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Thursday, March 30, 2006


I'm taking a break from blogging. Until I resume, I invite you to visit some of my favorite blogs and websites. See the links in the column on the right.

Wednesday, March 29, 2006

Misallocation of Resources

Here's Bill Bonner at http://www.lewrockwell.com/bonner/bonner220.html:

In America today, the Fed's phony new money – created out of thin air – feeds phony house price increases that turns into phony consumer demand that coaxes businessmen in China to make bad capital investments. When the cycle tops, almost everyone everywhere will feel the pain, because the funny money drew out real resources – oil, labor, steel – that might have been put to better use.

Don't get us wrong; we love the Fed as much as everyone else. In the Soviet Union, resources were misallocated by force. In the Fed's empire, they are misallocated by fraud. This is undoubtedly a big improvement; for one thing, it is much more entertaining.

Tuesday, March 28, 2006

Economics and Healthcare

In my previous post, Economic Ignorance (http://livefreeormove.blogspot.com/2006/03/
), I quoted Congressman Ron Paul (R-TX) as follows:

We cannot suspend the laws of economics or the principles of human action any more than we can suspend the laws of physics.

Physics cannot tell us whether or not we should jump out of the top floor of a 10-story building. Physics can only tell us what the consequences of that choice would be. Similarly, economics cannot tell us whether we should adopt a government-financed, government-controlled healthcare system. Economics can only tell us what the consequences of that choice would be.

For instance, under a government-financed, government-controlled healthcare system, the prices paid by the consumer for healthcare products and services would be zero; accordingly, demand would skyrocket. To bring demand back in line with supply, government would be forced to ration healthcare. Government would have to refuse to provide certain products and services to some citizens. Other citizens would be forced to wait in long queues before receiving the products and services they need.

Perhaps this is why P. J. O'Rourke says, "If you think health care is expensive now, wait until you see what it costs when it's free"?

To reiterate: economics does not tell us what kind of healthcare system we should choose. All economics tells us is that by choosing a government-financed, government-controlled healthcare system, we are also choosing to ration healthcare. (As Stephen Covey says, when we pick up one end of the stick, we pick up the other end, too.) Americans of all political persuasions should think carefully about this. Do we want a government run by George W. Bush or Hillary Clinton making healthcare decisions for us? Do we want a government run by Dick Cheney or Ted Kennedy deciding who will be refused certain healthcare products and services and who will have to wait in long lines for them?

Before we jump on the bandwagon of government-financed, government-controlled healthcare, we should take Henry Hazlitt's words to heart:

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

Government-financed, government-controlled healthcare means universal access only in theory--only in an ideal world in which the laws of economics don't apply. Back here in the real world, government-financed, government-controlled healthcare means rationing--refusing to provide certain products and services to some citizens and/or forcing some citizens to wait (often in excruciating pain) in long queues while their diseases progress and their prognoses worsen.

If you don't like our current healthcare system, don't blame it on the free market, because we don't have a free market in healthcare. Instead, the current system is the result of a large number of past government interventions. If we want a better healthcare system, we ought to undo these interventions, thereby eliminating their unintended, undesirable effects.

Economic Ignorance

Congressman Ron Paul (R-TX) writes (http://www.lewrockwell.com/paul/paul311.html),

I believe one of the greatest threats facing this nation is the willful economic ignorance of the political class. Many of our elected officials at every level have no understanding of economics whatsoever, yet they wield tremendous power over our economy through taxes, regulations, and countless other costs associated with government. They spend your money with little or no thought given to the economic consequences of their actions. . . .

We cannot suspend the laws of economics or the principles of human action any more than we can suspend the laws of physics. Yet this is precisely what Congress attempts to do time and time again, no matter how many times history proves them wrong or economists easily demonstrate the harms caused by a certain policy.

I strongly recommend that every American acquire some basic knowledge of economics, monetary policy, and the intersection of politics with the economy. No formal classroom is required; a desire to read and learn will suffice. There are countless important books to consider, but the following are an excellent starting point: "The Law" by Frédéric Bastiat; "Economics in One Lesson" by Henry Hazlitt; "What has Government Done to our Money?" by Murray Rothbard; "The Road to Serfdom" by Friedrich Hayek; and "Economics for Real People" by Gene Callahan.

I have read "Economics in One Lesson" by Henry Hazlitt, "Economics for Real People" by Gene Callahan, and portions of "The Road to Serfdom" by Friedrich Hayek and recommend them highly.

"Economics in One Lesson" is online at http://www.fee.org/pdf/books/Economics_in_one_lesson.pdf.
"What has Government Done to our Money?" is online at http://www.mises.org/money.asp. And, finally, "The Law" is online at http://www.fee.org/pdf/books/The_Law.pdf.

In "Economics in One Lesson", Hazlitt wrote,

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

It's easy to support many of the laws proposed by politicians, as long as we focus only on their immediate effects and only on their effects on one group of citizens. It is not so easy to see the wisdom of these laws when we also consider their long-term effects and their effects on all groups.

Hazlitt's central idea can be used to better understand most if not all of the public policy issues confronting us today, including healthcare, gasoline prices, education, etc.

Along this line, Sheldon Richman writes (http://www.fee.org/publications/the-freeman/article.asp?aid=4606),

Opening the newspaper almost any day, one finds the same subjects that occupied Hazlitt for many decades: inflation—that is, government control of money; trade restrictions; business regulation; taxation; deficit spending; the minimum wage; labor unionism; agricultural and business subsidies; price controls; the welfare state; the presumption that government can intelligently guide economic affairs.

With so many excellent books and articles on economics available online, there is simply no longer any excuse for the politicians or the public to remain in a state of economic ignorance!

Thursday, March 16, 2006

Real Competition

Scott McPherson has posted another good article on schooling. It's a two-part article: Part 1 is at http://www.fff.org/freedom/fd0512d.asp and Part 2 is at http://www.fff.org/freedom/fd0601d.asp.

Here's an excerpt from Part 2:

A person’s competence in the marketplace is determined by something more concrete than his ability to perform on demand like a circus animal. He doesn’t take a written test to prove his worth; his abilities are revealed through trade with voluntary consumers. That is true competition.


Tuesday, March 14, 2006

Socialism Is Evil. And So Is Democracy?

Chris Leithner's statement, "democracy is evil" (http://livefreeormove.blogspot.com/2006/03/
), calls to mind the article, "Socialism Is Evil", by Walter Williams, an economist at George Mason University (http://www.gmu.edu/departments/economics/wew/articles/04/

(See also Willliams' "Socialism Is Evil: Part II" at http://www.gmu.edu/departments/economics/wew/articles/04/

Highly Recommended: The Leithner Letter

One of my favorite pages on the web is The Leithner Letter (http://www.leithner.com.au/newsletter/), posted about once a month by Chris Leithner, a value investor (a la Benjamin Graham and Warren Buffett) at the eponymous Leithner & Company Pty Ltd (http://www.leithner.com.au/index.html), a private investment company based in Brisbane, Australia.

Chris' letters are highly readable and chock full of good information and worthwhile insights. His letters demonstrate that he is a serious student of history (American and Canadian as well as Australian) and the Austrian school of economics (Mises, Hayek, etc.).

Past Issues of The Leithner Letter are available in an online archive (http://www.leithner.com.au/archives.htm ).

His latest letter (Issue No. 75, 26 March 2006) is a true gem. In it Chris takes on and demolishes the "god" of democracy. Whether or not you believe in democracy (and whether or not you support Bush's efforts to "spread democracy" willy nilly throughout the Middle East) you owe it to yourself to read this Letter!


The collapse of the Soviet Empire was superficially a victory of democracy. Much more profoundly, however, it culminated the moral and material bankruptcy of Communism. As such, it should have been regarded as a harbinger of the eventual demise of Western, liberal and democratic socialism. Communism abolished private property; democratic socialism bastardises it. In Communist states, economic calculation was impossible; in Western democracies, it is ever more constrained by and dependent upon governments. Communism collapsed. For identical reasons – namely, the futile attempt to suspend the laws of economics – Western liberal democracy stands on shaky legs. The Soviet Empire’s breakdown, in other words, might foreshadow that of the American Empire (see in particular William Bonner and Addison Wiggin, "Empire of Debt: The Rise of an Epic Financial Crisis", John Wiley & Sons, 2005 and its review by Doug French). As Hans-Hermann Hoppe demonstrates in "Democracy, the God That Failed: The Economics and Politics of Monarchy, Democracy and the Natural Order" (Transaction Books, 2002), democracy is incompatible with private property – and hence with liberty and civilisation. To ponder these two books is to realise that the proponents of democracy are either misguided or malevolent. Either way, investors beware: democracy is evil.

"Democracy is evil"? As I said, you owe it to yourself to read Issue 75!

If you discover that you like The Leithner Letter as much as I do, you can sign up to be notified by email when future Issues are posted. Simply enter your email address in the place provided at the very bottom of each Issue.

Monday, March 13, 2006

Town Meeting And Education, Part II

After pledging allegience to the flag, which involves a claim that in the U. S. there is "liberty . . . for all", we ended up discussing the budget for the schools. The schools, of course, involve not liberty for all but coercion for all--compulsory attendance for the kids and coercive taxation for the adults. (Not to mention the threat of coercion by the teachers' union if contract negotiations break down.)

We spent a lot of time discussing whether to spend $40,000 on mosquito control and almost no time at all discussing whether to spend over $1.1 million on the elementary school (an increase of 10.7% over last year's budget!). Mind you, this is for a school of only about 100 students! (And, while the vote on mosquito control was by paper ballot, the vote on the school budget was by voice vote! Go figure!)

Meanwhile, Vermonters wonder why there are no jobs in Vermont for high school and college graduates (see this New York Times article [sr]). Could it be that after Vermonters have finished paying their school property taxes, they have little or no money left over to invest in Vermont's economy to create the needed jobs? Perhaps this is yet another reason to support the separation of school and state?

Monday, March 06, 2006

Town Meeting And Education

It's Town Meeting Day here in Vermont. In my town (Weybridge), the school board is proposing a 10% increase in the elementary school budget. My prediction is that it will pass with almost no real debate. In particular, no one will question why it is that government is involved in education.

In "Changing the Education Paradigm", Scott McPherson wrote (http://www.fff.org/freedom/fd0509e.asp),

The idea of replacing bread lines and empty store shelves with a free market in food production and distribution appeared ridiculous to the Soviets. They simply couldn’t imagine what such a system would look like, and we laughed at their feeble attempts to reform their flawed policies.

So too do most Americans shut their eyes to the possibilities accessible to everyone if government were to get out of the education business.

Just as the Russians couldn’t feed their citizens using a system of collective agriculture, Americans are failing to give every child a chance to live up to his fullest potential by locking children in a system of collective education. Government’s “one size fits all” approach to learning is failing 40 million school kids. The stultifying effects of our public schools can be seen everywhere.

At a home-schooling conference in Maryland last April, author John Taylor Gatto — an award-winning teacher with almost three decades of classroom experience — told his audience that debates over high-stakes testing, sex education, “new math,” and phonics are merely red herrings that deflect us from identifying the real problem: government schools are unfixable.

We don’t have a Department of Sustenance because food is far too important to be controlled by a government bureaucracy. Likewise, we don’t need education central planners of any kind, from the federal Department of Education to state boards of education to local school boards. It’s time we stopped arguing about petty details about how best to run state schools and instead started talking about true educational freedom in America.

The Loyal Citizen

My daughter passed this on to me. I liked it so much, I am passing it on to you.

A Funny Tale Of A Loyal Citizen

Moishe is being indoctrinated by the Russian

Govt. Official: "If you had a yacht, what would you do
with it?"

Moishe: "Give it to Mother Russia."

Govt. Official: "And if you had a palace, what would
you do with it?"

Moishe: "Give it to Mother Russia."

Govt. Official: "And if you had a sweater, what would
you do with it?"

No reply.

Government official asks the question again.

And still not reply.

Finally he shouts: "Moishe, why don't you reply?"

Moishe: "Because I have a sweater."

The Path To Peace, Revisited

In an earlier post, "The Path To Peace Part II" (http://livefreeormove.blogspot.com/2006/02/path-to-peace-part-ii.html) I wrote,

In sum, government extracts the resources it needs to wage war in four ways: it taxes, it prints, it borrows, and it steals--it forces individuals to provide services under terms that the individuals in question do not agree to freely. If we truly are for peace and not for war, we will work to end the income tax, end the ability of government to print money, end the ability of government to borrow, and end the ability of government to force individuals into servitude of any kind.

Today Lew Rockwell writes (http://www.lewrockwell.com/rockwell/five-rationales.html) as follows:

Now we come to the reason this system is able to perpetuate itself. And there is something of a mystery to explain here. No people anywhere will put up with a leviathan that grows and grows forever. At some point, the problem of funding state expansion will result in too much violence against property, and the people will revolt. Indeed, if the federal government had to collect all its revenue through a tax of any kind, leveled right now against the public, I submit to you that it would spark a tax revolt on a scale never before seen in modern history.

Thus do we have the central bank to create money for the state. Thus do we have paper money that can be created in unlimited quantities. Thus do we have deposit insurance to make banks failure proof, so that the masses will never doubt that the credit pyramid is immortal. Thus do we have the fed's power to manipulate interest rates and control the flow of credit to the system.

An economist at Lehman Brothers sent us an interesting chart the other day. It compares the level of price increases across many Fed regimes. Under the first Fed governor Charles Hamlin, the dollar declined 8% in value. Under Thomas B. McCabe from the late forties, it declined 7.2%. Under Arthur Burns, wholly owned by Nixon, the dollar declined 42% in value. Under Volcker, Mr. Tight Money, it fell 40%. And under Greenspan, who has a reputation as a great inflation fighter, the value of the dollar in terms of goods and services fell fully 44%!

Inflation serves the cause of the state by giving it room to run up debts without limit and fund its activities without making the people cough up more revenue. Indeed, that is the primary purpose of the inflationary state. People often say to me that a gold standard is impractical. In fact, that is not the case. It is very practical. It is the free market answer. The state doesn't need to produce money any more than it needs to produce shoes or shirts or clocks. The problem is that we lack the political will to stop the inflation monster.

How many Americans understand how the ability to print money supports the government's ability to wage war? How many in the peace movement understand that, if you want peace, you must work against central banking?

Friday, March 03, 2006

Harry Browne, R. I. P.

Harry Browne, a great libertarian, died March 1.

You can read about Browne at
http://www.lewrockwell.com/rockwell/harry-browne.html and http://www.fee.org/in_brief/default.asp?id=311.

His "The Greatest Mistake in American History: Letting Government Educate Our Children" is at http://www.fee.org/pdf/notes/NFF_0105.pdf.

Harry wrote many articles against U. S. intervention abroad in general and the Iraq War in particular. You can find links to many of those articles at http://www.antiwar.com/blog/index.php?id=P2674.

If you don't have time to read much of what Harry wrote, you owe it to yourself to read what he wrote on September 12, 2001--the day after 9/11 (http://www.antiwar.com/orig/browne2.html).

Here's a short excerpt:

What should be done?

First of all, stop the hysteria. Stand back and ask how this could have happened. Ask how a prosperous country isolated by two oceans could have so embroiled itself in other people's business that someone would want to do us harm. Even sitting in the middle of Europe, Switzerland isn't beset by terrorist attacks, because the Swiss mind their own business.

Second, resolve that we won't let our leaders use this occasion to commit their own terrorist acts upon more innocent people, foreign and domestic, that will inspire more terrorist attacks in the future.

Third, find a way, with enforceable constitutional limits, to prevent our leaders from ever again provoking this kind of anger against America.

A voice of sanity in an insane world.

Wednesday, March 01, 2006

Restore The Republic! Part II

What's the difference between a republic and a democracy? Walter Williams, an economist at George Mason University in Virginia, discusses the differences at http://www.capmag.com/article.asp?ID=4588.

Here's an excerpt:

In a republican form of government, there is rule of law. All citizens, including government officials, are accountable to the same laws. Government intervenes in civil society to protect its citizens against force and fraud but does not intervene in the cases of peaceable, voluntary exchange.

Democracy, what the Bush administration calls for [in Iraq], is different.

In a democracy, the majority rules either directly or through its elected representatives. The law is whatever the government determines it to be.

Laws aren't necessarily based upon reason but power. In other words, democracy is just another form of tyranny -- tyranny of the majority.

Williams goes on to claim that

The ideal political model for Iraq is Switzerland's cantonal system

and he describes some of the details of Switzerland's federal government.

Restore The Republic!

In an earlier post, "Voting Is Not Freedom" (http://livefreeormove.blogspot.com/2006/02/voting-is-not-freedom.html), I wrote,

We should shun democracy once and for all. We should restore our Republic. We should restore our Constitution. And we should end the empire, close all of our overseas bases, and bring home ALL of the troops.

Today, Jacob Hornberger writes as follows (http://www.fff.org/blog/jgh2006-03.asp):

There are some who think that simply exiting from Iraq is the solution to America’s woes. Not so. That would be like giving aspirin to someone who has cancer. The American people must go much deeper than that and ask themselves much more profound questions as to the future direction of our nation. As the new documentary “ Why We Fight” suggests, the most important foreign policy question that we must debate in this country, especially in the wake of the Iraq debacle, is: Should we continue the U.S. government’s role as international policeman, invader, and interloper or should we instead bring an end to the U.S. Empire and restore a constitutionally limited republic to our land?

Separation Of Ports And State

The real issue is not whether or not a company (Dubai Ports World) owned by a foreign government should be entrusted with running some terminals at some East Coast ports. As Sheldon Richman points out, the real issue is whether government should be entrusted with providing security at the ports!

Here's an excerpt from Sheldon Richman's article, "Imperial Troubles", posted today at http://www.fff.org/comment/com0603a.asp:

It is worth mentioning that knowledgeable people say that port security is a problem no matter who is managing the terminals. No surprise here: who’s in charge of port security? The federal government. And who owns the ports? Local governments and government-created authorities. No wonder the ports are insecure. Can you imagine a private profit-seeking company leaving itself vulnerable to terrorism? This suggests a way out of the port problem: privatize them.