticated. People knowledgeable about finance and securities presumably can take care of themselves. But what makes the Madoff scandal so noteworthy is that the most sophisticated types were taken in, even though several experts sounded alarms. Why?

The rest of my op-ed, "Madoff Scandal Exposes Government Failure," is at The Future of Freedom Foundation website.

Contradictions in Terms

Some of my favorites:

• Paid vacation -- why would one person pay another person to be idle?
• Free election -- how can it be free when voters are under the duress of taxation and other impositions?
• Keynesian economics -- how can the rejection of economics be a form of economics?

Heads They Win, Tails We Lost

Why is it that when the regulatory regime fails–see the Madoff fraud case–many people call for more regulation, but when markets (allegedly) fail, these same people don’t call for more markets but rather more regulation?

Cross-posted at Anything Peaceful.

Economic Stimulus Amounts to Central Planning

That there will be a huge “stimulus” package in the early days of the Obama administration is a certainty. Nearly everyone thinks the government must do something drastic to, using President-elect Obama’s word, “jolt” the economy into recovery. That something is deficit spending on “infrastructure.” But it’s not as simple as it sounds. A big debate is shaping up over whether the program should concentrate on big, transformative projects or boring bridge repairs and pothole filling.

Either way, it is taken for granted that deficit spending will stimulate a sustainable recovery. But it won’t. A real recovery requires real savings and investment to correct for years of government-induced waste. Government spending, however, displaces savings and investment. Whether the government borrows, taxes, or creates money through the Federal Reserve, real wealth will be commandeered by bureaucrats. Jobs thus created in the parasitic sector will mean fewer jobs created in the productive sector. That can hardly be a recipe for recovery.

Moreover, real danger lurks in the Obama administration’s plan to use the recession as a cover for “transforming” the economy, particularly with respect to energy.

The rest of my op-ed, "Economic Stimulus Amounts to Central Planning," is at The Future of Freedom Foundation website.

And here are a few previous ones I neglected to blog:
"The Wizards of Washington"
"The Bailout State"

Taxpayer Protection

In arranging the various multi-billion-dollar bailouts, members of Congress and the Bush administration incessantly promise "taxpayer protections." That's most considerate, except for one problem. What the taxpayers need protection from most are Congress and the Bush administration!

Cross-posted at Anything Peaceful.

Second Amendment Book Bomb

I heartily pass this long from the Second Amendment Book Bomb:

Monday, December 15, marks America’s Bill of Rights Day, the anniversary of the ratification of the Bill of Rights of the U.S. Constitution. To commemorate this event, the Second Amendment Book Bomb website has been created, a unique and powerful way to communicate the importance of the Bill of Rights’ Second Amendment for the protection of liberty. With your help, we can launch constitutional rights to the top of national book bestseller lists, making a loud and clear statement that Second Amendment rights are inalienable!

The Second Amendment has already won a historic victory on June 26, 2008, when the U.S. Supreme Court ruled in the landmark case of District of Columbia v. Heller that the Second Amendment protects an individual right to own and bear arms. However, the Heller ruling was immediately attacked and efforts continue on the national level and across the country to undermine gun rights. Therefore, to secure the Second Amendment now and for the future the American public must be made aware of the reasons why the Founders sought to protect this right.

And now we have the tool to do so. Fascinating, seminal, and inspiring, the new book, The Founders’ Second Amendment: Origins of the Right to Bear Arms, by Dr. Stephen P. Halbrook, is the perfect way both to educate ourselves and to reach friends and family who don’t yet understand Second Amendment rights. Our goal is to reach one million Americans with Dr. Halbrook’s book during the Holiday Season and throughout the New Year ahead. Will you help?

To achieve this goal the Second Amendment Book Bomb website has been established to create a phenomenon so great that even the mainstream media will have to take notice. Let’s spread The Founders’ Second Amendment so far and wide that Americans across the political spectrum, and all walks of life, will be discussing the Second Amendment in every possible venue.

With your help, we can make Dr. Halbrook’s book #1 on the New York Times bestseller list. To make this happen, please go to the website and pledge to buy at least one copy of the book before or on the December 15th Second Amendment Book Bomb date. Let’s make this the most amazing and explosive event ever on the right to bear arms, and declare in no uncertain terms that the Second Amendment will be around for a very long time to come.

With your pledge to buy the book, we can:

* Make The Founders’ Second Amendment #1 on the New York Times bestseller list.
* Make The Founders’ Second Amendment a #1 bestseller on Amazon.com.
* Make The Founders’ Second Amendment a #1 bestseller on BarnesandNoble.com.
* Make The Founders’ Second Amendment a #1 bestseller on BooksAMillion.com.

Please help now by making your pledge here.

Republican Betrayal on the Auto Bailout

The Senate Republicans who killed the auto bailout betrayed the free-market principles they claim to embrace. (I know what you're saying: Is this really news? No, it's not.)

Why betrayal? The Republicans did not say they opposed a bailout on principle under all circumstances, which is what free-market advocates would be expected to say. Rather they said they oppose the House version of the bailout. In its place they favor one in which the United Auto Workers makes bigger concessions.

The Wall Street Journal editorial page said:

Senate Republicans ... asked the auto workers to show they were serious about making Detroit competitive again. In exchange for a lifeline from Washington, [Sen. Bob] Corker wanted the union to set a "date certain" in 2009 for lowering the Detroit Three's hourly labor costs to the average of foreign-owned auto makers in the U.S....

The union's counteroffer was that it would bring down labor costs in 2011, when its current contracts run out.

What's wrong with the Republican demand? What's wrong is that government has no business trying to abolish the wage differential between domestic and foreign-owned companies, which by the way is smaller than usually reported. (For the lowdown on the wage differential see David Leonhardt's article.)

It should offend any market advocate to see the government meddling in business-labor relations like this. By all means (well, not all means), work to deregulate and desubsidize business and labor, but do not encourage the state to determine the details of companies' labor relations.

It is hypocritical for Republicans to claim to favor the free market and then to use a bailout as a crowbar to break the union. If you favor the free market, say you favor the free market and oppose all bailouts on principle. If you favor government's breaking unions, say that. But don't sully the free-market position, as the Senate Republicans have done, by conflating the two. Are we to think it would have been some kind of libertarian triumph had the Senate GOP alternative passed?

Cross-posted at Anything Peaceful.

So Much for Democracy

Nice to know that even though the auto-bailout bill died in the Senate, President Bush may bail the Big Three out anyway using the TARP money. Reportedly, the Fed itself could come to the rescue. Isn't democracy grand?

Robert Higgs Told Us So

According to Reuters:

The credit crunch is not nearly as severe as the U.S. authorities appear to believe and public data actually suggest world credit markets are functioning remarkably well, a report released on Thursday says.

As a result, governments are pumping masses of public money into the economy across the world because of the difficulties of a few big, vocal banks and industries such as car manufacturing, which would be in difficulty anyway, according to the report published by Celent, a financial services consultancy....

The report, much of which is based on U.S. Federal Reserve data, challenges a long list of assumptions one by one, arguing that there is indeed a financial crisis but that, on aggregate, the problems of a few are by no means those of the many when it comes to obtaining credit....

The picture appeared to be broadly similar in much of Europe and Japan, said the report, based on publicly available data on trends in bank lending to industry, households and among banks themselves in the so-called interbank markets. [Emphasis added.]

The taxpayers are on the hook for over $7 trillion in federal commitments that were supposedly critical to easing the credit crisis. We have been scammed.

Cross-posted at Anything Peaceful.

Hat tip: Steve Horwitz

Governmental Logic

Mitch McConnell, the Republican Senate leader, had this to say in connection with the auto bailout:

We will not let the taxpayers spend their hard-earned money on ailing carmakers unless these companies are forced to reform their bad habits -- either inside or outside bankruptcy.

So the way McConnell sees it, we taxpayers want to spend our hard-earned money to save the Big Three, but he is going to stop us -- for our own good -- if the companies aren't compelled to reform themselves.

I guess that's Republican paternalism. As a libertarian, I object. If I want to spend my tax money on GM, Chrysler, and Ford, I'm going to do it whether some presumptuous senator from Kentucky wants me to or not. This is a free country!

Cross-posted at Anthing Peaceful.

Beth A. Hoffman, 1950-2008

I am saddened to announce that my longtime colleague and Freeman managing editor, Beth A. Hoffman, passed away Monday at the age of 58. Beth, who joined the FEE staff over 30 years ago, was beloved by the Foundation’s many friends and supporters. She worked tirelessly and ably in a variety of capacities, including the editing of books and other materials. But her great love was The Freeman, which she served as managing editor for many years. While her important work was behind the scenes, it was not unheralded. She was a true champion of liberty whose contributions were many and long-lasting.

We will miss her.

She is survived by her husband, Peter, and son, Ted.

Budget Deficits and Stimuli

It’s an article of faith that running budget deficits during the New Deal helped end the Great Depression. This myth has been demolished countless times, but it hasn’t penetrated to the pundits and pop economists who host cable news-talk shows. In fact, FDR did not run extraordinarily large budget deficits, and J.M. Keynes actually criticized FDR for this. For details see this New York Times article by Price V. Fishback of the University of Arizona and the National Bureau of Economic Research. Fishback writes, “Once we take into account the taxation during the 1930’s, we can see that the budget deficits of the 1930’s and one balanced budget were tiny relative to the size of the problem [reversing the fall in GNP since 1929]."

This point was also made by Jim Powell in FDR’s Folly: “Changes in federal budget deficits didn’t correspond with changes in gross domestic product, and in any case the federal budget deficit at its peak (1936) was only 4.4 percent of the gross domestic product, much too small for a likely cure.” (Emphasis added.)

Cross-posted at "Anything Peaceful."

It's Official. I'm Tired of Barack Obama

I tried to hold out until after inauguration day. I really did. But I can't. He promises a "fresh" approach to our economic problems -- monster "stimulus"borrowing and deficit spending is fresh? -- without ideological (read: theoretical) preconceptions. But of course that is impossible. No one looks at economic or social phenomena without theoretical preconceptions. The only question is whether one's theoretical preconceptions are sound or unsound. It's been said we're all Keynesians now, and in one respect that includes me. Keynes said, "Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slaves of some defunct economist."

Mr. Obama, pay attention.

Auto-Destruct

The Big Three automakers got a cold reception in Congress this week when they asked for a bailout loan of $25 billion. But I wouldn’t count them out just yet. After appropriating over $700 billion to bail out the financial industry -- with nothing to show for it but an ominous precedent and a scary accretion of power in the U.S. Treasury -- members of Congress may be a little reluctant to hand out more money to demonstrably failing -- even de facto bankrupt -- companies. Yet I have a hunch Congress will get over its reluctance, maybe as early as next month. Things just seem to work that way in Washington. Remember the first bailout bill?

The rest of this week's TGIF, "Auto-Destruct," is at the Foundation for Economic Education website.

Preventive Detention?

Update: My full op-ed on this subject is at The Future of Freedom Foundation website.

The New York Times reports:

[A]s Mr. Obama moves closer to assuming responsibility for Guantánamo, his pledge to close the detention center is bringing to the fore thorny questions under consideration by his advisers. They include where Guantánamo’s detainees could be held in this country, how many might be sent home and a matter that people with ties to the Obama transition team say is worrying them most: What if some detainees are acquitted or cannot be prosecuted at all?That concern is at the center of a debate among national security, human rights and legal experts that has intensified since the election. Even some liberals are arguing that to deal realistically with terrorism, the new administration should seek Congressional authority for preventive detention of terrorism suspects deemed too dangerous to release even if they cannot be successfully prosecuted. [Emphasis added.]

President-elect Obama, put a stop to this at once by categorically opposing preventive detention.

Hat tip: Jacob Hornberger, FFF

What Does Obama See in Her?

I don't mean Hillary Clinton, though I could ask that too. I mean Madeleine Albright. She has spoken for Obama's campaign, and now she is one of his representatives at the G-20 meeting on how to fix the world financial markets. Shudder.

So what's wrong with Albright?

For those who have forgotten, Albright was Bill Clinton's UN ambassador and then secretary of state who in 1996 notoriously pronounced the deaths of half a million Iraqi children due to the U.S. post-Gulf War embargo "worth it." When Sarah Palin accused Barack Obama of "palling around with terrorists," she had the wrong person in mind.

Read my account of her attempt to clean up the record.

Bush Warns Against Dismantling Free Market

This is not from The Onion. It's from the Washington Post:

After presiding over some of the most dramatic market interventions in U.S. history over the past two months, President Bush came to Wall Street on Thursday to urge world leaders not to venture too far down a path of government interference in capitalist economies. ...

"History has shown that the greater threat to economic prosperity is not too little government involvement in the market, it is too much government involvement in the market," Bush said to resounding applause from the crowd of about 175. "Our aim should not be more government," he added later, "it should be smarter government."

Given all the intervention he's embraced, what would he consider too far?

George Bush, Big-Government Man

In an unscripted and candid moment, a top spokesman for President-elect Barack Obama let the cat out of the bag. On Meet the Press, interviewer Tom Brokaw asked transition co-chair Valerie Jarrett, “I wonder if, as a Democrat, which has always represented the party of big government, . . . there will be a kind of paradigm shift this time, that you’ll take the [Chicago mayor] Rich Daley model and shift more money and more responsibility to municipalities and the state government.”

To which Jarrett replied, “It’s ironic that you would say that it’s the Democrats that are responsible for big government because government has grown enormously over the last eight years.”

That was a significant concession from the Obama camp because the advocates of activist government like to portray the Bush years as “laissez-faire” and “do nothing.”

The rest of this week's op-ed, "George Bush, Big-Government Man," is at The Future of Freedom Foundation website.

Save Us from Government Spending

If you're a glutton for torment as I am, you watch cable-TV news shows most nights. These days the shows are feeding viewers a steady diet of 100-proof Keynesianism as the cure for our economic woes. Leading in this department is Chris Matthews of MSNBC's "Hardball." (I call it "Nerf Ball." Matthews's idea of a hardball question for a politician is, "Are you running for president?") Matthews declared last week, "We're all Keynesians now," and each night he pontificates on why the government must start to spend massive amounts of money, even though it doesn't have massive amounts of money. We'll worry about the consequences later. Why must it spend? Because we aren't doing it and that's putting the economy in recession. Someone has to spend, Matthews says, and the government is spender of last resort.

The rest of this week's TGIF, "Save Us from Government Spending," is at the Foundation for Economic Education website.

The Freeman, November

The November Freeman is now online. The table of contents is here.

Anything Peaceful

FEE now has its own blog, Anything Peaceful. Check it out here.

What's So Funny, Chris?

Chris Matthews, host of "Hardball" on MSNBC (it really should be called Nerfball), tonight found the idea of an African-American libertarian laughable. Now why in the world would he want to insult African-Americans that way?

Cross-posted at Liberty & Power.

Left-Libertarianism Comes to Cato!

I urge everyone to read Roderick Long's blast at the corporate state at Cato Unbound:

"Corporations versus the Market;
or, Whip Conflation Now."

Responses will be published over the next few days.

Well done, Roderick!

Did She Really Say That?

Obama transition co-chair Valerie Jarrett let this slip yesterday when talking to Tom Brokaw on Meet the Press:

It's ironic that you would say that it's the Democrats that are responsible for big government because government has grown enormously over the last eight years.

I thought the Obama position was that we've had eight years of laissez faire under George II.

Tacit Consent

On Friday I conducted a colloquium at Hendrix College in Conway, Arkansas, with the title "If You Believe in Nonviolence, You Should Be an Anarchist." (I'll post the link when it's uploaded to YouTube.) During the Q&A I was challenged by two professors who invoked the social contract and tacit consent in an effort to refute my claim that the state is founded on (the threat of) violence against nonaggressors. They argued that since we all tacitly consent to the state, its use of force cannot be properly regarded as aggression. Rather, it is merely a sanction against those who have violated their agreement to obey the state. (I apologize if I have not precisely captured their objection. I believe this is the gist of their argument.)

For the first time in a while this got me thinking about the curious principle of tacit consent. Here are the thoughts I jotted down today. (I'll be returning to this subject, I'm sure.)

• When did I or anyone consent?(One of my interlocutors seemed to think this was an invalid, even unfair question.)
  
• If I have tacitly consented to be taxed, why haven't I also tacitly consented to all the purposes to which the state puts my money?
  
• Why can't I withdraw my consent?
• How do I withdraw my consent? Must I move out of the state's jurisdiction?
• If that is the only way, doesn't that imply that the state owns the territory?
• How did that come about? (I'm thinking of Monte Python and the Holy Grail now; script is here.)
  
• Presumably the state has obligations under the social contract. But what if the state defaults on its obligations? Does that nullify the contract?
• Who decides when and if that has occurred? Presumably, the state's own courts.
  
• Why do the state's courts get to judge a claim that the state has defaulted on the contract? Why not a truly neutral arbiter?
  
• Is my consent tacit, unconditional, and perpetual?
• How can that be?

Humility or Hubris?

Another presidential election has come and gone, only this time the results are astoundingly and, yes, satisfyingly historic. In light of our racial history and leaving aside political philosophy, I am overjoyed at what Barack Obama’s election means. I cannot put it better than Will Wilkinson did at The Fly Bottle, “It means something profound that a black man was elected to the most visible, high-status position our society offers. The mere fact that Obama won truly does make our society a better place.” I also share Wilkinson’s reservations. In a truly free society, the presidency would not be the most visible high-status position our society offers. That designation would be reserved for a variety of private-sector roles. Unfortunately, however, the presidency does have that status today, and Obama’s election must be appreciated from that perspective. Relatedly, I am uneasy about, though understanding of, the public displays that followed John McCain’s concession Tuesday night. Again, Wilkinson: “[F]rankly, I hope never to see again streets thronging with people chanting the victorious leader’s name.” Amen.

President-elect Obama’s many supporters and well-wishers have great confidence in his ability to solve the economic problems that vex American society. That ability is said to lie in his cool judgment, his good intentions, and his eloquence. Let us grant that he possesses all three. Valuable as they are, they will be useless if he attempts to solve our economic problems directly by an exercise of power. That’s because there is something he does not have -- something no man or woman can have: the power to repeal the laws of economics.

The rest of this week's TGIF, "Humility or Hubris?" is at the Foundation for Economic Education website.

Cross-posted at Liberty & Power.

Marshall Fritz, 1943-2008

I am saddened by the news that Marshall Fritz, my friend and constant source of inspiration, died yesterday at age 65 after a long struggle against cancer. Marshall was founder of both the Advocates for Self-Government and the Alliance for the Separation for School and State. It was in the latter context that he and I worked together. He founded the Alliance in 1994, just as my book Separating School and State was being published, though neither of us knew in advance what the other was up to. Marshall's conferences (SepCons) were important gatherings of the wide variety of advocates of educational freedom and opponents of government schooling. The Alliance continues to play a key role in promoting the liberation of families from the state.

Marshall was a great public speaker, whose eloquence flowed from his love of life and his love of liberty. Because of his enthusiasm about the future and his great humor, Marshall was unforgettable. He was as decent a human being as I've ever known. Through all his medical challenges he was unfailingly optimistic and inspirational.

I will miss him very much.

The Day After

"Government is not reason; it is not eloquence; it is force. Like fire, it is a dangerous servant and a fearful master."

Depressing Day

Not only because one of those presumptuous scoundrels will fulfill his dream of being "commander in chief," but because the airwaves and cable channels are rife with media talking heads discharging their self-appointed duty of re-legitimizing the state. The last few days especially have been devoted less to partisanship than to praise of both "courageous" candidates for their service and dedication. In the end, for these windbag commentators what counts most is the process, i.e., the state's continued legitimacy. Nothing disturbs them more than discussion that undermines The Consensus. All underhanded campaigning can be forgiven in light of the larger mission, the collective choosing of a Leader, which can be used ultimately to absolve the state of its crimes. Nothing, therefore, is more sacred than the ritual of voting. Or so the media talkers would have us believe, as they rhapsodize about "caring" and "participation." In truth, getting out the vote is a way to get everyone's hands dirty enough that they can't regard the state as an external villain, an occupying power.

Anyone who points out that this process is based on fraud and coercion would be dismissed as a cynic or a nihilist. But no need to worry. No one who would point this out will be invited to comment in the first place. Can't have the purity of the moment sullied by the truth. The media are safe for Peggy Noonan, David Gergen, and the rest of the state's cheerleaders. No one will say what should already be obvious to any thinking person: the electoral process is a distraction, a massive effort in misdirection to keep our minds off what is really going on. The illusion of popular power hides the fact that real power is securely beyond the people's reach.

"If voting could change things, it would be against the law." No wiser words ever graced a wall.

Staying Home

That's what I'll be doing today.

American Conservative

My American Conservative article on the foolishness of the Wall Street bailout is here.

Choices, Choices

McCain says Obama wants to be redistributor in chief, while he wants to be commander in chief.

Oh my. Shall we not be spared?