Monday, January 16, 2017

The statist view of the world

From today's Open Europe news summary:

Meanwhile, The Guardian reported that Lodewijk Asscher, leader of the Dutch Labour party (PvdA), which is currently a partner in the ruling coalition government, has said “I propose to come to a new trade agreement with Great Britain, but only if we can agree firmly upon tackling tax avoidance and stopping the fiscal race to the bottom.”

According to the Dutch Labour party leader, when a business or individual takes legal steps to avoid taxes and/or a country decides to lower its taxes, both are engaged in a "fiscal race to the bottom". This is the perspective of all statists; i.e., that they are entitled to our money first and any scraps we are allowed to keep should be accepted with gratitude.

Thursday, January 5, 2017

Book Recommendation

The Impending Monetary Revolution, The Dollar and Gold (second edition)

by Edmund Contoski

Reviewed by Patrick Barron

Austrian school economist Edmund Contoski has written a welcome addition to his 2012 explanation of the inevitable consequences of forcing fiat money on society. Six additional chapters have been added to his fifteen chapter 2012 first edition. Not only are readers of the original treated to new material, they are treated to a plan of action. Whereas the first edition laid out the case for commodity based money that arises naturally in the market place (and is well worth rereading), the second edition adds recent monetary insults that have arisen, the logical adverse consequences of these additional insults, and policy fixes. It is the latter addition, the policy fixes, that I found most interesting.


The author makes clear that policy must change. But what kind of change? The answer is a return to the wisdom of the Founding Fathers. Most readers, including your humble reviewer, will be treated to an in-depth explanation of the principles of federalism that go beyond the separation of powers. Once exposed to their ideas, one cannot but agree that nothing superior to the thoughts of our Founding Fathers has been advanced over the almost two and a half centuries since the Constitution's adoption by the states. There has been a steady chipping away at our freedoms, which will lead to catastrophe if not reversed.


Chapter XIX "More on Amendments" is a blueprint for action with the states taking the leading role. Only the states have the resources to counter the federal leviathan. But they must act in unison and with full adherence to the law. The law to which the states must adhere is the Supreme Law of the Land, the Constitution itself. But they must adhere to the Constitution as written and as explained by our Founders at the time of adoption, not by subsequent supposed legal scholars who have found much federal power "between the lines" of the written document. There is much original source material by the Founders upon which the states may depend. Our Constitution is a living document in the sense that the Founders provided the philosophical underpinnings to the real framework of our federal system, which is infinitely adaptable to the challenges of modern life.


Apologists for a strong central government will miss the point of this book. Americans do want a strong federal government, but we want that strength applied only to the areas of government delegated to it by the states and enumerated in the Constitution. We do want a strong national defense. We do want free trade within our borders. We do want a federal judiciary to which we may appeal when the states overstep their bounds and threaten our liberties. The problem that has existed at least since the Civil War is that there seems to be no appeal when the federal government itself oversteps its bounds. That government's own court system decides these questions. The states must act in unison to oppose these federal encroachments. I am certain that the author does not ascribe all wisdom to the states, but at least there are fifty states in competition for our productive citizens. A state that adopts perfectly legal but foolish policies will find that it has lost resources to other, wiser states. Currently there is no escape from the federal government's poor policy choices. This must change!


Please read Mr. Contoski's updated book when released by American Liberty Publishers.

Tuesday, December 20, 2016

My letter to the NY Times re: Free Basic Income Is Not a Solution to Unemployment

Re: Free Money for the Jobless

Dear Sirs:
Your article about Finland's experiment in providing a free basic income to the unemployed fails to address the main question--what exactly is the cause of unemployment and what is the best way to eliminate it? The cause of unemployment is a change in the market, which, if not caused by government itself, is a natural occurrence in a dynamic economy. The great Austrian economist Joseph Schumpeter coined the phrase "creative destruction" to describe the process whereby an advancing, wealth generating economy is constantly shedding old production methods for better ones, causing malinvestment of capital and temporary unemployment of labor. Government programs such as unemployment insurance hinder the necessary and beneficial process of capital and labor adapting to the new market environment. Not only do they cause disincentives to adaptation, they must be funded out of the wealth generating sector of the economy. Finland's experiment in going beyond unemployment payments and providing a basic income is simply the welfare state bureaucracy trying to justify its own existence after the failure of its previous programs. There is no solution to unemployment other than that provided by the market itself.

Sunday, December 4, 2016

The Chimera of Mandating Health and Safety Standards


Federal regulation of health and safety is based upon several illogical premises. Unfortunately these premises are never discussed. Instead we are bombarded with scare stories that business intends to make its profits with no consideration to the health of the public or the safety of its workers.


Illogical premise number one: There is an absolute criteria for health and safety that can be discovered.


 Wrong! There is only a continuum of healthier and safer practices. For example, we accept some level of pollution and some level of worker risk. Some level of pollution escapes from factories, commercial establishments, and even homes. Likewise, there are many occupations that are obviously dangerous, such as lumberjack and commercial fisherman. Furthermore, even occupations that no one would consider to be dangerous contain some level of risk. My wife broke her foot a few years ago when she slipped on a well waxed hallway at work.


Illogical premise number two: The federal government should be responsible for conducting research into determining the extent of risks to health and worker safety.


Wrong! All research should be conducted by private means, because such research itself comes at a cost to society. Wealthier societies can afford more research than poorer ones. Yet the federal government will command resources to conduct health and safety research that the free market would direct to a higher use. Nothing should be exempt from the market test. Therefore, all research should be conducted at private expense.


Illogical premise number three: The federal government should be responsible for setting health and safety standards based upon either public or private research.


Wrong! Any standards should be set by the most local community affected. For example, pollution standards may be different in Gary, Indiana than Hollywood, California. The former is a major industrial city, and the latter is a wealthy bedroom community. Hollywood's residents may very well set more stringent standards than Gary residents, because there is little factory-type pollution or worker risk there. Therefore, stringent standards would not affect production or jobs. Jurisdictions may even be a city block or two long and not encompass an entire city. Residents of Gary, Indiana may set more stringent noise level standards in residential neighborhoods than directly across the street from a factory. Of course, there may be natural gradations to noise level, with homes in noisier neighborhoods selling cheaper than homes in quieter neighborhoods.


Illogical premise number four: The federal government should fine and/or shut down businesses that violate its standards.


Wrong! Violations of health and safety are torts--i.e., harms--or a taking--i.e., violation of the benefits of property rights--that can be adjudicated only in a court of law based upon the standards of the local community. Standards need not be the same for every community. Any financial remedy should go entirely to the plaintiffs and not to a federal government agency. Otherwise, the federal government agency becomes a legitimate shakedown/extortion racket, funding itself through its own fines imposed for so-called violations of its own standards. (Regrettably, this is the situation today!)



Standards for health and safety are legitimate concerns. Violations are torts (harms) and/or takings (of property rights). There is no one standard that can be discovered, only a continuum of standards that may be different in different places, according to community desires. All standards impose costs that involve tradeoffs with other needs. In other words, a costly new standard may be accepted in some richer venues and rejected in poorer ones. Imposing one strict standard impoverishes the latter while perhaps having little or no effect on the former. Therefore, health and safety standards should be adopted by the smallest constituency possible.



Wednesday, November 30, 2016

Germans favor self-destructive policy

From today's Open Europe news summary:

Majority of Germans want Merkel to take tough stance in Brexit negotiations

A poll for the Körber Foundation reveals that 58% of Germans think Chancellor Angela Merkel should ‘negotiate tough’ with the UK while 40% say she should be ‘ready to compromise’. Within Merkel’s CDU party 65% are in favour of a hardline approach whereas supporters among the leftwing parties and the AfD are more inclined towards a compromise deal. The poll also shows that 67% of Germans think that the UK’s decision to leave the EU has reduced the cohesion among the remaining members of the bloc. Meanwhile, 62% believe that the EU is not on the right track and 42% want a referendum about Germany’s EU membership.

Although this short clip never defines what constitutes a "tough stance", I assume it means that goods and services from the UK should face restrictions--tariffs, quotas, or even outright prohibitions--regarding accessing the EU market. OK. Does that also mean that EU businesses should be restricted from exporting to the UK? I doubt that the Germans want to reduce sales, but the only way UK customers can buy EU goods is with euros obtained from exports to the EU. Of course, the Europeans could continue to sell to the UK and stockpile their British Pounds, but that is equivalent to buying something with a check that the payee never cashes. In other words, the EU would be making a gift to the UK. Let us not forget that the purpose of exporting is to import.

Tuesday, October 25, 2016

Raising taxes is "tax harmonization"; lowering taxes is "Brutal Brexit"

From today's Open Europe news summary:

European Commission plans corporate tax rule harmonisation

The European Commission will announce plans today to harmonise corporation tax policy across the EU. The plans would not mandate a single tax rate across Europe, but would instead seek to “eliminate the mismatches and loopholes between national tax systems, which companies can currently exploit,” as well as applying only to firms with an annual turnover above €750 million. An opinion piece for Expansión describes mooted reductions in UK corporation tax as ‘Brutal Brexit.’

"Doublespeak" is alive and well at the European Commission.

Sunday, October 16, 2016

The Global Financial Consequences of US Foreign Policy

Andy Duncan of interviewed me last week from London.

Click on the link below for the 32 minute interview.

The Global Financial Consequences of US Foreign Policy