Wednesday, July 29, 2009

What Makes Theft a Crime?

If A takes something from B, we call this theft and consider it a crime. But why is this so? What exactly makes the taking of something from another considered a crime? The socialists desire that all things be held in common for the good of all. If this is so, how can anyone be considered a criminal when he takes something, since all things should be commonly owned? Is not A part of the commons and just as entitled to the possession of whatever it is as B? This is no small matter.

Of course, there are several valid reasons why theft is a crime, and all are based upon undeniable facts of nature. For one thing, we all need resources in order to live; therefore, if we are not secure in the possession of some resources, we cannot survive. If I grab the food from your hand (and do so without committing a crime) just as you are about to eat it, eventually you will starve. Presumably I grabbed the food from your hand and not from the sky, because food is a scarce resource…it may not simply be conjured out of thin air to satisfy our hunger. Your possession of the food, in the absence of facts to the contrary, is testament to its ownership. So already we have two undeniable facts: that resources are scarce and that the ownership of resources is necessary in order that they may be useful to us. These undeniable facts stand as impassable barriers to the pipe dream of socialism; that is, the common ownership of valuable resources to be shared by all.

But how do we gain legitimate ownership of anything? There are only two ways. Number one, we find some previously hidden and/or ignored resource. Since it was unknown or ignored by all, no one else may claim its ownership. But finding something is not enough. We must go further. We must turn the resource into something useful for man by, as John Locke said, “mixing our labor” with it. That labor may be something as simple as carrying the resource from the previously hidden place to our abode or it may be much more complicated, such as extracting some mineral from the earth, refining it, transporting it, etc. But we cannot claim ownership to something simply by planting our flag and proclaiming that it is ours and ours alone, as did the conquistadors when they planted the flag upon a beach in the Americas and preposterously claimed the New World as the possession of Spain.

The second way we gain legitimate ownership of something is through exchange of resources already possessed legitimately by someone. This is the way that most resources come to us. We exchange one resource that we value less for another one that we value more. Exchange can be direct exchange, meaning barter…apples for oranges, for example. But mostly exchange is indirect exchange, meaning money exchange…buying the apples or the oranges with money (the indirect exchange medium) that we earned through previous production.

Notice that theft does not involve either direct or indirect exchange. The thief takes without exchanging anything of value. He may do this stealthily, as would a pickpocket; or he may do it threateningly, as would an armed robber or through extortion, as do gangsters in the so-called “protection racket”; or he may hire someone to steal for him, promising political and legal protection for the thief. But the key point is that there is no mutually agreed upon exchange of some previously and legitimately obtained resource. One party gets something and the other nothing (or something less than he would accept in the absence of extortion or the threat of violence).

Now, then. How are we to categorize the actions of government? Mostly as a thief, in my opinion. Let us count the ways:

1. Stealthily. Through inflation of the money supply, which rewards government and robs the entire population of its previous and legitimately earned purchasing power. Expansion of government controlled money MUST enter the economic system somewhere, unjustly rewarding those first recipients of the new money.
2. Threateningly or through extortion. Pay your (fill in the blank) tax or we will confiscate your wages, sell your house, and send you to jail. It does not matter that you do not want the service, do not need it, or can purchase it more economically elsewhere.
3. The hired gun. Special interests promise to vote for politicians who will give them special privileges at the expense of the polity in exchange for returning them (the politicians) to lucrative and powerful elective office. In this case the thief is merely the agent of a criminal conspiracy. The “real” criminals are the special interests who “hire” the thief. The thief gets a salary for his services and the “real” criminals provide him with political and legal protection. The most well known “real” thieves in America are unions, farmers, the American Association of Retired Persons (AARP), and big businesses seeking trade protection. All seek undeserved economic advantages at the expense of everyone else not so well organized or shameless.

Of course, this is not to imply that all government taxation is theft. If government restricted itself to gathering taxes for maintenance of public safety and little else, then the entire polity will benefit from having its life, liberty, and property protected from criminals. This is the proper, legitimate role of government as envisioned by our Founding Fathers and enshrined in our majestic Constitution, the very same one that has been systematically debased practically before the ink was dry but with increasing disregard for its very words in the last one hundred years. America’s “living Constitution” provides no protection to its citizenry when it is government itself that has the power to interpret it for its own benefit, as does the Supreme Court.

But America was founded not on the Constitution but on another, more fundamental document—the Declaration of Independence. That document states very clearly that “…when a long Train of Abuses and Usurpations, pursuing invariably the same Object, evinces a Design to reduce them under absolute Despotism, it is their Right, it is their Duty, to throw off such Government and provide new Guards for their future Security.” We need no Supreme Court to tell us the meaning of those words. The Declaration of Independence is not a “living Declaration” that means what government says it means. The Declaration of Independence founded America, and America will remain eternal. Governments, however, are mortal.

Why No One Would Desire to Be a King of France

My wife and I just spent a delightful week and a half in France, during which we made the obligatory trip to the Palace of Versailles, home of the kings of France prior to the great Revolution of 1789. The crowds were massive. Even with pre-purchased tickets, we had to wait in line for over an hour just to get inside the palace. Of course, it is unbelievably ornate, but my impression, reinforced as our self-guided tour progressed, was how lucky we all are not to have lived in the era that this palace represents.

One’s first impression of Versailles is from a quarter mile away. The building is massive. I leave it to the gentle reader to Google all the details, but it struck me as a preserved dinosaur. Now, dinosaurs are very popular, with children especially. We anthropomorphize them through cartoons as gentle giants. Barney comes to mind. This is a common theme among children—to make them believe that something that is really quite dangerous is not to be feared. As we grow older, we may find the study of these long gone monsters to be of historical interest. But this does not mean that we desire their return or, if possible, our return to their age in history. I felt the same way about Versailles.

No one who has given the matter serious study would desire to return to the age of the kings of France, even if he were king himself! That is quite a statement, but bear with me. As one tours massive, ornate-beyond-belief Versailles, one is struck at the lack of true creature comforts. True, the king could drink out of a gold and bejeweled goblet; he could dine on the finest hand-painted porcelain; and he could sit on a plush chair. These comforts were the products of pre-capitalism, pre-industrial revolution France. They were the products of very little specialization. Just a few artisans--the best in the world, no doubt--produced the table service and furniture, but they produced these beautiful things over months and years of personal labor on one single item. Furthermore, these objects, beautiful as they are, performed no more utility than the commonest dinner service and easy chairs do today—they held food and beverage for our tableside consumption and provided comfortable seats for our weary backsides. The crystal chandeliers provided no better illumination, and probably worse, than a lamp purchased at any modern discount store.

In the movie “National Lampoon’s European Vacation”, when comedian Chevy Chase first views the great Hall of Mirrors, he says “It’s good to be king.” But the great Hall of Mirrors does not enchant us as it did visitors in pre-capitalist France. Mirrors are as common today as, oh, hot and cold running water, something that the kings of France did not enjoy. Remember the old proverb about breaking a mirror bringing seven years’ bad luck? At one time, mirrors were so rare and so expensive that breaking one was worse than having one’s house burn down. Houses could be built quickly, but mirrors could not be obtained for love or money.

But the greatest and most striking reason that none of us would desire to be transported back in time to be a king of France is the lack of hygiene. Proper hygiene is the end result of massive industrial-scale specialization. Even a king could not command central heat and air-conditioning at the flick of a switch. He could not read by the soft light of a non-burning and smokeless lamp. He could not wash his hands and face in hot water at the turn of a knob, much less take a shower whenever the mood struck him. His teeth rotted from poor dental materials—no dental floss or fluoride toothpaste, much less regular checkups for early detection and repair of decay. Reader sensibility prevents me from discussing toilet etiquette in the absence of flush commodes and sewers systems. All these hygienic conveniences are the products of modern post-industrial revolution capitalism. The wonders of the division of labor among cooperating peoples has given us mass production of creature comforts. The price has been driven down to such a degree that today the poorest of the poor in the Western world take them for granted. All these products were unknown even to the very richest in the era of absolute kingships.

When King Louis XVI attempted to flee the revolutionary mob, his heavy carriage became bogged down on the muddy roads and he was captured. Later he lost his head…literally. Today’s tyrants fly in their personal jets to political asylum in a friendly country. No king of France could dream of such service. Contrary to Chevy Chase’s conclusion upon viewing the great Hall of Mirrors, it would NOT be good to be a king of France.

Saturday, July 11, 2009

Private Property and the Seeming Problems of Resource Scarcity

My letter below to National Geographic Magazine illustrates how important is economic insight to the proper understanding of seeming intractable problems.

Saturday, July 11, 2009

National Geographic Magazine
711 Fifth Avenue
New York, NY 10022

Dear Sirs:
A neighbor kindly gave me some back copies of your magazine. I found several of the articles to be of interest to me as an economist. Yes, as an economist. Your magazine seems to be very concerned with the depletion of natural resources. I refer to recent articles about over fishing of tuna (June 2009), the scramble by governments to claim sovereignty over the arctic in order to secure oil fields (May 2009), and the water shortage problems of Australia (April 2009), just to name a few.

All of these problems can be understood and solved through an understanding and application of proper economic theory, namely those of the Austrian School. All of these problems you so clearly and entertainingly outline are the result of and exacerbated by the lack of property rights.

A key concept is the theory of the “tragedy of the commons”, which explains that all valuable resources held in common will be plundered to extinction. Since all have an equal claim, all must grab as much as possible. But private property is not plundered; instead its owners capitalize it in order to secure the most value over the longest period of time.

For example, it may be a challenge technically, but the over fishing of the world’s oceans, of which the depletion of tuna is just one symptom, will be solved only when private property rights are secured over the fishes or their habitats. But how does one secure these rights? The Austrian School of Economics explains how private property becomes so. No, it is not through a grant by a king or government, but rather by homesteading. John Locke explained the concept over three centuries ago—that when man mixes his labor with formerly unexploited physical resources of the earth, he thereby secures them as his private property.

The world’s governments could avoid all potential conflicts if they recognized the right of anyone or any company to secure private property in arctic resources by the simple act of exploiting them. It matters not whether the oil is obtained by a Russian, an American, or an international company. All of us benefit from the new resource so secured for the world market. It may require billions of dollars to exploit the oil and bring it to market, and there is no guarantee of success for those engaged in wildcat drilling. But if they are, they alone should be the beneficiaries of their vision, dedication, and treasure put at risk.

As for the seemingly intractable problem of parched Australia, the government has taken almost total control of this valuable resource with predictable results. Your article repeatedly explained how farmers and businessmen were robbed of their livelihoods by governmental decisions to greatly reduce their water allocation. Government takeover of a resource does not remove it from the risk of plunder through the aforementioned “tragedy of the commons”. Quite the contrary. Instead of the private market ensuring that water goes to its most urgent need, government allocates it politically, making near life and death decisions based upon…what?

Without a free market in water, Australians will be plagued by seeming water shortages forever. Let us make clear that water is a scarce resource everywhere. It may be more abundant in some areas of the earth, but it still must be “brought to market” via piping and purification. Without a free market in water, Australians will continue to suffer the socialist dilemma explained by Ludwig von Mises in his century old masterpiece Socialism. Without economic calculation, the entrepreneur does not know which resource to secure or which avenue of enterprise to pursue. Although the government of Australia may “sell” the water, it has no way to know whether its price is too high or too low. So, of course, it keeps the price low and allocates its to the interest group that cries out the loudest at the moment. It cannot do otherwise.

Your interesting article explained very clearly that farmers do not know what crop to plant under the conditions of government control of water. In fact, they do not know whether they should plant a crop at all. The risks of farming will become more readily understood when water becomes a commodity controlled by the free market alone. Think of water as just one more variable that entrepreneurs must secure in order to plan for an uncertain future. The Australian economy must adapt as best it can to its scarce water availability, and it will approach equilibrium of supply and demand only under a free market.

Patrick Barron
20 McMullan Farm Lane
West Chester, PA 19382
Phone: 610-793-3605

Tuesday, July 7, 2009

Why Financial Regulation Will Not Work

Please read my letter to the Philadelphia Inquirer. I recommend that you also read a relatively short essay by Wilhelm Ropke in which he explains the consequences of what he calls "repressed inflation". "Repressed inflation" destroys production by attempting to forbid risk and/or to direct investment by political means in conjunction with excessive credit expansion...exactly what all the governments and central bankers of the world are attempting to do now.

Ropke wrote his essay in 1947. Read it here:

----- Original Message -----
From: Patrick Barron
To: Editor Philadelphia Inquirer
Sent: Tuesday, July 07, 2009 8:28 AM
Subject: Why Financial Regulation Will Not Work

Re: "Financial overseers in place", by Robert Lam, acting chairman of PA Securities Commission, 7July09

Dear Sirs:
Mr. Lam's confidence in the ability of regulators to spot excessive financial risk should have been shaken during his three decades on the Pennsylvania Securities Commission. During his tenure, we have suffered innumerable financial booms and busts. If vigorous oversight by regulators will prevent such occurrences in the future, why did past regulatory oversight fail? The answer, of course, from Mr. Lam is that financial markets need even more regulation. The real answer is that financial booms and busts are caused by excess fiat money generated by the Federal Reserve System. Once this excess money--generated by the printing press and not by real savings--enters the banking system, nothing can prevent it from doing its inevitable harm of initiating unsustainable business investment. These investments do not appear to be unsustainable at the time, because the Fed suppresses the interest rate. Only years later, when it becomes evident that there exists a deficiency in the factors of production necessary to carry these projects through to profitable conclusion, does it become apparent to everyone that our scarce capital has been misallocated. At that point it is fruitless to attempt to sustain the boom by printing even more money, as our Federal Reserve System is doing right now. All the Fed is accomplishing is the destruction of even more scarce capital. Free financial markets operating under a sound money environment tend toward equilibrium, as explained by Jean-Baptiste Say over two centuries ago. The free market prevents and punishes bad investment more quickly and with less damage than an army of regulators empowered with all the modern tools of financial analysis.

Patrick Barron
20 McMullan Farm Lane
West Chester, PA 19382

Friday, July 3, 2009

The Consequenses of Restrcting Power Generation

Please read my letter below written to the Philadelphia Inquirer. I attempted to convince my state senator to vote against Act 129, but "the great man"--Dominic Peliggi--refused to see me. Instead his sycophantic chief of staff spent an hour with me trying to talk around the issue. Finally he told me the truth, that no politician can vote against any piece of legislation, no matter how bad it may be for us citizens, if it wraps itself in environmentalism. By the way, Senator Peliggi's chief of staff is a revolving door lobbyist, working a few years for our largest utility--PECO--and a few years for some politician. I am certain that PECO is in cahoots with the legislature. PECO will be allowed to raise rates to compensate for its reduced revenue from selling less power. All utilities in America are regulated by public utility commissions, which make them nothing more than arms of the government--just another way to fleece us and control us. If we citizens do not reduce our power consumption in line with Act 129, what are the likely consequences? The only alternatives are penalty rates and periodic shutoffs of power. Already PECO is proposing a program whereby we citizens would "allow" it to shut off our power during peak demand. Just think about it. What free market business purposefully rations its goods to consumers? State regulation of utilities turns the producer/consumer relationship on its head. Instead of the producer trying to meet the needs of consumers, we consumers must adapt our lifestyles to the wishes of the this case a politically controlled utility monopoly. Just another nail in the coffin of our freedoms.

Patrick Barron

To: Editor Philadelphia Inquirer
Sent: Friday, July 03, 2009 8:24 AM
Subject: The Consequences of Restricting Power Generation

Re: "Peco rolls out a bold proposal", 2July09

Dear Sirs:
Act 129, which mandates that Pennsylvania utilities REDUCE! power generation in ever greater percentages in the next four years is but one more example of the attack by radical environmentalists upon modernity. Government has no moral authority to deny the citizens of Pennsylvania all of the power that we desire and are willing to purchase. The consequences of this foolish and dangerous law are not hard to predict--lower profitability for Pennsylvania businesses, fewer new businesses choosing to locate in Pennsylvania, the flight of some existing businesses from the commonwealth, lower wages for Pennsylvania workers, fewer job opportunities for Pennsylvania workers, the flight of "the best and brightest" from the commonwealth, higher costs and lower standard of living for Pennsylvania residents, lower property values for those seeking to sell their homes and move to more economically hospitable states...I could go on and on. This law should be repealed forthwith.

Patrick Barron
20 McMullan Farm Lane
West Chester, PA 19382
Phone: 610-793-3605