Tuesday, May 29, 2012

mujerchile: This is a defining moment in history.

This is a defining moment in history.

President Barack Obama and First Lady Michelle Obama greet the U.S. Navy's first contingent of women submariners to be assigned to the Navy's operational submarine force, in the Blue Room of the White House, May 28, 2012. The 24 women were accepted into the Navy's nuclear submarine program after completing an intensive training program and serve on ballistic and guided missile submarines throughout the Navy. Also attending were ADM Mark Ferguson, left, Navy Secretary Ray Mabus and Defense Secretary Leon Panetta, right. (Official White House Photo by Pete Souza)

President Barack Obama and First Lady Michelle Obama greet the U.S. Navy's first contingent of women submariners to be assigned to the Navy's operational submarine force, in the Blue Room of the White House, May 28, 2012. The 24 women were accepted into the Navy's nuclear submarine program after completing an intensive training program and serve on ballistic and guided missile submarines throughout the Navy. Also attending were ADM Mark Ferguson, left, Navy Secretary Ray Mabus and Defense Secretary Leon Panetta, right. (Official White House Photo by Pete Souza)


Rodrigo González Fernández
Diplomado en "Responsabilidad Social Empresarial" de la ONU
Diplomado en "Gestión del Conocimiento" de la ONU
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Five Ways to Avoid the Next Facebook IPO Fiasco

Five Ways to Avoid the Next Facebook IPO Fiasco

On the heels of the Facebook IPO fiasco, many investors are wondering how they can find the next best thing and avoid getting "facebooked" in the process.

Tall order? Not really.

First, look for companies with ideas that can be applied across a wide variety of industries.

If I had said this five years ago, you'd be looking for Internet- related startups or companies that can do "it" better, faster or cheaper.

Going forward however, I think the true innovation will be exponential progress that's made linking living systems with their digital counterparts. Everything from synthetic biology to computational bioinformatics will grow a lot more rapidly than the broader markets.

So will key markets related to healing human illness, solving hunger and figuring out how to deliver potable water to broad swathes of the planet.

No doubt there will be tremendous ethical challenges along the way, but I believe we will see the line blur between what's needed to live and how we actually live our lives.

Though it's hard to imagine given the state of the world at the moment, I believe a fair number of the best up- and- coming investments will be outside the traditional first- tier markets of the United States, Europe and Japan.

In fact, I'd bet on it.

Second, don't confuse the ability to organize or share information with the ability to generate revenue

One might lead to the other but they are not the same thing.

The way I see it, Facebook is a classic example of everything you don't want in a business. It is 900 million users who spend an average of $1.32 a year. Compare that to Amazon.com, which clocks in at a much more valuable and consistent $36.52 per person.

Call me crazy, but I don't think Facebook stock will see the bottom for a while. As I wrote last Friday, at best Facebook is worth $7.50 a share.

Revenue is slowing. Facebook doesn't dominate the mobile markets that are becoming the preferred consumer channel for tens of millions of people. And, in what is perhaps the death knell, startups are already cannibalizing Facebook's user base.

The ability to "like" somebody is really no different than signing their yearbook in high school --only you're using a computer and the Internet to do it.

Third, hunt for ringe thinkers working in their garages.

It's not enough to think differently. The next big things will come from those thinkers operating on the fringes of what the rest of us consider normal.

For example, there's a self-taught school dropout mechanic in Wichita, KS, named Johnathan Goodwin who turned the automobile industry on its ear by figuring out how to convert gas- guzzling hummers into biodiesel trucks and 100 mpg hybrids. Detroit said it couldn't be done yet his company, H-Line Conversions, proved them wrong. Don't forget that Bill Hewlett and Dave Packard started H-P in their Palo Alto garage. Incidentally, their first product was not a computer but an audio oscillator Walt Disney purchased to make the film Fantasia.

Then there's eBay (Nasdaq: EBAY).

Now an institution, eBay has created several millionaires like Jordan Insley and Sarah Davis. Insley has sold more than $8 million worth of electronics via eBay, while Davis has moved more than $4 million worth of designer handbags online. Many eBayers operate from their garages quite literally.

Steve Jobs and Steve Wozniak also built the first Apple computers in Jobs's parents' garage. And the rest, as they say, is history.

Fourth, be a "nowist" instead of a futurist.

Joi Ito, Director of MIT's Media Lab and an early stage investor in both Twitter and Flickr, notes that the ability to respond to suddenly emerging trends is key.

I agree.

It's one thing to identify long- term trends, but it's entirely another to understand the moves you need to make ahead of time.

Consider what's happened during this financial crisis.

Most investors were totally unprepared for the chaos in 2007 just as they were in late 1999. On the other hand, those who had prepared for the unexpected did just fine, including many Money Map Report subscribers.

Why? - Because they invested in companies that had strong international sales, diversified assets, competent management and healthy cash flow. In other words, the "glocals" I've favored and will continue to favor until this mess resolves itself one way or the other.

These are the companies that are quite literally prepared for anything. Many, like ABB Ltd. (NYSE: ABB), CNH Global NV (NYSE:CNH), SPDR Gold Shares (NYSEArca: GLD), and iShares Silver Trust (NYSEArca: SLV) actually melted-up in the triple digits.

Now, with the markets getting ready to roll over again, we're preparing to repeat the process if needed.

Fifth, watch people and travel if you can.

I got started people watching with my grandmother, Mimi. You've heard me talk about her before.

She was widowed at a young age and managed to turn a small life insurance settlement into the money she needed to live out her life in style by becoming an extremely savvy self-taught investor.

We used to go to malls, the country club and even to burger joints (her favorite) just to watch the sea of humanity that paraded in front of us.

At the time, I didn't really understand what she was looking for. Over the years, though, I began to understand Mimi was also watching how and what people bought.

Were they more interested in bulk purchases? Did they favor ultra-expensive goods or counterfeits? Were they paying in cash or whipping out credit cards?

She paid particular attention to folks she referred to as the "most important consumers on the planet"...our middle class. Mimi reasoned that what and where they were buying told her a lot more about the state of the economy than any "five dollar dandy" in a suit on Wall Street ever could.

To this day, that's why I watch the same- store sales for Wal- Mart (NYSE: WMT) and McDonalds Corp. (NYSE: MCD) very closely, among other data points .

And, when I'm travelling, I go out of my way to plunk down in a local shopping mall if I can.

Sometimes this involves luxury goods carried by those stores in Shanghai's Xintiandi shopping complex or along the Avenue des Champs-Elysees in Paris.

Other times, it's simply a Publix Market in Sarasota, FL, that catches my attention or the Vivre near our home in Kyoto.

Either way, the cross section of humanity I see helps me recognize patterns that, in turn, represent opportunities others don't yet see or recognize.

T here are all kinds of ways to spot the next big thing. No one data point is going to present the single "aha" you need, but together they may form a massive blinking sign.

I hope I'm smart enough to "see" it.

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Rodrigo González Fernández
Diplomado en "Responsabilidad Social Empresarial" de la ONU
Diplomado en "Gestión del Conocimiento" de la ONU
Diplomado en Gerencia en Administracion Publica ONU
Diplomado en Coaching Ejecutivo ONU( 
 CEL: 93934521
Santiago- Chile
Soliciten nuestros cursos de capacitación  y consultoría en GERENCIA ADMINISTRACION PUBLICA -LIDERAZGO -  GESTION DEL CONOCIMIENTO - RESPONSABILIDAD SOCIAL EMPRESARIAL – LOBBY – COACHING EMPRESARIAL-ENERGIAS RENOVABLES   ,  asesorías a nivel nacional e  internacional y están disponibles  para OTEC Y OTIC en Chile

Thursday, May 24, 2012

Sponsor a Mises University Student

Sponsor a Mises University Student

Mises Daily:Thursday, May 24, 2012 by


The right instructor can change a student's life. I know. It happened to me. Looking through the course catalog at UNLV years ago, I noticed the class "EC 742 — History of Economic Thought. Instructor: Rothbard." I didn't know who Murray Rothbard was. I hadn't ever heard of Austrian economics. I didn't know what a libertarian was. I was in my late 20s but hadn't thought much about my worldview at all.

I asked a fellow student about the course, and he urged me not to take the class with Rothbard. "He's a kook," said the student, providing the worst advice in academic history. "Take the class independent study." He then suggested one of the many Keynesian instructors at UNLV.

I decided to take EC 742 with Rothbard anyway and my life was changed forever. My eyes were opened. The lightbulb was turned on. I was struck by Rothbard's Austrian lightning.

Most of my classes at UNLV were very forgettable, but classes with Rothbard changed my mindset. He made me understand that peace and prosperity can only come from free markets and liberty. It is a message that will save the world.

Although Murray is no longer with us, his colleagues and students are here to pass his wisdom on to a whole new generation of students each year at Mises University. "There exists nothing as comprehensive, learned, or world-class as Mises U," Amherst College's Gregory Campeau wrote about MU a couple years ago. "If taken seriously, it can be a life-changing week in your intellectual life."

A gift to fund Mises University is a gift that doesn't just educate the students who come to Auburn for an intense week of morning-to-night education; many of these students will go on to educate hundreds and in some cases thousands of students themselves. Students you will never meet but who, because of your gift, will be educated about the benefits of a free economy and free society instead of learning the same old Keynesian claptrap. Your generosity is leveraged many times over in the advancement of freedom.

The importance of Mises University has never been greater.

The mainstream financial press calls this the worst economic recovery in history. Bernanke's Fed and the Obama administration have thrown everything at the economy but the kitchen sink, and even the phony government numbers are punk. GDP grew 3 percent in 2010, 1.7 percent in 2011, and 2012 doesn't look any better. Millions are unemployed and many more millions have given up. Uncle Sam provides groceries for 46 million Americans.

While government and its captive press desperately want to characterize the current economy as a recovery, it is anything but. And for young people it is a tragedy. "I've never seen the world so bad for young people. The only way I can describe it is as a Great Depression," said Andrew Sum, director of the Center for Labor Market Studies at Boston's Northeastern University, who has studied young-adult unemployment in depth.

"Mises University has helped me in my search for truth and purpose — it has convinced me to become a professor."
– Michael Szpindor Watson, University of Illinois, Chicago

The number of young adults in their 20s without jobs is the highest since recordkeeping began after World War II, and the bleak outlook has barely improved even as the broader US economy has seen new hiring in recent months.

Only 55 percent of Americans in the 16-to-29 age bracket were working in 2010, which is down dramatically from 67 percent in 2000. However, the situation is even worse than those numbers indicate. That's because millions of young adults are also underemployed, working part time while looking for a full-time job — the modern term for that being "mal-employed," which means holders of college degrees working low-end jobs.

The average young college graduates don't know what hit them. They've done everything they were told. They went to good universities, persevered, earned their diplomas, and collectively piled up a trillion dollars in debt doing it. Now, depending on their major, they're tending bar or waiting tables.

Northeastern's Sum is outraged that the Obama administration hasn't created a stimulus plan to employ college graduates. "We've betrayed our young people badly," he said.

However, government has betrayed young people with its continuous meddling in the economy. The future is cloudy because of the endless stimulus plans, high taxation, and overregulation by government busybodies. The Federal Reserve continuously prints money, bailing out bankrupt businesses, allowing these capital wasters to destroy the resources that could spur job growth.

The Fed-induced booms and busts have decimated the retirement savings of older Americans, at the same time that price inflation keeps those hoping to retire from saving enough. Instead, they must remain on the job rather than enjoy retirement, denying positions to young people.

The worst of it is, Ben Bernanke has every intention of making matters worse. He believes it when people call him the foremost authority on the Great Depreciation. The Fed chair believes he must flood the world with money to eradicate deflation. He holds the dangerous notion in his head that he knows just the right amount of money to inject and just the proper interest rate to fix in order to centrally plan the economy.

He told a 60 Minutes TV audience a couple years ago that he was 100 percent certain of being able to control inflation. But the nation's high unemployment bothers him, and he thinks he can fix it with more money. He's wrong, but he doesn't understand that he's wrong.

What government is doing to the futures of young people makes Mises University more important now than ever before. They deserve to know the truth. Mises U provides students an education they can't obtain anywhere else. There is absolutely nothing like it: six days of systematic training in the Austrian School of economics from a world-class faculty — all made possible by donors like you.

"Mises University has been an amazing experience and has stimulated my continued interest in studying economics and spreading the message of liberty. I feel very privileged to have had this opportunity."
– Sam Selikoff, Boston College

Students leave the Mises Institute with an understanding of the evils of government force and meddling. They are not only informed and educated but inspired to change the world by teaching and promoting liberty and free markets. "My experiences at Mises U will stick with me for the rest of my life and allow me to further educate others about liberty and freedom," writes 2011 MU attendee Nga Nguyen from the University of Louisville.

Universities aren't doing the job, so we must. With your help, we can produce more scholars like Bob Murphy, Tom Woods, Mark Thornton, Peter Klein, and Timothy Terrell, all of whom started as MU graduates and are now instructors at Mises U and making a difference on college campuses and the world of ideas.

In 26 years, Mises University has produced hundreds of talented professors teaching in universities all over the world. Imagine how important this is. Students attending state and private universities would never be exposed to the ideas of the free market if not for instructors trained at Mises University.

Students who go on to other professions will be that much more prepared to succeed in an economy made more challenging by big government every day, understanding that the standard of living we do enjoy comes from the entrepreneurial genius of businesspeople who persevere through the government interference.

Mises U includes lectures, discussion groups, and panels that run from morning until night. It all ends with oral examinations, evaluations, and a graduation ceremony. It is not only educational but highly inspiring. With your help we recruit smart young people into the world of ideas to do battle on behalf of freedom and truth.

Please help us counter the government's economic-lies machine and make the Mises University even better. We have more smart young people than ever, students whose minds and hearts are starved for the intellectual nourishment that only Mises University can provide. We accept only the best: kids who excel in intellect and character, and who want to be taught Misesian economics in the classical manner and dedicate their lives to teaching, inside and outside the classroom.

Students question the authorities and the government's quashing of personal and economic freedoms. They know something is wrong when day-to-day economic news bears no relation to the state of the real economy. They don't believe the mainstream babble, because their job prospects are abysmal and they want to know what caused this mess. At Mises University they gain an academic understanding of the diabolical effects of this government tyranny. The education they receive has relevance each and every day.

Mises, Rothbard, and the rest of the great Austrian thinkers taught us that meddling by Washington and the Federal Reserve will not create economic riches. The malinvestments of the boom must be liquidated, and that liquidation process will continue despite Obama and Bernanke claiming they can reinflate the bubble prosperity. They can't.

In these tough economic times, we know that giving to the causes you believe in is hard. But nothing is more important than ensuring that civilization is given a chance to survive and thrive. Your tax-deductible gift of $100, $50, or any amount, would be great. Your contribution of $500 or even $1,000 would be magnificent. Since its founding in 1982, the Mises Institute has trained thousands of young scholars. But we must do more, especially now that campuses and political life and the media continue to be saturated with economic lies.

Young people want to be free from every form of tyranny. They are eager to change the world and have the energy to make it happen. We must give them the intellectual firepower to do just that.

I'm thankful every day that I took EC 742 with Rothbard. Please help other students be struck by Rothbard's Austrian lightning.

Rodrigo González Fernández
Diplomado en "Responsabilidad Social Empresarial" de la ONU
Diplomado en "Gestión del Conocimiento" de la ONU
Diplomado en Gerencia en Administracion Publica ONU
Diplomado en Coaching Ejecutivo ONU( 
 CEL: 93934521
Santiago- Chile
Soliciten nuestros cursos de capacitación  y consultoría en GERENCIA ADMINISTRACION PUBLICA -LIDERAZGO -  GESTION DEL CONOCIMIENTO - RESPONSABILIDAD SOCIAL EMPRESARIAL – LOBBY – COACHING EMPRESARIAL-ENERGIAS RENOVABLES   ,  asesorías a nivel nacional e  internacional y están disponibles  para OTEC Y OTIC en Chile

Thursday, May 10, 2012

Previous Mises Daily IndexThe Rawlsitarian Paradox

The Rawlsitarian Paradox

Mises Daily: Thursday, May 10, 2012 by


[Free Market Fairness By John Tomasi • Princeton University Press, 2012 • Xxvii + 348 pages]

Free Market Fairness

To write about bleeding-heart libertarianism is no easy task. Self-professed bleeding-heart libertarians, who include well-known political philosophers, now run their own website, and the movement has aroused among libertarians considerable interest. But the bleeding hearts do not profess a unified philosophical point of view. If someone is a Rothbardian, e.g., or an Objectivist, you at once know what views you need to address; not so for a bleeding heart.

If the movement professes no fixed body of doctrine, though, many bleeding hearts seek to combine support for the free market, albeit often in an attenuated form, with a favorable view of social justice, and, in particular, of John Rawls's theory of justice.[1] Though Rawls was of course far from a supporter of the free market, a number of the bleeding hearts believe that his views can, suitably modified, provide a powerful defense of classical liberalism.

John Tomasi does not in Free Market Fairness call himself a bleeding-heart libertarian, but his excellent book offers the best and most comprehensive defense yet to appear of the position just described. Tomasi is a distinguished and imaginative political philosopher who teaches at Brown University, and every reader of his book will learn a great deal from it.

Tomasi describes in an engaging way what led him to what appears at first sight a mixture of incompatible commitments. On the one hand, he found classical liberalism appealing; on the other hand, he was attracted to a conception of justice usually taken to be inimical to that position.

Two classical-liberal ideas especially attracted him. The free market enables people to mold their own lives; no longer need they passively react to the wishes of others.

Growing prosperity seems to give an ever-wider range of people a sense of power and independence. It encourages a special form of self-esteem that comes when people recognize themselves as central causes of the particular lives they are living — rather than being in any way the ward of others, no matter how well meaning , other-regarding or wise those others might be. (p. 61)

Many have criticized the free market because, in Marx's phrase, it is an "anarchy of production": no central body coordinates the vast array of market prices. But this is of course not a failing but a virtue. Hayek has through his notion of "spontaneous order" done a great deal to illuminate why this is so, and Tomasi is impressed:

I am also drawn to the libertarian idea of "spontaneous order." … Friedrich Hayek argues that a free society is best thought of as a spontaneous order in which people should be allowed to pursue their own goals on the basis of information available only to themselves. Along with the moral ideal of private economic liberty, I find the libertarian emphasis on spontaneous order deeply attractive. (p. xii)

Among his fellow political philosophers, support for the free market is decidedly a minority view. Classical liberalism has been overthrown by what Tomasi, following Samuel Freeman, calls "high liberalism":

The distinctive political commitment of high liberals is to a substantive conception of equality. Perhaps as a result, high liberals are skeptical of the moral importance of private economic liberty. Unlike the classical liberals and libertarians, the high liberal ideal of equality leads them to affirm a conception of social or distributive justice. (p. 54)

Clearly, you cannot at the same time consistently be both a classical liberal and a high liberal. But Tomasi makes a surprising claim. The most important theorist of high liberalism is John Rawls, but Tomasi argues that Rawls's conception of justice as fairness, which he accepts, can be adapted to the defense of "market democracy," Tomasi's version of classical liberalism.

Rawls's theory is not the only left-liberal account of social justice on offer, and Tomasi does not intend to "marry market democracy to the Rawlsian program" (p. 105). But "I [Tomasi] choose justice as fairness simply because, once it has been adjusted and corrected according to market democratic principles, it is the conception of liberal justice I find most compelling" (p. 175).

In order to understand Tomasi's claim and to judge its success, it is important to grasp what market democracy means. It is by no means the same as the libertarianism of Rothbard and Nozick.

Within the framework of market democracy, economic liberties can properly be regulated and limited to advance compelling interests of the liberal state.… Unlike strict libertarians, market democrats can join high liberals as well as classical liberal thinkers such as Milton Friedman, F.A. Hayek, and Richard Epstein, who say that the liberals state should be given the power to provide a social minimum funded by a system of taxation. (pp. 91–2).

Tomasi also favors government support of education, e.g., through a voucher scheme. (A complication, which will not be pursued here, is that Tomasi distinguishes two versions of market democracy, democratic laissez-faire and democratic limited government; the second allows somewhat more direct government intervention than the first.)

But even if Tomasi is not a strict libertarian, does not his position differ entirely from that of Rawls, who expressly repudiates as inadequate the "system of natural liberty"? How then can Tomasi arrive at a Rawlsian defense of market democracy?

Tomasi's answer is not the obvious one that will first occur to most readers. Rawls's difference principle allows inequalities that make the worst-off class in society better off than they would otherwise be. Suppose that a great deal of inequality turns out to be to the advantage of the worst off because, e.g., economic incentives strongly motivate people. Would we not have a Rawlsian justification of inequality?

We very well might; but this is not the line that Tomasi takes. The point just considered depends on an empirical hypothesis about how people in the actual world are motivated. Tomasi prefers to operate at a higher level of abstraction. He is concerned, like Rawls himself, with "ideal theory." This consists of two tasks of identification. The first of these

involves identifying a set of principles of justice that expresses our commitment to treat citizens as free and equal self-governing agents. The second identificatory task concerns institutions … we seek to identify institutional regime types that "realize" the principles of justice. (p. 206)

What Tomasi has in mind, then, is this. Rawls's own social-democratic views are simply interpretations of his theory of justice. If we accept Rawls's principles of justice, we are not bound by Rawls's own views about how these principles are to be implemented, and the door to a market-democratic interpretation of Rawls lies open. To think otherwise, Tomasi holds, is to fall victim to what he calls an "ipse dixit" fallacy. "At the extreme, the exegetical approach treats justice as fairness as a plot in the archaeology of ideas rather than as a living, growing research paradigm" (p. 179).

For each of Rawls's principles of justice, then, Tomasi offers an interpretation congenial to market democracy. Rawls's first principle specifies a set of liberties that enjoys lexical priority to the distributive requirements of the second principle.[2] Rawls does not include rights to acquire and hold productive property among the set, but Tomasi does. The ability to engage in business often proves an excellent way to develop one's moral powers. Why, then, exclude it from the list of protected liberties? Tomasi intends this point to apply to what Rawls terms the "special conception of justice," where "social conditions are favorable to the attainment of social justice" (p. 181). He contends that with "prosperity, the existence of thick private economic liberty is for many citizens an essential condition of responsible self-authorship" (p. 183).

Tomasi offers his own understanding of other Rawlsian principles. For fair equality of opportunity, Tomasi stresses the need for each person to have a wide variety of choices, as opposed to efforts to counter the effects of status. For the difference principle, he emphasizes the need to increase through economic growth the wealth of the worst-off class. Not for him are efforts directly to reduce inequalities, e.g., through progressive taxation.

Those of libertarian inclination will find Tomasi's political program far more acceptable that Rawls's own program, but I do not think that Tomasi succeeds in making a Rawlsian case for market democracy. The problem as I see it is that he does not take adequate account of the originality of Rawls's approach to political philosophy.

The situation that drives Rawls to his theory is that of people in a large society like the United States who are divided by conflicting conceptions of the good. Some of these conceptions may be better than others, and one may in fact be the correct one: Rawls does not commit himself on this question. But none of these conceptions can be shown to be true in the strong sense that it would be unreasonable for anyone to reject it. This state of affairs Rawls terms "the fact of reasonable pluralism."

Given reasonable pluralism, it would be wrong for the holders of one conception to impose their views on others; respect for others requires that we defend our political views with reasons others could acknowledge. Our aim, Rawls holds, should not be a mere modus vivendi with those who profess other conceptions of the good. Rather, we should seek a stable society in which people decide disputed questions by democratic discussion.

He intends the principles of justice to give the conditions under which such democratic decisions can take place. Herein lies Rawls's originality. By inquiry into the conditions of a stable regime, given the fact of reasonable pluralism, one can avoid appeals to controversial moral intuitions or problematic moral theories like utilitarianism. His approach to justification is "political, not metaphysical."

Why did I embark on this elementary account of Rawls's theory? The reason is to bring out that to adopt a Rawlsian account of justice, one must accept democratic participation in a strong sense. For Rawls, the people in a society are bound to one another by special ties and decide political questions together. The echoes of Rousseau here are not accidental.[3]

Tomasi, it is clear, is not committed to this sort of democracy. People on his account need not value at all the process of deciding questions together with other citizens (though of course they are not precluded from doing this) He seems to me entirely right that productive business activity has great value; but this claim, right or not, derives from a particular conception of the good, not from asking for the presuppositions of democratic decision making under the condition of reasonable pluralism. In like fashion, the egalitarian implications Rawls finds in his principle of fair equality of opportunity and in the difference principle are not simply interpretations of his own that reflect distaste for wealth. Rather, once more they are plausibly taken as necessary conditions for the type of democratic participation Rawls favors.

Why does any of this matter? Suppose Tomasi responds that he rejects the democratic solidarity that Rawls wishes to promote. If he does this, though, then his defense of his interpretations of political liberty, fair equality of opportunity, and the difference principle depend on his own conception of the good. Like most political philosophers, he is reduced to his own moral intuitions or moral theory. He has abandoned the distinctive Rawlsian method of political justification.

I do not at all contend that he is wrong to do so: I am not a Rawlsian.[4] But Tomasi ought to be clear that, though he has adopted some Rawlsian themes, he has proceeded in an un-Rawlsian way. Many of the words of Rawls are present in Tomasi's book, but not the music.

Taken apart from the misleading Rawlsian framework, Tomasi's book contains many good arguments in defense of classical liberalism. But the intuitions that underlie these arguments must be weighed against other intuitions and arguments, in particular those that support the more stringent libertarianism from which Tomasi recoils.

Tomasi has little use for strict libertarians. They consider property rights "absolute"; by this he appears to mean that they would not allow the interventions by government such as the social-safety need and provision of vouchers that he thinks acceptable. He remarks that libertarians, like high liberals,

single out the economic liberties for special treatment. But instead of lowering the status of the economic liberties, libertarians elevate them above all others. Economic liberties become the weightiest of all rights. Indeed, libertarians such as Jan Narveson assert that liberty is property. (p. 48, emphasis in original)

But if, as Narveson and Rothbard think, all rights can be analyzed as property rights, how does it follow that property rights are more important than other rights? To the contrary, the conclusion negates the premise. If there are no rights besides property rights, property rights cannot be more important than property rights. If Tomasi means that libertarians believe that property rights in the ordinary-language sense exceed in importance other rights such as civil liberties, this by no means follows from the libertarian view of property. In fact, it is directly contrary to Rothbard's own view that self-ownership is the primary right.

I do not want to close on a critical note. My favorite passage in the book is this:

From George Washington's warning to avoid the dangers of exclusive economic and military pacts with other countries … to James Madison's proposal of a constitutional amendment requiring political leaders wishing to go to war to raise funds from current taxes (rather than hiding the costs through borrowing), advocates of limited government have long been among the strongest critics of the politico-military establishments common with contemporary states … the very idea of a large publically funded military-industrial complex runs against the grain of market democracy. (p. 263)

That is well said indeed.


Rodrigo González Fernández
Diplomado en "Responsabilidad Social Empresarial" de la ONU
Diplomado en "Gestión del Conocimiento" de la ONU
Diplomado en Gerencia en Administracion Publica ONU
Diplomado en Coaching Ejecutivo ONU( 
 CEL: 93934521
Santiago- Chile
Soliciten nuestros cursos de capacitación  y consultoría en GERENCIA ADMINISTRACION PUBLICA -LIDERAZGO -  GESTION DEL CONOCIMIENTO - RESPONSABILIDAD SOCIAL EMPRESARIAL – LOBBY – COACHING EMPRESARIAL-ENERGIAS RENOVABLES   ,  asesorías a nivel nacional e  internacional y están disponibles  para OTEC Y OTIC en Chile

Wednesday, May 09, 2012

The Ultimate Disorganizing Organization

The Ultimate Disorganizing Organization

Mises Daily: Wednesday, May 09, 2012 by 


[Testimony before US House Committee on Financial Services Domestic Monetary Policy and Technology Subcommittee, May 8, 2012]

I specialize in the economic theory of organizations — their nature, emergence, boundaries, internal structure, and governance — a field that is increasingly important in economics and was recognized with the 2009 Nobel Prize awarded to Oliver Williamson and Elinor Ostrom. (Ronald Coase, founder of the field, is also a Nobel laureate.) Much of my recent research concerns the economics of entrepreneurship and the entrepreneurial character of organizations, both private and public. Like business firms, public organizations such as legislatures, courts, government agencies, public universities, and government-sponsored enterprises seek to achieve particular objectives, and may innovate to achieve those objectives more efficiently.[1] Public organizations, like their for-profit counterparts, may act entrepreneurially: They are alert to perceived opportunities for gain, private or social, pecuniary or not. They control productive resources, both public and private, and must exercise judgment in deploying these resources in particular combinations under conditions of uncertainty. Of course, there are important distinctions between private and public organizations — objectives may be complex and ambiguous, performance is difficult to measure, and some resources are acquired by coercion, not consent.

In the remarks below I evaluate the Federal Reserve System — and the institution of central banking more generally — from the perspective of an organizational economist. While I strongly disagree with many of the key policies of the Federal Reserve Board both before and after the financial crisis and Great Recession, my argument does not focus on particular actions taken by this or that chair and board. The problem is not that the Fed has made some mistakes — perhaps addressed by restating its statutory mandate, scrutinizing its behavior more carefully, and so on — but that the very institution of a central monetary authority is inherently destabilizing and harmful to entrepreneurship and economic growth.

A central bank is a government entity in charge of the monetary system — an entity that "controls the money supply," in layman's terms — with the task of maintaining "price stability," achieving a "full employment" of the economy's resources, and other national economic performance objectives. (The Federal Reserve System is charged explicitly with achieving both price stability and full employment, the so-called dual mandate now challenged by proposals from Representatives Pence and Brady.[2] ) The Fed, like other modern central banks, also serves as a "lender of last resort" tasked with protecting the financial system from bank runs and other panics by standing ready to make loans to commercial banks, using funds that are created instantly, from nothing, at the click of a mouse.

The central bank's job, in short, is to "manage" the monetary system. As such, it is the most important economic-planning agency in a modern economy. Money is a universally used good and the loan market, through which newly created money enters the economy, is at the heart of the investment process. Ironically, though economics clearly teaches the impossibility of efficient resource allocation under centralized economic planning, as demonstrated (theoretically) in the 1920s and 1930s by economists such as Ludwig von Mises and F.A. Hayek,[3] and (empirically) by the universally recognized failure of centrally planned economies throughout the 20th century, many people think that the monetary system is an exception to the general principle that that free markets are superior to central planning. When it comes to money and banking, in other words, it is essential to have a single decision-making body, protected from competition, without effective oversight, possessing full authority to take almost any action it deems in the best interest of the nation. The organization should be run by an elite corps of apolitical technocrats with only the public interest in mind.

And yet everything we know about organizations with that kind of authority without oversight or any external check or balance tells us that they cannot possibly work well. Just as economy-wide central planners lack the incentives and information to direct the allocation of productive resources, monetary planners lack the incentives and information to make efficient decisions about open-market operations, the discount rate, and reserve requirements. The Fed simply does not know the "optimal" supply of money or the "optimal" intervention in the banking system; no one does. Add the standard problems of bureaucracy — waste, corruption, slack, and other forms of inefficiency well known to students of public administration — and it becomes increasingly difficult to justify control of the monetary system by a single bureaucracy.[4]

"Do we really want a system in which one person's personality type has such a huge effect on the global economy?"

This is especially true when the good in question is money, the only good that exchanges against all other goods, meaning the good in which all prices are quoted. Mismanagement of the money supply not only affects the general price level but distorts the relative prices of different goods and industries, making it more difficult for entrepreneurs to weigh the benefits and costs of various forms of action, leading to malinvestment, waste, and stagnation. Price inflation rewards debtors while punishing savers, just as artificially low interest rates reward homeowners while punishing renters.

Instead, market forces should determine levels of borrowing and saving, owning and renting, and entrepreneurial activity. Put differently, the monetary system is so important that it cannot be entrusted to a government agency — even a scientifically distinguished, nominally independent, prestigious organization like the Federal Reserve System.

Critics of discretionary monetary policy have argued for fixed rules, such as Milton Friedman's famous recommendation of a fixed rate of money-supply growth, or Professor Taylor's more accommodating set of countercyclical rules.[5] Others debate whether inflation targeting or nominal-income targeting is a more straightforward and realistic policy for the Fed.[6] However, none of these proposals is as effective as eliminating the monetary authority altogether, and relying on the voluntary decisions of market participants to determine the money supply and interest rates. A commodity standard, for example, removes even the possibility of central-government intervention in the monetary system. If rules are better than discretion, the best policy is to eliminate all discretion, and to achieve a monetary standard that is wholly independent of political or technocratic interference.

The Fed's Performance before and after 2008

My own views on monetary theory and policy derive from the "Austrian School" of Ludwig von Mises, F.A. Hayek, Murray N. Rothbard, and other important scholars and analysts.[7] From this perspective, the cause of the housing bubble was not irrational exuberance, corporate greed, or lack of regulation but the highly expansionist monetary policy of the Fed under Chairmen Greenspan and Bernanke.[8] After the dot-com crash the Fed turned on the printing presses, increasing the monetary base by 5.6 percent in 2001, 8.7 percent in 2002, and 6.3 percent in 2003, while MZM rose by 15.7 percent, 13.0 percent, and 7.3 percent during those years. Greenspan slashed the federal-funds rate from 6.5 percent in January 2001 to 1 percent by June 2003, keeping it at 1 percent until late 2004, a level not seen since 1954. This infusion of credit led to overinvestment in housing and other capital-intensive industries, aided by federal-government policies designed to increase the rate of homeownership by relaxing underwriting standards.[9]

The correct response to the collapse of Lehman Brothers on September 16, 2008, and Washington Mutual ten days later, would have been to let these insolvent institutions fail and to encourage a massive deleveraging of the economy and an increase in savings and investment. An economic crisis represents a misallocation of productive resources, and the best policy response is to allow market participants to redirect resources from lower- to higher-valued uses. In short, once investments are revealed to be mistakes, it is critical to let the market liquidate the bad investments as quickly as possible to make them available for other purposes.[10] Of course, physical and human resources cannot be instantly and costlessly reallocated to alternative uses. However, contracting parties should be allowed to renegotiate resource use without central banks getting in the way. Existing mechanisms for liquidating existing investments and organizations, such as bankruptcy, should be used where appropriate.

The Fed, working hand in hand with the Treasury Department under the Bush and Obama administrations, has done precisely the opposite, bailing out insolvent financial institutions and industrial concerns, driving interest rates to zero, and injecting trillions of dollars into the financial system — increasing the monetary base, for example, by an average of 33.7 percent per year between 2008 and 2012, a cumulative increase of 198 percent. In short, the Fed's philosophy has been to prevent, as much as possible, entrepreneurs from liquidating any bad investments — indeed, to perpetuate those bad investments as long as possible. Insolvent financial institutions, rather than go through bankruptcy and reorganization, with poorly performing executives replaced by better ones, have received billions of dollars of free money. Incompetent executives remain at the helm.

The Fed Has Too Much Power

The Fed's defenders acknowledge that its recent actions are controversial. But, they say, that is the nature of the beast. Someone has to be in charge of the monetary system, and during a crisis, leaders have to make tough decisions. If not the Fed chairman and staff — intelligent, competent, well-trained economists — who else? Who better than the distinguished Princeton macroeconomist Ben Bernanke?

Economist Lawrence Ball produced an interesting paper in February of this year on the psychology of the chairman.[11] Ball traced the evolution of Bernanke's thinking between 2000 and 2012, arguing that, since 2008, "the Bernanke Fed has eschewed the policies that Bernanke once supported." Ball attributes the change in Bernanke's thinking to groupthink and to the chairman's own personality, which Ball describes as shy, withdrawn, and unassertive.

"A naive faith in the wisdom of central bankers to do what's right just isn't good enough."

Without intending to, Ball makes powerful arguments against discretionary monetary policy itself, which relies on a small, elite group of powerful technicians, interest-group representatives, and political advisers to design and implement rules and procedures that affect the lives of millions, that reward some (commercial and investment bankers, homeowners) while punishing others (savers, renters), that shape the course of world events. Under central banking, there are no rules, only discretion. Do we really want a system in which one person's personality type has such a huge effect on the global economy?

Yes, the Fed's defenders insist. It is vital, they say, that the Fed not be constrained in any way from pursuing whatever policies it deems best. Federal Reserve officials are regarded as Plato's philosopher-kings. When a group of distinguished economists expressed skepticism in 2008 about what became the Troubled Assets Relief Program — the government rescue of inefficient, badly managed financial firms, Harvard's Gregory Mankiw offered the following response:

I know Ben Bernanke well. Ben is at least as smart as any of the economists who signed that letter or are complaining on blogs and editorial pages about the proposed policy. Moreover, Ben is far better informed than the critics. The Fed staff includes some of the best policy economists around. In his capacity as Fed chair, Ben understands the situation.… If I were a member of Congress, I would sit down with Ben, privately, to get his candid view. If he thinks [the bailout] is the right thing to do, I would put my qualms aside and follow his advice.[12]

One can hardly imagine a more dangerous perspective on government decision-making. It ignores differences in theoretical frameworks between, say, Keynesian, Austrian, monetarist, new classical, and other economists. It ignores differences in the interpretation of data, which is a matter ofjudgment, not intelligence. It ignores the possibility that key decision-makers, including Fed and Treasury officials, have private and conflicting interests. And of course it ignores normative concerns — some citizens may oppose rewarding incompetent managers with taxpayer funds, regardless of the efficiency consequences. More generally, Mankiw's argument would seemingly apply to any and all forms of government economic planning. Why have markets at all, if we can have smart, well-informed planners directing the allocation of resources?

Sadly, Mankiw is hardly alone in holding to this worldview.[13] It is the implicit philosophy underlying the institution of central banking. And, to be sure, "Ben" did exactly the wrong things. Contrary to a popular storyline that the Fed and other central banks prevented financial catastrophe, and made the Great Recession less harmful than it otherwise would have been, the Fed's actions have made a bad situation much worse, by perpetuating the very structural imbalances that brought about the recession in the first place. The problem with the US economy today is hardly a lack of effective aggregate demand, as Keynesian economists like to say, but a structural imbalance brought about by two decades of cheap credit — imbalances the Fed is working hard to make permanent (e.g., keeping the discount rate close to zero, and promising to do so through the end of 2014). And needless to say, the issue here is not Chairman Bernanke himself but the impossible situation he faces as Fed chair.

Fed Independence

In 2009 a group of economists circulated a petition in support of Federal Reserve "independence," and against congressional attempts to exercise increased oversight and governance.[14] The idea that the Fed must be independent of any external constraint and must not be audited, governed, or supervised in a serious manner has become a shibboleth of contemporary macroeconomic policy. But it should be challenged. I declined to sign the petition, for two reasons:

First, proponents of Fed independence focus exclusively on monetary policy, as if the Fed's congressional critics simply want to know how the federal-funds rate is set. But the Fed conducts not only monetary policy but fiscal policy as well, increasingly so since 2008. If the Fed can buy and hold any assets it likes,[15] if it works hand in hand with the White House and the Treasury to coordinate bailouts in the hundreds of billions of dollars, if it facilitates trillion-dollar deficits by buying all the treasuries the federal government wants to sell, isn't it reasonable to have a bit more oversight? (And don't forget bank supervision. Even the Fed's defenders recognize a need to separate its monetary-policy and bank-supervision roles. But as long as the Fed continues as a bank regulator, shouldn't someone be watching the watchmen?)

"Central banks don't fight inflation; they create it."

Second, and more generally, the Fed is a national economic-planning agency, and it performs about as well as every national economic-planning agency in history. Have we learned nothing from the collapse of centralized economic planning in the Eastern bloc, its demise in China, and its crippling hold on places like North Korea?

"Independence," in this context, simply means the absence of external constraint. There are no performance incentives and no monitoring or governance. There is no feedback or selection mechanism. There is no outside evaluation. Why would we expect an organization operating in that environment to improve overall economic performance? The Fed is run by men, not gods.

Supporters of independence argue that congressional or other oversight will pressure the Fed to pursue short-term goals (boosting output) at the expense of long-term performance (controlling inflation).[16] But these arguments ignore what economists, following Ronald Coase and Harold Demsetz, call "comparative institutional analysis."[17] Of course, there are potential hazards associated with congressional oversight, but also potential benefits of stronger governance and greater transparency. For instance, exposing monetary policy (and the Fed's other controversial actions, e.g., bailing out foreign central banks) to congressional scrutiny could put pressure on the Fed to service short-term political goals, but under the present system, the Fed can make trillion-dollar bets without any monitoring and feedback system. Unfortunately, cost-benefit analysis is usually forgotten where the Fed is concerned. Consider Mark Thoma's defense of independence:

The hope is that an independent Fed can overcome the temptation to use monetary policy to influence elections, and also overcome the temptation to monetize the debt, and that it will do what's best for the economy in the long-run rather than adopting the policy that maximizes the chances of politicians being reelected.[18]

This naive wish is simply that, a hope. Where is the argument or evidence that a wholly unaccountable Fed would, in fact, "do what's best for the economy in the long-run"? What are the Fed officials' incentives to do that? What monitoring and governance mechanisms assure that Fed officials will pursue the public interest? What if they have private interests? Maybe they are influenced by ideology. Suppose they make systematic errors. Maybe they are unduly influenced by the banking industry or other special-interest groups. To make a case for independence, it is not enough to demonstrate the potential hazards of political oversight; you have to show that these hazards exceed the hazards of an unaccountable, unrestricted, ungoverned central bank. A naive faith in the wisdom of central bankers to do what's right just isn't good enough.

Do We Need a Central Bank?

Without a central bank, how can a monetary system work? Don't we need a central bank to create bank reserves? Isn't the Fed necessary to maintain stable prices? Don't we need the government to create and regulate money? Actually, the reverse is true.

One of the first scientific analyses of the nature and origin of money, Carl Menger's 1892 essay "On the Origin of Money," explains how money — a generally accepted medium of exchange — emerges from the trading patterns of individual market participants.[19] Menger was challenging the then-dominant "state theory of money," which held that money must be created, ex nihilo, by benevolent central planners. Rather, as decades of research in monetary theory and history have shown, there is no need whatsoever for government participation in the monetary and financial system.

Money — whether a physical commodity like gold or silver or their paper equivalents — is essentially a commodity that is selected and "governed," so to speak, by the choices of entrepreneurs and consumers in the market. This is as true today, in an era of paper currencies and electronic payments, as it was under the international gold standard.

There is no need for a government agency to increase or decrease the supply of money. Indeed, according to the Austrian School, government attempts to control the money supply create distortions in the economy by interfering with relative prices and warping the capital structure, encouraging the bad investments that manifest themselves over the course of the business cycle. Rather, the value of money should be determined on the market, as part of the normal, day-to-day process of exchanges between money and goods and services.

How, then, is price stability to be maintained? The answer is that the economy doesn't need "stable" prices, just market prices. Some of the proposals discussed at this hearing suggest removing the Federal Reserve Act's language about "maximum employment," keeping just the part about "stable prices." Eliminating the dual mandate would be a step in the right direction, as it would reduce the Fed's incentive to increase the money supply when unemployment rates rise beyond some arbitrary threshold. But the requirement of price stability should be removed as well. The idea that a central bank is needed to maintain a stable or modestly rising price level — to prevent high levels of inflation, in other words — is based on a misunderstanding of inflation. In a growing economy, with a stable or slightly growing money supply (as under a commodity standard), prices will tend to fall, as in the United States during the 19th century, when the US experienced dramatic increases in production and living standards. Price levels rise because the real economy is shrinking or — as is almost universally the case in practice — because the money supply is increasing faster than the increase in real production. Inflation is not caused by an "overheated" economy that the government needs to somehow cool off. Inflation, as Milton Friedman famously put it, is everywhere and always a monetary phenomenon. Central banks don't fight inflation; they create it.

But isn't it vital that a government agency try to control interest rates, keeping interest rates sufficiently low to generate economic growth? Not at all. Interest rates are prices, prices that clear the markets between suppliers and demanders of loans. Increasing the money supply in an attempt to lower interest rates can indeed give the economy a short-term "boost," but at the cost of channeling resources into areas — housing, for instance — where the market does not want them to go. Driving down interest rates below their market-clearing rates does not create real economic growth but only distortions, by making it more difficult for entrepreneurs to anticipate the future goods and services that consumers will want to purchase, and thus be profitable.[20]

"We don't want a government agency setting the price of tomatoes or shoes or forklifts or computer software; why do we want a government agency setting the price of loans?"

Credit expansion shifts wealth from savers to borrowers (and, in the case of mortgage lending, from renters to owners), from less time-sensitive investment projects to more time-sensitive ones; and from those who are last to receive the new money to those who are first in line.[21] In short, activist monetary policy always, whether intentionally or not, picks winners and losers, increases uncertainty, and destroys real wealth.[22] We don't want a government agency setting the price of tomatoes or shoes or forklifts or computer software; why do we want a government agency setting the price of loans?

What about the need for a lender of last resort? Even proponents of central banking recognize that the lender-of-last-resort function encourages what economists call "moral hazard": banks take on more risk than they would if they had to bear the full consequences of their portfolio decisions. The presence of a central bank, armed with an infinite supply of "liquidity," ready to supply liquidity to any bank in financial distress, discourages prudent behavior.[23]

Diamond and Rajan link the financial crisis to

the actions of the Federal Reserve earlier in the decade, not only in convincing the market that interest rates would remain low for a sustained period following the dot-com bust because of its fears of deflation, but also in promising to intervene to pick up the pieces in case of an asset price collapse — the so-called Greenspan put.[24]

More generally, a dynamic, wealth-creating market economy relies on the power of competition — what Joseph Schumpeter famously called "creative destruction" — to sort between high-valued and low-valued use of resources, including the displacement of less efficient firms by their more efficient rivals. The banking industry is no different. If a bank, like any other business, cannot profitably produce goods and services that its customers demand, it should be liquidated and its assets made available to entrepreneurs who can do a better job. Bailouts, subsidies, and other forms of special privilege for particular entrepreneurs hinder the market process of directing productive resources to their highest valued uses. As Luigi Zingales reminds us, the price of bailouts is "billions of dollars in taxpayer money and, even worse, the violation of the fundamental capitalist principle that she who reaps the gains also bears the losses."[25]

Besides explicit bailouts, implicit subsidies from "too-big-to-fail" guarantees stymie the entrepreneurial selection process, not only by protecting unsuccessful entrepreneurs and entrepreneurial ventures, but also by rewarding lobbying and other forms of rent seeking, directing investment toward subsidized activities (at the expense of consumer preferences), and discouraging entry by nascent entrepreneurs who lack political connections.

These principles apply fully to the banking industry. Of course, financial firms are closely linked through complex transactions and instruments such as derivatives and other contracts. The failure of a particular financial institution imposes costs on various counterparties, including other financial institutions. But the production of virtually every good and service in a mature industrial economy is characterized by a complex, interlocking web of transactions, mutual obligations, and contractual relationships. Banking is not unique in this regard. Yet we do not worry about contagion effects sweeping the computer hardware or retail clothing or dairy industry should one or two leading firms go bankrupt. Moreover, the extent to which parties expose themselves to counterparty risks, in banking or any other industry, depends on the protections offered by the regulatory system. If a computer hardware company knows that it is too big to fail, or that a "computer-industry resource provider of last resort" stands ready to supply labor, machines, and raw materials in case of trouble, that company will engage in all kinds of risky behaviors it would have otherwise avoided.

Alternatives to Central Banking

Many scholars and practitioners support the Federal Reserve System, and central banking more generally, because they cannot conceive of any alternative. "If we got rid of the Fed," they ask, "who would control the money supply?" Of course, to ask the question that way is to answer it: the market would control the money supply, just as it "controls" the tomato supply, the shoe supply, the forklift supply, and the Angry Birds supply.

Exactly how a market-based monetary system would function, what form it would take, and how an economy can transition from government-controlled to market-based money, are interesting and important subjects that have stimulated large and growing academic and practitioner literatures.[26]Most proponents of market-based money favor a commodity standard, though competing paper currencies have been suggested as well.[27] All these schemes have the basic advantage of taking the value of money out of the hands of government planners, allowing it to be determined by supply and demand, as with every other good and service in a market economy.

Another advantage of a commodity standard is that it prevents allowing a central bank to monetize the government's debt by purchasing government bonds (and reducing debt payments by generating price inflation). In the interest of transparency, it is far better to require that federal government spending be financed through taxation or borrowing from the public. Wouldn't this constrain the federal government's ability to "stimulate" the economy with increased spending during times of recession? Yes, and that's exactly the point — a commodity standard imposes fiscal discipline, something the US economy desperately needs. Such discipline would rescue entrepreneurs from the unpredictable and often arbitrary whims of monetary planners, freeing them to invest, innovate, and create economic growth — not just in the long run, but in the short run as well.


There is an old joke about a central-bank official picking up a pizza. (Perhaps it's Chairman Bernanke, on his way home after a long day of quantitative easing.) The clerk asks, "Do you want it cut in six slices, or eight?" The central banker responds: "I'm feeling extra hungry today; better make it eight."

Of course, dividing the stock of goods and services by a larger quantity of money does not create wealth. One of the most important lessons of economic theory is that the only way for a society to generate economic growth is to consume less than it produces. The surplus (real savings) can be invested in the production of capital goods (and innovation) that allows for greater production in the future. Conversely, one of the oldest economic fallacies is the idea that the economy sometimes gets "stuck" with low production and high unemployment due to a shortage of money, and that the way to get it unstuck is to print more money to increase "total spending" — to consume more than the economy produces. Some 60 years ago Ludwig von Mises ridiculed this as the "spurious grocer philosophy" (the merchant's view that his products aren't selling because buyers lack enough currency), noting that this fallacy is essentially the philosophy of Lord Keynes, the 20th-century apostle of central banking and macroeconomic stabilization policy.

Keynes was wrong. Cheap credit does not help bring an economy out of recession (particularly when it was cheap credit that caused the recession in the first place). More generally, a monetary system controlled by an all-powerful central bank is inherently destabilizing and harmful to economic growth. The mistakes made by the Fed before and after 2008 are not isolated incidents, mistakes that can be corrected by making minor changes to the Fed's charter, structure, or independence; they are the predictable result of giving control of the monetary and financial system to a government agency. The best option is to replace the central bank and let the market be in charge of money.

The position advocated here is often dismissed as radical or extreme, a kind of "market fundamentalism" (to use a derogatory term). But it is a reasonable, pragmatic, realistic view. Economics and management scholarship teach that monopoly providers are inefficient and ineffective, and a government monopoly on money is no different. Markets are not perfect, but neither are Fed chairs. It's time to make the supply of money independent of political interference.


Rodrigo González Fernández
Diplomado en "Responsabilidad Social Empresarial" de la ONU
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