Sunday, December 13, 2020

Perfect Liberty Is the Proper Response to Covid-19

 

Perfect Liberty Is the Proper Response to Covid-19

or

The Socialist Calculation Problem and Covid-19

 

by Patrick Barron

 

 

 

One hundred years ago Ludwig von Mises wrote the definitive exposure of the impossibility of socialism: Economic Calculation in the Socialist Commonwealth. In a recent Mises Wire essay--Socialist Robert Heilbroner's Confession in 1990: "Mises Was Right."--Gary North sums up the socialist problem succinctly (his emphasis).

"But Heilbronner failed to present the central argument that Mises had offered. Mises was not talking about the technical difficulty of setting prices. He was making a far more fundamental point. He argued that no central planning bureau could know the economic value of any scarce resource. Why not? Because there is no price system under socialism that is based on the private ownership of the means of production. There is therefore no way for central planners to know which goods and services are most important for the state to produce. There is no hierarchical scale of value that is based on supply and demand—a world in which property-owning individuals place their monetary bids to buy and sell. The problem of socialism is not the technical problem of allocation facing a planning board. It is also not that planners lack sufficient technical data. Rather, the central problem is this: assessing economic value through prices. The planners do not know what anything is worth."

 

Notice North's point. Socialism is impossible, not just technically difficult. Knowing what to produce requires a price system. A price system requires private ownership of the means of production. Why? Because the price system rests on individually held hierarchical scales of values. And the hierarchical scale of values require private ownership of the means of production. In other words, if you don't own something, you cannot know its worth. This doesn't mean that everyone has the same hierarchical scale of values. But all these individual scales of value do meet in the market place to determine marginal prices at given points of time. Your beanie baby collection may be worth a thousand dollars in today's market and possibly zilch tomorrow. Now, your beanie baby collection may be priceless to you and you don't really care about its value to others. But if you decided to make a business of selling beanie babies or even simply sell your collection, you would be forced to confront the reality of the marketplace.

 

Covid-19 and the Socialist Calculation Problem

 

You may well ask what this has to do with Covid-19. Covid-19 isn't a marketable good. It isn't owned by anyone. No one wants it. Quite the opposite in fact. True. Nevertheless, government's response to Covid-19 assumes that it knows everyone's personal risk hierarchy and can tailor an appropriate public response. This is as impossible as knowing values in a socialist commonwealth. In the place of a hierarchy of wants, we have a hierarchy of risk. And just as everyone's hierarchy of wants is different, everyone's hierarchy of risk is different. No one can deny this. We see it played out everywhere. Young people in college assess their personal health risk from Covid-19 as very low. The aged and those suffering from other illnesses assess their personal health risk as very high. Furthermore, one's response is determined by what one gives up. The elderly living on pensions may be giving up very little in a lockdown or quarantine other than their social life. Certainly they are not giving up their life sustaining income by staying in semi-isolation. But those still of working age have a very different tradeoff. Business owners who are forced to shut down may lose their entire wealth. Salaried and hourly workers may see a slower drain on their wealth, but the longer the lockdowns continue the more accumulated wealth they will see drain away.

 

I have used stereotypical broad categories here for illustrative comparisons only. Of course, those of the same age, health profile, wealth accumulation, etc. may have entirely different personal risk assessments. The old adage applies that no two people are alike. These facts of human existence make universally acceptable public policy responses to Covid-19 not just difficult but impossible. The only acceptable public response is one of perfect liberty; i.e., each individual decides his own response to Covid-19 as long as he does no harm to others.

 

What about Externalities?

 

This brings up a common retort that perfect liberty DOES harm others. A typical government justification for coerced lockdowns and quarantines was that there was a need to conserve hospital beds for the expected onslaught of Covid-19 patients. Sounds reasonable at first, but not upon further examination. This so-called line of reasoning rests upon faulty externality theory; i.e., that everything you do affects others in some degree. By this logic government has a right to regulate everything you do. Forgetting for a moment that government's access to information is no greater than that of thousands of others, there is the ethical problem of government's right to determine to whom a private entity may offer services. For example, a private hospital may refuse patients who wish to have elective surgery in order to preserve beds for what the hospital considers more important patients, but government may not insert its power of coercion into this decision. Like the socialist allocation problem, government has no "skin in the game" and, therefore, it has nothing upon which to make a universally applicable policy except the temporary prejudice of those currently elected to office and/or those currently working for government. Perhaps an even more damning criticism of the externality rationale is that there is no attempt and probably no definitive calculation of the many adverse consequences to lockdowns and quarantines, from delayed medical treatment that leads to worsening health (both physical and mental) or even death to permanent loss of one's ability to feed, house, and clothe one's family adequately.

 

"Perfect Liberty" IS the choice of our political leaders. Why not the rest of us?

 

So, we are left with these conclusions: Since all risk is personal, no one knows the risk tolerance of others. Therefore, one's response to Covid-19 is a personal decision based upon one’s personal risk assessment. In other words, perfect liberty must be respected because it is the only rational option. Impractical? This is the very policy actually followed by many of the authors of the current restrictions. Governor Newsom of California attended a lavish dinner party after issuing new and more onerous restrictions on public and private gatherings. Illinois Governor Pritzker has been unapologetic about visiting his many out-of-state residences after telling his constituents not to do the same. Other politicians have been similarly embarrassed. Are they taking unnecessary risks, both to themselves and others? There is no definitive answer. By the very fact that they violated their own restrictions, we can conclude that they valued their freedom to do so above their personally perceived risk. Why should not that same right be available to all of us?

Sunday, December 6, 2020

Letter from America #1--sent to a UK blog that champions liberty and free markets

 

Letter from America

 by Patrick Barron

December 1, 2020

As I write my first "Letter from America" the US election is still undecided. One would think that this is a topic number one on everyone's mind, but such is not the case. The first topic of any conversation is about Covid restrictions. It's hard to keep track of them in the US, because each state sets its own. I live in southeast Pennsylvania about thirty miles from Philadelphia. But I am actually closer to the states of Delaware and New Jersey than to Pennsylvania's largest city, Philadelphia. The rules are different in each state and they change all the time, making complying difficult if not impossible. But here's the thing: No one seems to care. Oh, sure, everyone wears a mask of some sort indoors and some wear them outdoors, too. But for the ordinary consumer, the rules are about the same. The real challenge is for businesses, especially restaurants, bars, and school districts. The people running these services have a hard time of it. Their rules change often: one day restaurants cannot seat anyone indoors, carryout only or possibly outdoor dining where possible. Later they may be allowed to open one fourth or one half of their tables indoors, only to have that relaxation of the rules and a move toward normalcy rescinded when the Covid case numbers start to increase. We see more and more signs outside long established restaurants and bars thanking the public for their patronage over the years but advising us that their establishment has closed down for good. Some folks who track these things project that over half of America's restaurants may close permanently, a loss of wealth that is staggering in total and a tragedy for those owners.

 

Like the UK, there is little to no scientific evidence put forward that these restrictions work. But everyone knows where these restrictions originated--out of the very opinionated mind of some politician. As a result, slowly but assuredly the public health and political authorities are losing credibility. They are becoming the butt of jokes, the sure indication of eventual irrelevancy.

 

But, we are not there yet.

 

What worries many of us libertarian is that the restrictions on our supposedly sacrosanct liberties have been usurped with hardly a dissent. And where there have been dissents the restrictions on liberties continue. For example, the federal district court in my home state of Pennsylvania ruled that the governor had no power to lock down businesses. Yet the lock downs continue with a temporary stay of the court's ruling. This emboldens the petty tyrants to even greater and more frequent insults to our liberties.

 

On to the election and its yet-to-be-decided winner.

 

The Republicans are attacking the results of several "battleground" states, namely Wisconsin, Michigan, Georgia, and especially Pennsylvania. There were significant voter ID issues and vote counting problems in all these states. At present it looks like the Democratic candidate, Joe Biden, will prevail. But President Trump has not conceded, and the result may be decided in the Supreme Court. Again, this is very complicated, due to America's decentralized and indirect system of choosing the president. Each state has its own election certification rules and each state determines how its votes in the Electoral College will be distributed. It's the Electoral College that determines the president, not the popular vote. Each state gets one elector for each Senator and Representative. Therefore, the least populated states get three Electoral College votes--one for each of its two senators and one for its representative in the House. Each state legislature certifies its electoral college distribution, but the US Supreme Court could overturn that certification. Forget that the mainstream media have "given the election to Biden". The mainstream media has no such power. The Electoral College chooses the president and that hasn't happened yet.

 

But here is the crux--no matter which candidate eventually is chosen by the Electoral College, the other party will not accept that decision. Republicans will claim voter fraud and Democrats will claim that a court overruled the people. In other words, America is divided politically, and an election will not change that fact. Therefore, no matter who "wins", expect a continuation of bitter feuding and animosities, maybe even violence. This likely will lead to a "do nothing" government with neither party controlling the White House and both houses of Congress. Many believe a divided government is good for the country, for it cannot enact legislation and make a mischief of itself. But, the president has lots of leeway to use executive orders to rescind current regulations and enact new ones. There is little doubt that a President Biden would reinstate many currently-rescinded Obama administration regulations on the coal, natural gas, and oil industries. This would be bad for America even though the environmentalists would be happy. But, a Biden administration might abandon President Trump's tariffs and undeclared trade war with China. This would be good for America as a whole, even though it would anger favored domestic industries.

 

The elephant in the corner is the out of control federal budget. The annual deficit is over one trillion dollars. There is no real discussion of lowering it through spending cuts. In fact, a Biden victory would see attempts to expand the welfare state through making Medicare open to all age groups and/or adopting a Universal Basic Income. Both parties are discussing another round of Covid-inspired stimulus checks to all Americans. A three trillion dollar package passed in 2020. Another, perhaps somewhat smaller, package is being discussed now by both parties as if money printing and federal government debt beyond imagination and beyond the possibility of repayment in dollars of similar purchasing power as borrowed just simply do not matter. No one in government or at the Fed care one whit, so thoroughly engrained are they in the toxic waste of Keynesian economic theory, now called "Modern Monetary Theory". MMT posits the falsehood that we simply owe the debt to ourselves! It's one pocket owing the money to another pocket, don't you see? This may be the greatest hoax of all time.

 

Stay tuned.

Monday, November 23, 2020

My letter to the NY Times re: Do As I Say, Not As I Dine

 Re: For Newsom the Coronavirus Message Is Do as I Say, Not as I Dine


Dear Sirs:
California Governor Gavin Newsom is being pilloried as a hypocrite, and rightly so, for not following his own Coronavirus guidelines while dining at an exclusive French restaurant. But here is another way to look at it: Governor Newsom valued a special dining experience with friends and colleagues more than the possibility of catching the virus, very small, and if he did catch it that he would become very sick and possibly die, even smaller. In other words, he made a personal decision based upon his personal risk assessment. Fine with me as long as all the rest of us riff raff, wherever we may live, can do the same.

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

Tuesday, August 18, 2020

Poor Understanding of Monetary Theory Leads to Disastrous Government Policies

 

Austrian School economists know that unsound money has been at the heart of disastrous government policies since time immemorial. The greater the ignorance of money the greater the monetary debasement in order to fund government's latest folly.

 

Monetary debasement always ends badly, but end it will. Robert L. Shuettinger and Eamon Butler, co-founder and director of the Adam Smith Institute, wrote Forty Centuries of Wage and Price Controls: How not to fight inflation, a very readable short book that covers a vast expanse of time.  In The Ethics of Money Production Jorg Guido Hulsmann outlined all the various schemes used over the millennia by those in government to counterfeit the lifeblood of the economy for their own purposes. But Professor Hulsmann, who wrote the book in 2010 probably could not have predicted the scale of today's money expansion. What is the point of all this?

 

Well, the point is that the ignorant public and the tyrants who rule them apparently believe that all that is wanting to achieve some great goal is the lack of money. And, since government can conjure all the money that it desires out of thin air, government ought to do so. It's really as simple as that.

 

Fiat Money Makes Keynesian Economics Appear to Be Possible

 

Along the way some almost universally accepted economic principles have had to be shunted aside. John Maynard Keynes, author of The General Theory of Employment, Interest, and Money, and who is considered to be the father of modern macroeconomics, managed to concoct a new economic school of thought that completely ignored Say's Law. No longer was money an indirect medium of exchange to facilitate the transfer of real goods and services for other real goods and services, what Professor Frank Shostak calls the exchange of "something for something". No. Now money itself could be conjured out of thin air and used to confiscate real goods and services. No longer would government be forced to convince its constituents that its latest spending proposal was so necessary that it could justify an increase in taxes and/or a reduction or elimination of some other spending programs. Barring the failure of those two funding options, it would no longer be forced, as it had in the past, to convince savers that its credit was good. In other words, spending is completely unshackled from the reality of uncertainty and scarcity.

 

Fiat Money Hides the Consequences of Lockdowns

 

The coronavirus pandemic has exposed the hollowness of what is called Modern Monetary Theory (MMT). The horrible consequences of government shutdowns throughout the country have been truly "papered over" with trillions of dollars of fiat money through so-called "stimulus checks", handouts to politically connected businesses, and boosts in unemployment payments. Real money would have revealed the damage to the world economy long ago, and I am in no doubt that shutdowns as a tool for controlling the virus would have been over quickly. As it is, the shutdowns linger in many parts of the world because the consequences are not yet fully seen.

 

The End of the Credit Cycle

 

Yet the coronavirus-inspired shutdowns and helicopter money to placate a frightened populace are merely the latest example of foolish government policies made possible only by the government's ability to conjure money out of thin air. The broader background of weakening bank balance sheets has ensured a recession and possibly a depression through bank credit expansion funded not by an increase in real savings but central banks. In his latest warning that the end of the latest credit cycle is nigh, Alasdair Macleod of Goldmoney.com paints a bleak picture of the weakness of the "Globally Systemically Important Banks" (G-SIBs).

 

...the elephant in the room is systemic risk — visible to all but simply ignored. This is partly due to everyone in government and central banks, as well as their epigones in the investment industry and mainstream media, believing our economic problems are only a matter of Covid-19.

 

Governments have introduced emergency plans. The US Government is distributing money by metaphorical helicopters, and Britain has a furlough scheme and tax deferments. But they do little to alleviate the concerns of highly leveraged commercial bankers, facing the prospects of soaring bad debts. Bank balance sheet asset values to market capitalisation  ratios strongly suggest the banking system cannot cope with what is ahead.

 

Conclusion

 

There is NOTHING that government can do to help the economy other than remove barriers to wealth creation and preservation that it itself created and allowing the people the freedom to pursue their own ends. Since government creates nothing itself, all interventions interfere with what the people themselves desire and are nothing more than transfers of wealth for the benefit of some and destruction of wealth for all. Yet wealth destruction may not be the worst thing that can happen. A nation can lose its freedom entirely, when government doubles down and doubles down time and again in the pursuit of phantom fixes with ever increasing amounts of fiat money conjured out of thin air. It happened in Rome (Inflation and the Fall of Rome, a speech by Joseph R. Peden). It happened in Weimar Germany (When Money Dies, by Adam Fergusson). It certainly can happen here and now.

 

Sunday, August 16, 2020

My letter to the Wall Street Journal re: Gold Mining Is Not the Same as Owning Gold

 Patrick Barron

Sunday, August 16, 2020

Re: Gold Is Flying High, But Getting Harder to Mine

Dear Sirs:
This caption below the picture associated with Mr. Macdonald's article about the difficulty of mining gold illustrates the mistaken belief that the difficulty of mining for gold somehow makes gold unsuitable as a medium of exchange:

"The price of gold is going haywire, driving a frenzy of investment that’s calling into question the metal’s reputation as a safe-haven during times of economic uncertainty."

Gold mining is an industry and no one should expect that investing in this industry should be more profitable than investing in any other industry. A higher price of gold certainly will make it profitable to cover the increased expense associated with extracting gold from marginal deposits. This is no different from any extraction industry. Known oil deposits are opened and closed as the price of oil goes up and down. Gold mining over time is no more or less profitable as any other industry. Gold mining should not be confused with the inherent qualities of gold as a monetary medium, one of which is the difficulty and expense of bringing more gold to market through mining.

Patrick Barron
20 McMullan Farm Lane
West Chester, PA 19382

Tuesday, July 21, 2020

My Letter to CBS Sports

Sunday, July 19, 2020

Sean McManus, CEO
CBS Sports
1401 W. Cypress Creek Road
Fort Lauderdale, FL 33309

Dear Sir:
Thank you and CBS Sports for broadcasting Jack Nicklaus' Memorial Golf Tournament this week. I thoroughly enjoyed the coverage. Well, let me say that I WAS thoroughly enjoying the coverage until accosted by former Pittsburgh Steelers coach Bill Cowher for...well, I'm not really sure why he was accosting me. He yelled angrily into the camera that I must "open my eyes" to the BLM movement.

According to reliable sources, Mr. Cower makes "at least" four million dollars per year as a paid sports commentator for CBS Sports and perhaps ESPN, too. Good for him. Nevertheless, by what presumption does he--with your approval, I'm sure--feel qualified to question my personal ethics and those of all the other viewers of this great golfing event?

My reaction was much the same as if Mr. Cowher or some other lout accosted me face-to-face. I turned off the TV and walked away. I did not watch the conclusion of the tournament.

Patrick Barron
20 McMullan Farm Lane
West Chester, PA 19382

cc:
Kirt Walker, CEO, Nationwide Insurance
One Nationwide Plaza, Columbus, OH 43215-2220

Jack Nicklaus, Jr., CEO, Nicklaus Foundation
Golden Bear Plaza, East Tower
11770 U.S. Highway One, Suite 308, North Palm Beach, FL 33408

James Pitaro, CEO, ESPN
935 Middle Street, Bristol, CT 06010

Jay Monahan, CEO, PGA Tour
100 PGA Tour Blvd., Ponte Verde, FL 32082

Wednesday, June 17, 2020

The Great Lie of All Tyrants: Your Liberties Are a Threat to Others and Even to Yourselves


The forces of totalitarianism have been chiseling away feverishly at our liberties for many years now. Their efforts have taken the guise of radical equalitarianism (income redistribution), radical diversity (whom one may hire or accept into a position normally reserved for those of the greatest merit), radical environmentalism (what one may buy, sell, or freely use), and political correctness (a blatant attack on free speech). Like all totalitarian movements these forces co-opt the language of true liberty, notably "progressivism" and "liberalism". George Orwell warned us of the power of "Newspeak" in his dystopian novel Nineteen Eighty-Four.

But these forces now are taking on a new tactic, seizing the power to restrict our liberties to move about freely, peacefully associate with others, and to earn a living from peaceful, social cooperation. I refer, of course, to the lockdowns imposed in response to the coronavirus. George Orwell would recognize these tactics and, I hope, be appalled at how complacently populations all over the world have not only complied with these diktats but many have actively supported them to the point of proselytizing others for non-compliance.

The Lockdowns Violate Ethics

Principles are important. Without them a society has nothing more than arbitrary rule. That is why even dictatorships such as the now thankfully defunct Soviet Union had detailed constitutions. Constitutions outline the limits of government. Constitutional conventions are serious events and may take months. But even constitutions must be based upon an ethical foundation. Two unsurpassed explanations of the limits to which government may legitimately rule have been penned by Immanuel Kant and Frederic Bastiat.

Immanuel Kant's Humanity Formula, penned in the middle of the eighteen century, exhaustively explains that man is an end in himself and may not be used as a means to an end. In other words, due to man's inherent humanity, no man may have his liberties or property curtailed in any way in order to benefit others. A simple example will suffice. Mr. Smith is a very wealthy man, and Mr. Jones is very poor. Mr. Jones' son needs an expensive operation to save his life. He goes to Mr. Smith and asks for his financial assistance. Mr. Smith refuses. Mr. Jones does not have the right to take Mr. Smith's money in order to save his son's life. Kant would point out that taking Mr. Smith's money would be using Mr. Smith as a means to another's end, a violation of the Humanity Principle.

Frederic Bastiat wrote The Law in 1850. In this short book Bastiat explains the difference between just law and unjust law. Posted on June 11, 2020 on the Mises Wire, Lee Friday applied Bastiat's principles of just and unjust law to the current lockdown diktats: Bastiat Leads the Way on the Morality of Forced Lockdowns. Every man has a God given right to life, liberty, and property. No man nor any collective of men (government) may deprive any man of this God given right. Any law that purports to do so is unjust.

Do Your Liberties Threaten Others and Yourselves?

So much for ethics, but what about the claim that a man at liberty is acting irresponsibly by opening his business or traveling freely; that liberty does not apply to those who are a threat to others; plus, you yourself are too ill informed or just plain bloody minded to be allowed to exercise your liberties? Furthermore, to do so would mean that you are taxing the healthcare system unnecessarily and denying its resources to others who are more worthy. Or so the argument goes. Note that this is NOT an ethical argument but a practical one by which supporters of the lockdown wish to end all further debate. The argument sometimes is enhanced with the claim that one cannot place a value on human life, so sacrifices must be made, etc. Of course, this argument violates Kant's Humanity Formula, but what about meeting it on its supposed merits? Are people who open their businesses or travel freely threatening others? If so, how?

I have asked supporters of this claim to explain how one can "catch the virus" if he self isolates--i.e., does not patronize businesses or travel freely himself--or wears a mask, gloves, etc in his few necessary excursions to public places . The usual answer is that such "irresponsible people" have a greater chance of catching the virus and spreading it. But why is this a concern, whether scientifically valid or not? Do not those who do not self isolate tacitly accept the increased risk? Naturally, some people are more risk averse than others, so are we to force everyone into forced isolation until the most risk averse among us are no longer fearful of their fellow men? The most risk averse among us have the right to self isolate but they have no right to force others to do so.

No Logical Criteria for What Is Excessive Risk and Should Be Prohibited

There is no logical criteria to guide the state in what risky activities, willingly pursued, should be prohibited. Many risky vocations (lumberjacks, high iron workers, test pilots, commercial fishermen, etc.) plus many avocations (mountain climbing, sky diving, scuba diving, hang gliding, etc.) undoubtedly would be at the top of the any radical risk averse prohibited activities list. As for taxing the healthcare system unnecessarily, end socialized medicine and let the market place a price on those who engage in risky pursuits. The insurance industry already does this where not prohibited by statute law. Your automobile insurance premium will increase if you have an accident. If you live in an area of the country with severe weather, such as tornadoes, your home owners insurance premium will reflect that risk. Some insurance companies will not write life insurance for those in very risky professions. I experienced this myself in my younger days in the Air Force.

In Conclusion: More of the Same in Our Future

In conclusion, it has become clear that officeholders in our once constitutionally limited government have exceeded their bounds of authority and, once these officeholders have tasted unlimited power, it is very unlikely that this power will be relinquished voluntarily. The pronouncements of which businesses may reopen and under what kinds of restrictions would be comical if they were not so tyrannical. (One is not allowed to touch the flagstick on a golf course. One is not allowed to touch someone else's tennis balls. Park playground equipment not only was cordoned off but in some cases actually made unusable: a basketball court in a park near my son's house was sabotaged by township workers.) Now that government has found that it has unlimited powers to prohibit and regulate personal liberties that once were constitutionally protected we can expect more of the same in the future. I fear that the genie is out of the bottle and we'll have a hard time getting him back in. A so-called "second wave" of the coronavirus will be instructive. If government locks down the economy again, I personally doubt that the public will comply...and that would be a very good thing.