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Obama's Sham Constitutionalism

2012-01-12T10:22:00.001-08:00

Obama's Sham Constitutionalism

President Obama's appointment of Richard Cordray to head the new Consumer Financial Protection Bureau (CFPB) is not only unconstitutional, but legally futile under the Dodd-Frank Act, which explicitly requires Senate confirmation as a matter of statute. Roger Pilon discusses Cordray and Obama's other "recess appointments" in an op-ed for the Daily Caller:

Senate confirmation is one of the basic constitutional checks on unbridled executive power. Far from the Senate, "through form, rendering a constitutional power of the executive obsolete," as Kathryn Ruemmler, Obama's White House counsel said yesterday, these "pro forma" sessions are securing the Senate's advice-and-consent power, which Congress's Article I, Section 5 adjournment power should otherwise be sufficient to do. But the Cordray appointment raises statutory problems as well, because the language of Dodd-Frank is clear: "The Secretary is authorized to perform the functions of the Bureau under this subtitle until the Director of the Bureau is confirmed by the Senate in accordance with section 1011." Cordray has not been "confirmed by the Senate." Therefore, he has no authority "to perform the functions of the Bureau under this subtitle."

Pilon is vice president for legal affairs at the Cato Institute.

Gene Healy also discusses the president's abuse of executive power in his column at the Washington Examiner, "Will Congress Stop King Barack the First?"

Fuente:cato

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La Polar: Corte ordenó la prohibición de celebrar actos y contratos sobre créditos pactados

2012-01-12T06:19:00.001-08:00

La Polar: Corte ordenó la prohibición de celebrar actos y contratos sobre créditos pactados

Además, el tribunal de alzada confirmó la resolución que declaró admisible la demanda de interés colectivo difuso interpuesta por el Servicio Nacional del Consumidor (Sernac) en contra de la multitienda.

por: La Segunda Online

jueves, 12 de enero de 2012

► Carabineros que enfrentaron a mujeres en La Araucanía continúan en servicio

► Ministerio dijo que cambiar la ficha de Protección Social "no es de la noche a la mañana"

► El viernes dan a conocer los alumnos preseleccionados en Crédito con Aval del Estado

► PDI detuvo a nueve personas por venta de productos falsificados del Dakar en Arica

► Armada hace llamado a la precaución por marejadas en el Litoral Central

La Corte de Apelaciones de Santiago confirmó la resolución que declaró admisible la demanda de interés colectivo difuso interpuesta por el Servicio Nacional del Consumidor (Sernac) en contra de la multitienda.

En fallo unánime (causa rol 7422-2011), los ministros de la Séptima Sala del tribunal de alzada Mario Rojas, Pilar Aguayo y el abogado integrante Bernardo Lara, ratificaron la determinación del Primer Juzgado Civil de Santiago que había declarado admisible la acción interpuesta por infracciones a la Ley del Consumidor.

Asimismo, el tribunal decretó una medida cautelar en contra de la sociedad administradora de la tarjeta de crédito de la empresa, y ordenó la prohibición de celebrar actos y contratos sobre créditos pactados.

"Que el Servicio Nacional del Consumidor solicitó la medida precautoria de prohibición de celebrar actos y contratos sobre los créditos concedidos a los consumidores, tarjeta habientes de la tarjeta de crédito de La Polar, que han sido objeto de repactación unilateral, y sobre los demás pagarés u otros títulos de crédito que documentaron la deuda contraída por dichos consumidores. Que la solicitud formulada cumple con todos los requisitos legales establecidos para su procedencia y resulta idónea para asegurar el resultado de la acción deducida, la cual ha sido declarada admisible por el tribunal", dice la resolución que, en este aspecto revocó la decisión del juzgado de primera instancia que había desestimado la medida cautelar precautoria.

Fuente:lasegunda

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Twin Deficits

2012-01-12T05:21:00.001-08:00

Twin Deficits

Mises Daily: Thursday, January 12, 2012 by Gary North

[LewRockwell.com, 2011]

There are two deficits that we hear about most: the federal government's deficit and the balance of payments of the United States. They are linked, but they are very different in their effects.

The federal deficit is seen by Keynesians as mostly a benefit and by Austrians as mostly a liability, and for the same reason: higher government spending.

The balance-of-payments deficit is seen by virtually all economists as a benefit for Americans and their creditors. Otherwise, the exchanges would not take place.

At some point, the twin deficits will become unsustainable. Then the debtors will have a choice: either default or else adopt a systematic reversal of policies: debt repayment. This means a federal-budget surplus and a balance-of-payments surplus. Balanced budgets won't do it. There will have to be surpluses.

That day is coming. That will be the day of reckoning — of counting up.

The participants give no indications that they believe that day is coming.

Neither did Greece's politicians in early 2010.

Federal Deficits

The heart of the disagreement between Keynesians and Austrians is easy to state. Each group has a unique selling proposition (USP). I have boiled them down into four words each.

Keynesians: Federal deficits overcome recessions.

Austrians: Tax cuts increase liberty.

If you are a glutton for punishment, you can view my presentation on this at the Mises Institute in 2010:

If you think about this, the positions can both be used to justify federal deficits in the short run. The federal deficit exists because tax revenues do not cover expenditures. Austrians favor lower taxes, no matter what. So, Austrians are concerned with the deficit because spending cuts do not match — or, better yet, exceed — tax cuts. The government continues to expand its operations. The goal of Austrians is to shrink the state. This means spending cuts.

The assumption of the Austrians is as follows. The government is not ready — will never be ready — to cut spending prior to a crisis that forces them to cut spending. They recognize that only a financial crisis will stop the government from spending. So, in the meantime, it is best to take whatever tax cuts we can get. This increases the deficit. But, the Austrian says, there are two ways to have a deficit:

with higher taxes, or
with lower taxes.

Congress is going to spend. Which way is better for liberty? Austrians generally conclude: the lower tax / high deficit way.

But doesn't this mean there will eventually be a Great Default? Yes, it does. But there is going to be a Great Default in either case: high tax or lower tax. So, let us keep more of our after-tax money today and prepare for that default. Congress is going to spend every dime that comes in, and then borrow against future revenues. Nothing will change this, short of a financial crisis when lenders will no longer lend at low rates. Call this the "Greek event."

Keynesians applaud the deficit for a different reason. They see increased government expenditures as an enormous advantage for the economy. Federal borrowing enables the government to increase expenditures in the short run without tax hikes. There is therefore no tax revolt by voters. The government can therefore spend more as a result.

Austrians want less government spending. Keynesians want more government spending. Both sides accept a rising deficit. Keynesians think the deficit gives consumers a chance to increase spending, even if this means taking on more personal debt. They also think there will never have to be a Great Default. They trust deficits and central bank inflation to defer the Great Default forever.

Austrians think the deficit gives future-oriented people time to prepare for the Great Default, which is inevitable in a world dominated by Keynesian economics.

Trade Deficits

An analogous pair of attitudes separate Keynesians and Austrians over the long run, yet unites them temporarily.

Both schools of opinion favor free trade, meaning no sales taxes on imported goods and no import quotas. Both see this as an advantage for customers on both sides of a border, just as they see benefits from people trading across the street or even next door. Both schools of opinion favor customer authority. The difference is this: Keynesians think that economic planners, especially the federal bureaucracy, know best what is good for customers. Austrians think customers know best what is good for them. Keynesians want to use state coercion to benefit certain voting blocs over others. Austrians do not.

So, both groups look at the trade deficit, which is a subset of the balance of payments, and conclude, "no problem." If some customers want to buy more than they sell — that is, if they want to borrow — that is their business.

Both groups of economists know there are limits to this process. A payments imbalance can exist only while lenders agree to lend to borrowers at rates borrowers are willing and able to pay. Loans must eventually be repaid.

But isn't this also true of federal debt? Keynesians admit that, in theory, the US government should run surpluses in good economic times, to reduce the debt. But, in practice, Keynesians never say, "Congress should run a surplus next fiscal year." I do not recall that any Keynesian in the last 50 years has recommended this in public. They may admit in theory that there should be surplus years, in which principal should be reduced, but that is always a theory only, never actual policy.

Austrians, understanding Congress and understanding Keynesians, recognize that federal surpluses cannot last long. So, the debt will grow. The goal, then, is to let taxpayers keep more of their wealth. Run the deficits. Let taxpayers keep more of their wealth. The losers will be the short-sighted lenders who let the US government borrow at historically low rates.

The economists have the same view of trade deficits. It's up to customers to decide where to put their money. If they want to buy imported goods, that is their decision. If exporters want to sell on credit, that is their decision. This is what customer authority and seller's authority is all about.

But isn't it better to be an exporting nation? That is irrelevant for economic theory, say Austrians. What is relevant is individual authority, not political authority. What is relevant is for the government to butt out.

What about government-funded trade subsidies by exporting nations? Austrians say these are a bad idea. The government should butt out. But these subsidies do exist. The Austrians say, "So what?" But doesn't this make American customers dependent on subsidies from foreign governments? The Austrian responds, "Flat-screen TVs are not heroin. If the exporters' subsidies from their governments ever end, Americans will buy fewer imported goods. There will not be widespread withdrawal symptoms. It is silly to think of families' budgeting as a detox program." Again, this goes back to the Austrians' view of individual responsibility. People should be responsible for what they do with their property. Governments should butt out.

Show me an advocate for tariffs as a tool of social planning, and I'll show you a person with a central planner deep inside, trying to get out. "Tariffs must save customers from themselves." So, the tariff supporter wants the government to send out people with badges and guns to tell citizens that they are not allowed to buy imported goods at "unfair" low prices. "I'm from the government, and I'm here to help you." To which an Austrian-influenced shopper asks, "Then why are you pointing that gun at me?"

The critic of trade deficits says, "This can't go on forever." The Austrian says, "Then it will stop." The critic says, "I think the government should use force to make it stop now." The Austrian says, "Why is Congress competent to decide?"

Congress Is the Problem

The reason why there is a trade/payments deficit is this: foreign central banks buy US debt. They create their own domestic currencies and use them to buy US dollars. Then they use these dollars to buy US government debt.

Why do they do this? Because it subsidizes exports. Their domestic currencies do not rise. Foreigners can buy more imported goods.

Every administration wants this to continue. Each administration wants buyers of the government's IOUs. Each administration thinks that there will never be a time to pay off this debt. "Federal debt is forever. Federal debt will grow forever." So, foreign central bank purchases of T-bills at 0.01 percent is free money for the administration.

Politicians like free money even more than customers do. There is a reason for this: the all-or-nothing position of most members of Congress. Congress wants the export nations' subsidies, which holds down Treasury debt interest rates. Unlike Congress, a customer can cut back on his spending and still muddle through. He cuts back at the margin. The politicians cannot cut back on their spending without being threatened by a loss at the next election. It's all or nothing for members of Congress. It's not all or nothing for a buyer of imports.

If a defender of tariffs wants to take a free-market position, he should call for a ban on the sale of all government debt to foreigners. That is where the main export subsidy is. The government should pass a law: "As of [date], the United States government will no longer make interest payments on its debt to any owner of this debt who is not an American citizen. It will also no longer redeem its debt held by noncitizens." Foreigners would start selling their US debt on the day some Congressman begins sending the draft around to other House members. Interest rates would soar. The depression would begin. The Great Default would be next, either openly or by Federal Reserve hyperinflation.

Links between the Deficits

This is why the twin deficits are connected. The US government is running massive deficits. Foreign central banks buy US government debt. This is the main form of their export subsidies: holding down their domestic currencies' price in relation to the US dollar.

There are other links. The main cause of the trade deficit is the cost of imported oil. The US government offers a military safety shield for Saudi Arabia. It allows the Saudis to buy American jets and weapons. The Saudi military is dependent on these exports from the United States. So, the government accepts dollars for oil. It gets OPEC to do the same.

Again, the connecting links are made at the highest level: government to government.

This is good for American consumers of energy. It keeps oil prices low. It is a subsidy from OPEC.

The Austrian economist says, "Make hay while the sun shines. Consume cheap oil while it is still cheap. If Saudi bureaucrats want to sell us their only valuable resource in exchange for government promises to pay, good for American consumers."

It is true that Americans may squander this cheap oil. They may not use the savings to save money the way intensely future-oriented people would. Americans will probably remain present oriented. They will not sacrifice consumption today for more consumption later. But I do not expect Congress to balance the federal budget by cutting spending. I do not expect Congress to become the exemplar of future orientation anytime soon.

Future Orientation

Ludwig von Mises called this time preference. Some people are highly future oriented. They are willing to sacrifice present consumption for even greater future consumption. Mises said they have low time preference. Other people are the reverse. So, at any given interest rate, some people will save more than others.

Mises did not pass judgment on people's motivations. He did pass judgment against government policies that use coercion to restrict people's peaceful pursuit of their own self-interest, as they see it.

There is a crucial economic chapter in the book of Deuteronomy that recommends thrift. It is chapter 28. Here, we read of positive sanctions and negative sanctions relating to credit/debt.

The LORD shall open unto thee his good treasure, the heaven to give the rain unto thy land in his season, and to bless all the work of thine hand: and thou shalt lend unto many nations, and thou shalt not borrow (v. 12).

The stranger that is within thee shall get up above thee very high; and thou shalt come down very low. He shall lend to thee, and thou shalt not lend to him: he shall be the head, and thou shalt be the tail (vv. 43-44).

These passages indicate that it is better to be a creditor than a debtor. But this is another way of saying that it is better to be future oriented than present oriented. Low time preference is better than high time preference. Leadership is better than followership. "The rich ruleth over the poor, and the borrower is servant to the lender" (Proverbs 22:7).

These are ethical issues. They are not technical issues. There is great debate over whether a specific debt is a good idea or a bad idea. The old answer is correct: it depends mainly on whether the debt is for a tool or consumption. Even here, it is not always clear. A consumption debt — water in a drought, food in a famine — may be a good idea. The issue is (1) goal and (2) future orientation. What is the purpose of the goal? If it is accumulation of assets, then the question arises: accumulation for what?

The future-oriented person prefers greater capital in the future to present capital. He may be a miser. He may be a philanthropist with a vision. In either case, his desire for greater wealth in the future is reflected in his low time preference. He will save at a lower rate of return than a high-time-preference person will.

When this outlook is widespread in a society, it will be marked by reduced debt and increased credit. The old Jewish gag is this:

Question: "Why are there gentiles?"

Answer: "Someone has to pay retail."

(This is qualified by an observation made by my Jewish roommate regarding Fresno, California in the 1940s: "When the Armenians moved in, the Jews moved out.") But the gag has a corollary: "Somebody has to borrow." To sell more, you must lend more. Low-time-preference people lend to high-time-preference people. It's win-win, given the time perspective of both groups. But it may be win-lose if either side is incorrect about what lies ahead.

If a nation has the power to inflate its currency, the high-time-preference person may be a winner. The low-time-preference person lends in a currency that is worth a lot. After the inflation, the high-time-preference person pays off the loan by selling an egg. This happened in the German inflation of 1922–23. Farmers won. Urban people lost.

Is the American shopper stupid for buying cheap imports that have been subsidized by some Asian central bank's domestic inflation and its willingness to buy bonds from the US government? Not necessarily. When the Fed inflates, as it will, the Asian central banks will find out how shortsighted their monetary policies were. They will discover that mercantilism fails.

Conclusion

$24.00$14.00

The twin deficits — trade and federal — are linked. They are linked by

the mercantilistic central-bank policy of inflating the domestic currency in order to buy IOUs from the US government, and
the Keynesian policy of increasing US government spending by borrowing.

We have two fiat-money governments specializing in what each does best. The Asians specialize in lending fiat money to buy fiat promises. Congress takes advantage of this blindness of Asians. Both sides say, "Let's party!"

The winners are American consumers — for as long as the party continues.

Gary North is the author of Mises on Money. He is also the author of a free 20-volume series, An Economic Commentary on the Bible. Visit his website: GaryNorth.com. Send him mail. See Gary North's article archives.

This article originally appeared on LewRockwell.com, December 8, 2011.

Comment on this article.

Fuente:http://mises.org/daily/5829/Twin-Deficits

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Perry v. Perez by Ilya Shapiro and Anna Mackin

2012-01-04T07:18:00.001-08:00

The decennial redrawing of electoral districts

Perry v. Perez

by Ilya Shapiro and Anna Mackin

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The decennial redrawing of electoral districts consistently produces extensive litigation. The most notable cases this cycle come, as they often have, from Texas. A number of activist groups challenged the Texas legislature's maps for state house, state senate, and congressional districts, alleging racial discrimination under Section 2 of the Voting Rights Act in a special three-judge federal district court in San Antonio. At the same time, Texas is seeking in another three-judge district court in D.C. the "preclearance" of its maps that it needs to implement them under the VRA's Section 5. Enacted in 1965 to combat pervasive discrimination against black voters in the South, the VRA has exceeded expectations in excising that shameful phenomenon. Its application now, however, stymies the orderly implementation of free and fair elections, particularly in jurisdictions subject not only to the general prohibition on race-based voter discrimination, but also the Section 5 preclearance requirement. Originally conceived as a check on states where discrimination was prevalent in the 1960s, preclearance requires certain jurisdictions to obtain federal approval before changing any election laws. (The Section 5 list is bizarre: six of the eleven states of the Old Confederacy — and certain counties in three others — plus Alaska, Arizona, and some counties or townships in five other states as diverse as New Hampshire and South Dakota. Curiously, (only) three New York counties are covered, all boroughs in New York City. What is going on in the Bronx, Brooklyn, and Manhattan that is not in Queens or Staten Island?) To obtain preclearance, proposed changes may not result in "retrogression," a reduction in minority voters' ability to elect their "preferred" candidates. Section 5 was originally a valuable tool in the fight against systemic disenfranchisement, but now facilitates the very discrimination it was designed to prevent. Indeed, the prohibition on retrogression effectively requires districting that assures that minority voters are the majority in a set number of districts — an inherently race-conscious mandate. The law, most recently renewed in 2006 for another 25 years, is based on deeply flawed assumptions and outdated statistical triggers, and flies in the face of the Fifteenth Amendment's requirement that all voters be treated equally. In any event, because the D.C. court here had not yet ruled on preclearance, the San Antonio court felt obligated to draw "interim" maps for use pending final adjudication of both the Section 2 and 5 cases. Texas filed an emergency appeal with the Supreme Court, arguing that the lower court insufficiently deferred to the Texas legislature's maps. Now on an expedited briefing and argument schedule, Cato filed an amicus brief supporting neither side and arguing that this case demonstrates all that is wrong with the VRA as it currently exists — highlighting the tension between the VRA and the Constitution and the practical difficulties that conflict engenders for election administration. Put simply, the VRA's success has undermined its continuing viability; courts and legislatures struggle mightily and often fruitlessly to satisfy both the VRA's race-based mandate and the Fifteenth Amendment's equal treatment guarantee. We also point out that Section 5's selective applicability precludes the establishment of nationwide districting standards, confounding lower courts and producing different, often contradictory, treatment of voting rights in different states — in large part because Sections 2 and 5 themselves conflict with each other. We note that regardless of the outcome of this litigation, it is unlikely that Texas will have fully legal electoral maps in time to administer the 2012 elections in a fair and efficient manner. These difficulties — constitutional, statutory, and practical — disadvantage candidates, voters, legislatures, and courts, and undermine the VRA's great legacy of vindicating the voting rights of all citizens. The Court should thus schedule this case for broader reargument on the constitutionality of the Voting Rights Act as presently conceived.

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Why Do Languages Die?

2012-01-04T05:30:00.001-08:00

Why Do Languages Die?

Mises Daily: Wednesday, January 04, 2012 by Danny Hieber

The history of the world's languages is largely a story of loss and decline. At around 8000 BC, linguists estimate that upwards of 20,000 languages may have been in existence.[1] Today the number stands at 6,909 and is declining rapidly.[2] By 2100, it is quite realistic to expect that half of these languages will be gone, their last speakers dead, their words perhaps recorded in a dusty archive somewhere, but more likely undocumented entirely.[3]

What causes this? How does one become the last speaker of a language, as Boa Sr was before her death in 2010? How do languages come to be spoken only by elders and not children? There are a number of bad answers to these questions. One is globalization, a nebulous term used disparagingly to refer to either global economic specialization and the division of labor, or the adoption of similar cultural practices across the globe.

The problem with globalization in the latter sense is that it is the result, not a cause, of language decline. Another bad answer, encompassed in the former definition of globalization, is trade and capitalism. Trade does not kill languages any more than it kills any other type of cultural practice, like painting or music. Trade enhances the exchange of cultural practices and fosters their proliferation; it does not generally diminish them. Historically, regional trade has fostered the creation of many new lingua francas, and the result tends to be a stable, healthy bilingualism between the local language and the regional trade language. It is only when the state adopts a trade language as official and, in a fit of linguistic nationalism, foists it upon its citizens, that trade languages become "killer languages."

Most importantly, what both of the above answers overlook is that speaking a global language or a language of trade does not necessitate the abandonment of one's mother tongue. The average person on this planet speaks three or four languages. Must youth in Japan abandon Japanese in order to partake in global English commerce? Must a business executive in Germany stop speaking German to her kids in order to be successful at her English-speaking office? Why bother giving up one language for another when you can just speak both?

The truth is, most people don't "give up" the languages they learn in their youth. They tend to speak those languages either until they die or they no longer have someone to speak them with. Instead, languages are lost when the process of intergenerational transmission is altered or interrupted. To wipe out a language, one has to enter the home and prevent the parents from speaking their native language to their children. Given such a preposterous scenario, we return to our question — how could this possibly happen?

One good answer is urbanization. If a Gikuyu and a Giryama meet in Nairobi, they won't likely speak each other's mother tongue, but they very likely will speak one or both of the trade languages in Kenya — Swahili and English. Their kids may learn a smattering of words in the heritage languages from their parents, but by the third generation any vestiges of those languages in the family will likely be gone. In other cases, extremely rural communities are drawn to the relatively easier lifestyle in cities, until sometimes entire villages are abandoned. Nor is this a recent phenomenon. The first case of massive language die-off was probably during the Agrarian (Neolithic) Revolution, when humanity first adopted farming, abandoned the nomadic lifestyle, and created permanent settlements. As the size of these communities grew, so did the language they spoke. But throughout most of history, and still in many areas of the world today, 500 or fewer speakers per language has been the norm. Like the people who spoke them, these languages were constantly in flux. No language could grow very large, because the community that spoke it could only grow so large itself before it fragmented. The language followed suit, soon becoming two languages. Permanent settlements changed all this, and soon larger and larger populations could stably speak the same language.

Quite impressively for someone with little to no knowledge of the linguistics of his day, Mises had already come to understand these connections between language decline, community growth, and economic exchange even in his earliest writings:

In primitive times every migration causes not only geographical but also intellectual separation of clans and tribes. Economic exchanges do not yet exist; there is no contact that could work against differentiation and the rise of new customs. The dialect of each tribe becomes more and more different from the one that its ancestors spoke when they were still living together. The splintering of dialects goes on without interruption. The descendants no longer understand one other.… A need for unification in language then arises from two sides. The beginnings of trade make understanding necessary between members of different tribes. But this need is satisfied when individual middlemen in trade achieve the necessary command of language.[4]

Thus urbanization is an important factor in language death. To be sure, the wondrous features of cities that draw immigrants — greater economies of scale, decreased search costs, increased division of labor — are all made possible with capitalism, and so in this sense languages may die for economic reasons. But this is precisely the type of language death that shouldn't concern us (unless you're a linguist like me), because urbanization is really nothing more than the demonstrated preferences of millions of people who wish to take advantage of all the fantastic benefits that cities have to offer.

In short, these people make the conscious choice to leave an environment where network effects and sociological benefits exist for speaking their native language, and exchange it for a greater range of economic possibilities, but where no such social benefits for speaking the language exist. If this were the only cause of language death — or even just the biggest one — then there would be little more to say about it. For as Mises so lucidly states,

Since nobody is in the position to substitute his own value judgments for those of the acting individual, it is vain to pass judgment on other people's aims and volitions. No man is qualified to declare what would make another man happier or less discontented. The critic either tells us what he believes he would aim at if he were in the place of his fellow; or, in dictatorial arrogance blithely disposing of his fellow's will and aspirations, declares what condition of this other man would better suit himself, the critic.[5]

Far too many well-intentioned individuals are too quick to substitute their valuations for those of the last speakers of indigenous languages this way. Were it up to them, these speakers would be resigned to misery and poverty and deprived of participation in the world's advanced economies in order that their language might be passed on. To be sure, these speakers themselves often fall victim to the mistaken ideology that one language necessarily displaces or interferes with another. Although the South African Department of Education is trying to develop teaching materials in the local African languages, for example, many parents are pushing back; they want their children taught only in English. In Dominica, the parents go even further and refuse to even speak the local language, Patwa, to their children.[6] Were they made aware of the falsity of this notion of language displacement, perhaps they would be less quick to stop speaking their language to their children. But the decision is ultimately theirs to make, and theirs alone.

Urbanization, however, is not the only cause of language death. There is another that, I'm sad to say, almost none of the linguists who work on endangered languages give much thought to, and that is the state. The state is the only entity capable of reaching into the home and forcibly altering the process of language socialization in an institutionalized way.

How? The traditional method was simply to kill or remove indigenous and minority populations, as was done as recently as 1923 in the United States in the last conflict of the Indian War. More recently this happens through indirect means — whether intentional or otherwise — the primary method of which has been compulsory state schooling.

There is no more pernicious assault on the cultural practices of minority populations than a standardized, Anglified, Englicized compulsory education. It is not just that children are forcibly removed from the socialization process in the home, required to speak an official language and punished (often corporally) for doing otherwise. It is not just that schools redefine success, away from those things valued by the community, and towards those things that make someone a better citizen of the state. No, the most significant impact of compulsory state education is that it ingrains in children the idea that their language and their culture is worthless, of no use in the modern classroom or society, and that it is something that merely serves to set them apart negatively from their peers, as an object of their vicious torment.

But these languages clearly do have value, if for no other reason than simply because people value them. Local and minority languages are valued by their speakers for all sorts of reasons, whether it be for use in the local community, communicating with one's elders, a sense of heritage, the oral and literary traditions of that language, or something else entirely. Again, the praxeologist is not in a position to evaluate these beliefs. The praxeologist merely notes that free choice in language use and free choice in association, one not dictated by the edicts of the state, will best satisfy the demand of individuals, whether for minority languages or lingua francas. What people find useful, they will use.

By contrast, the state values none of these things. For the state, the goal is to bind individuals to itself, to an imagined homogeneous community of good citizens, rather than their local community. National ties trump local ones in the eyes of the state. Free choice in association is disregarded entirely. And so the state forces many indigenous people to become members of a foreign community, where they are a minority and their language is scorned, as in the case of boarding schools. Whereas at home, mastering the native language is an important part of functioning in the community and earning prestige, and thus something of value, at school it becomes a black mark and a detriment. Given the prisonlike way schools are run, and how they exhibit similar intense (and sometimes dangerous) pressures from one's peers, minority-language-speaking children would be smart to disassociate themselves as quickly as possible from their cultural heritage.

The result is that, two generations ago, after the Prussian model of compulsory education had firmly taken root in countries across the world, an entire generation of minority peoples decided that their language was worthless, and when they had children of their own, refused to teach it to them. The impending die-off of languages is no less the result of processes put in motion a century ago by the state as it is the result of continuing hegemony today.

Mises himself, though sometimes falling prey to common fallacies regarding language like linguistic determinism and ethnolinguistic isomorphism, was aware of this distinction between natural language decline and language death brought on by the state. In fact, the entire first chapter of one of his earlier works, Nation, State, and Economy, is devoted to issues of language and the state. He notes,

Quite distinct from natural assimilation through personal contact with people speaking other languages is artificial assimilation — denationalization by state or other compulsion.… If individuals are put into an environment where they are cut off from contact with their fellow nationals and made exclusively dependent on contacts with foreigners, then the way is prepared for their assimilation.[7]

This is precisely what the Bureau of Indian Affairs accomplished by coercing indigenous children into attending boarding schools. Those children were cut off from their culture and language — their nation — until they had effectively assimilated American ideologies regarding minority languages, namely, that English is good and all else is bad.

Nor is this the only way the state affects language. The very existence of a modern nation-state, and the ideology it encompasses, is antithetical to linguistic diversity. It is predicated on the idea of one state, one nation, one people. In Nation, State, and Economy, Mises points out that, prior to the rise of nationalism in the 17th and 18th centuries, the concept of a nation did not refer to a political unit like state or country as we think of it today. A "nation" instead referred to a collection of individuals who share a common history, religion, cultural customs and — most importantly — language. Mises even went so far as to claim that "the essence of nationality lies in language."[8] The "state" was a thing apart, referring to the nobility or princely state, not a community of people (hence Louis XIV's famous quip, "L'état c'est moi.").[9] In that era, a state might consist of many nations, and a nation might subsume many states.

The rise of nationalism changed all this. As Robert Lane Greene points out in his excellent book, You Are What You Speak: Grammar Grouches, Language Laws, and the Politics of Identity,

The old blurry linguistic borders became inconvenient for nationalists. To build nations strong enough to win themselves a state, the people of a would-be nation needed to be welded together with a clear sense of community. Speaking a minority dialect or refusing to assimilate to a standard wouldn't do.[10]

Mises himself elaborated on this point. Despite his belief in the value of a liberal democracy, which would remain with him for the rest of his life, Mises realized early on that the imposition of democracy over multiple nations could only lead to hegemony and assimilation:

In polyglot territories, therefore, the introduction of a democratic constitution does not mean the same thing at all as introduction of democratic autonomy. Majority rule signifies something quite different here than in nationally uniform territories; here, for a part of the people, it is not popular rule but foreign rule. If national minorities oppose democratic arrangements, if, according to circumstances, they prefer princely absolutism, an authoritarian regime, or an oligarchic constitution, they do so because they well know that democracy means the same thing for them as subjugation under the rule of others.[11]

From the ideology of nationalism was also born the principle of irredentism, the policy of incorporating historically or ethnically related peoples into the larger umbrella of a single state, regardless of their linguistic differences. As Greene points out, for example,

By one estimate, just 2 or 3 percent of newly minted "Italians" spoke Italian at home when Italy was unified in the 1860s. Some Italian dialects were as different from one another as modern Italian is from modern Spanish.[12]

$8.00 $5.00

This in turn prompted the Italian statesman Massimo D'Agelizo (1798–1866) to say, "We have created Italy. Now we need to create Italians." And so these Italian languages soon became yet another casualty of the nation-state.

Mises once presciently predicted that,

If [minority nations] do not want to remain politically without influence, then they must adapt their political thinking to that of their environment; they must give up their special national characteristics and their language.[13]

This is largely the story of the world's languages. It is, as we have seen, the history of the state, a story of nationalistic furor, and of assimilation by force. Only when we abandon this socialist and utopian fantasy of one state, one nation, one people will this story begin to change.

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Set Culture Free Mises Daily: Monday, January 02, 2012 by Joel Poindexter ArticleComments Also by Joel Poindexter AA 53 Recently Salon featured an interview with author Robert Levine, entitled "Does culture really want to be free?" Levine has written

2012-01-02T15:03:00.001-08:00

Set Culture Free

Mises Daily: Monday, January 02, 2012 by Joel Poindexter

Recently Salon featured an interview with author Robert Levine, entitled "Does culture really want to be free?" Levine has written a new book, Free Ride, on the subject of intellectual property (IP). His subtitle is How Digital Parasites Are Destroying the Culture Business and How the Culture Business Can Fight Back, the thesis of which is predicated on a misunderstanding of property rights and a poor grasp of economics.

In this essay I'll begin with a brief outline of property rights, explain how IP fails to meet the requirements of tangible property, and refute some of Levine's other fallacies.

Over time, property rights emerged as a way of mitigating conflict over scarce goods. If there is a finite amount of something, say hammers, it's possible that at some point conflict over the use of a tool may arise. Establishing property rights, and institutions to enforce those rights and arbitrate disputes, tends to reduce this conflict.

Hans Hermann-Hoppe explains this concept by using the Garden of Eden as an example, where everything is in abundance. However,

outside the Garden of Eden, in the realm of scarcity, there must be rules that regulate not only the use of [property] but also of everything scarce so that all possible conflicts can be ruled out (emphasis in original).

If there are an infinite number of hammers, or a device exists to infinitely reproduce them, then the problem of scarcity disappears, along with the need for property rights. Intellectual property is not a scarce commodity. Whether it is the design plans to a rocket engine, the arrangement of musical notes, or the pixels of a digital image is immaterial. None of these meet the scarcity requirement to necessitate property rights. Each can be infinitely reproduced, without denying their use by the original owner.

Levine and other advocates of IP rights view reproduction as theft. But theft is not a synonym for duplicate. A key element of theft is depriving the original owner of his or her property, which does not occur when an item is reproduced. Therefore, IP should not have the protection that scarce property enjoys.

In the course of the interview Levine quotes Supreme Court Justice Sandra Day O'Connor regarding copyright and free speech. "The framers intended copyright itself to be the engine of free expression," she said. An interesting argument indeed, considering the actual wording from article 1, section 8 reads, "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries…." There is nothing in that clause regarding free speech. The history of copyright laws is rooted not only in protection for guilds but also in censorship. So to suggest that copyrights are intended to secure rights to free expression could only be described as Orwellian.

Levine asserts that "copyright laws … create some kind of market for intellectual property." And he's right to one extent; they do create some kind of market. The question however is, is it the kind of market a free society would have? Certainly not; there is a market now, but rather than one based on spontaneous order and voluntary trade, it's one of central planning, which is predicated on coercion.

The market for intellectual property would, and does, exist independent of IP laws. There are no laws that seek to regulate the hat industry in the way that IP laws do music, and yet there remains a vibrant market for headwear. A market is nothing more than two or more individuals exchanging in commerce. There need not be for utilitarian reasons, nor should there be for moral reasons, government regulation of any industry.

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Perhaps if the historical record supported Levine's thesis that government intervention is vital to the culture market we could at least find it plausible. To see that such regulation is not in fact necessary one need only look to the case of book publishing in the United States vis-à-vis England in the 19th century. Michele Boldrin and David K. Levine (no relation) did just that while researching for their book Against Intellectual Monopoly, and what they found is compelling.

During this period England had strict laws of copyright while publishers in the United States were free to reprint works from foreign authors. Despite the lack of legal protection, English authors and American publishing houses still found it profitable to contract with one another. In some cases these authors earned more in the United States than they did from royalties at home.

This relatively liberal set of copyright laws allowed books to be published on such a scale that their domestic price was but a fraction of what Britons paid. For example, a copy of Charles Dickens's A Christmas Carol was available in the United States for only 6¢, while the same book was available on English bookshelves for almost $2.50. The result of such low prices, as Boldrin and Levine point out, was that literacy rates in the United States were much higher.

We might also ask what explains great classical music. Jeffrey Tucker has noted that it was theabsence of IP laws that allowed composers to freely emulate and build on one another's works. Had IP laws been enforced in the manner they are today we would have missed out on so much of the great work. As Tucker explains, "There would be no progress in culture, ideas, or technology without [copying]."

Concerning the music business, Levine conflates low CD sales with a decline in total demand for music. But CDs aren't music; they're just one of many formats. It happens that they're becoming less desirable to consumers, as the principle of revealed preference has shown. Music downloads and streaming are increasingly becoming the most common media, and live performances are still the most lucrative aspect of the industry.

Many critics of digital downloading point to single-song sales as a terrible thing for artists. But this is only a terrible thing if the artist possesses marginal talent. Most people have probably experienced a time when they heard a song they liked on the radio and bought the CD, only to discover that overall it wasn't that good. Allowing consumers to buy one song at a time provides musicians an incentive to produce not one or two good songs for radio, but an entire record's worth of quality music.

Levine says in the interview,

Most online companies rely for their content, and hence for their money, on traditional media companies. If they destroy that business model, it's unclear what they're going to have to distribute. If you look at YouTube, eight of the top 10 videos are major-label music videos. If the major labels shrank to the point where they can't make videos, YouTube isn't much of a business.

These online companies are only the intermediary between producer and consumer, so it really doesn't matter who is creating content. Whether the traditional media companies or their business models survive or not, the Internet can still marry supply with demand. As far as clarity of what's going to be distributed is concerned, we can't know this a priori regardless of who's doing the production. Whether it's a traditional record label or an independent artist using YouTube to market himself, consumer preference will ultimately decide.

It does not follow that, because some of the highest-rated videos are from major labels, YouTube would become irrelevant for the business in their absence. All that shows is that major labels continue to provide the most popular products. If these traditional companies get left behind, there's still going to be a "top ten" on YouTube. The logical equivalent to his argument would be wringing our hands over Michael Phelps's eventual retirement from swimming. His departure won't mean that swimming as we know it will end; there will always be champion swimmers, and, who knows, maybe there's someone faster out there.

When asked to name the winners and losers following the digital age, Levine declares a short-term victory for the technology sector, and says the losers are large media companies. The long-term loser, he says, is everyone. Interestingly enough, he ignores the group that all of this is meant to serve: the consumers.

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It is for consumers that businesses innovate, and artists create. In order to earn a profit, firms look to produce valuable goods; and to put food on the table artists hope to please their patrons. IP laws are nothing more than monopoly grants — and an affront to property rights in real things. In their absence, consumers would have access to more and better goods, because, without IP laws, emulation and improvement are possible.

Levine's conclusion that anything outside of the current scheme is going to result in the [destruction of the] "Culture Business" is shortsighted. It looks only at "what is seen" while ignoring "what is unseen." We see that big media and technology companies thrived. We don't see what could have come about as a result of copying, emulation, and, ultimately, improvement.

Joel Poindexter is a student working toward a degree in economics. His writing has been published by the Ludwig von Mises Institute, LewRockwell.com and the Tenth Amendment Center. He lives with his wife and daughter near Kansas City. See his blog. Send him mail. See Joel Poindexter's article archives.

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Why the Left Is Losing the Argument over the Financial Crisis

2011-12-28T15:53:00.001-08:00

Fair-minded people are persuaded by facts, not invective.

The day before Christmas, Joe Nocera did it again—wasted a perfectly good column with another attack on us, Peter Wallison and Ed Pinto.

It's worth reading for what it says about the Left's current situation. According to Nocera, we "almost single-handedly" have created a "myth that Fannie Mae and Freddie Mac caused the financial crisis." Those who have fallen for this myth, according to Nocera, include congressional Republicans and the Wall Street Journal's editorial page.

It's somewhat implausible that two guys at a Washington think-tank, arguing that the financial crisis was caused by government housing policy, could create a widely accepted alternative to the conventional liberal narrative that the financial crisis was caused by the greed and lack of regulation of Wall Street. After all, the conventional narrative was created by the government, propagated by the New York Times, and accepted without question by just about every other major newspaper and electronic mass media outlet, foreign and domestic. Apparently, however, in Noceraworld, threats to the accepted narrative can never be fully suppressed.

It's somewhat implausible that two guys at a Washington think-tank could create a widely accepted alternative to the conventional liberal narrative that the financial crisis was caused by the greed and lack of regulation of Wall Street.

We doubt that we have been as successful as Nocera fears, but we believe that Nocera and his ilk are losing the argument about what caused the financial crisis. If in fact our views have received sufficient credence to warrant the alarm of the New York Times, a reading of his attack piece will tell you why. The article is fully representative of the Left's approach—don't bother with facts, just call your opposition liars or worse (racists) and leave it at that. This name-calling is then dutifully repeated throughout the leftwing echo-chamber.

To the extent that we have had any success in challenging the conventional narrative about the causes of the crisis, it is because fair-minded people are persuaded by facts, not invective. Our argument is and has been that the financial crisis would not have occurred but for government housing policy implemented principally through Fannie and Freddie and the Department of Housing and Urban Development (HUD). Although there were a number of such policies, the most important were the affordable housing requirements first imposed on Fannie and Freddie in 1992 and expanded and tightened by HUD through 2007.

Summarized below are the original numbers we relied on, taken from Fannie and Freddie's own data and from the views of bank regulators—and now supplemented with additional data from the Securities and Exchange Commission's recent complaints against certain officers of Fannie and Freddie. Of particular interest are Fannie and Freddie's non-prosecution agreements with the SEC, in which they agree with facts that confirm—and in many cases go beyond—our original research concerning the scope of the GSEs' subprime and Alt-A exposure. These are facts, and Nocera and others who might wish it otherwise should become familiar with them.

For example, in its non-prosecution agreement Freddie agreed that as of June 30, 2008, it had $244 billion in subprime loans, comprising 14 percent of its credit guaranty portfolio, rather than the $6 billion it had previously disclosed. Freddie also agreed that it had $541 billion in reduced documentation loans alone, vastly more than the $190 billion in previously disclosed Alt-A loans which Freddie had said included loans with reduced documentation.

While the SEC documents about $1.03 trillion in previously undisclosed subprime and Alt-A loans in Fannie and Freddie's credit guaranty portfolios, an estimated $812.8 billion, or about 80 percent, were already accounted for in the totals of Fannie and Freddie subprime and Alt-A exposures included in Pinto's Forensic Study and Wallison's Dissent from the majority report of the Financial Crisis Inquiry Commission.

The SEC findings add $219 billion and 1.43 million loans to our original Fannie and Freddie subprime and Alt-A totals, bringing the combined subprime and Alt-A total to $2.041 trillion and 13.37 million loans.

The SEC findings add $219 billion and 1.43 million loans to our original Fannie and Freddie subprime and Alt-A totals, bringing the combined subprime and Alt-A total to $2.041 trillion and 13.37 million loans.

All told, after adding the SEC's new data to our original estimates, there were approximately 28 million subprime and Alt-A loans outstanding on June 30, 2008, before the financial crisis, with a value of approximately $4.8 trillion. This was half of all mortgages in the United States. Of these loans, over 74 percent were on the books of U.S. government agencies and firms subject to government housing finance policies. This shows where the demand for these low quality loans came from. Fannie and Freddie were themselves exposed to more than 13 million subprime or Alt-A loans, or 65 percent of the government total.

The table below shows the values of the subprime and Alt-A loans originally included in Pinto's Forensic Study and Wallison's Dissent, supplemented by the data included in the SEC's complaints and the non-prosecution agreements.

Fannie and Freddie subprime and Alt-A totals as of June 30, 2008

(All numbers de-duped to eliminate inclusion in more than one category.)

Table in billions of dollars

Peter J. Wallison is the Arthur F. Burns Fellow in Financial Policy Studies and Edward Pinto is a resident fellow at the American Enterprise Institute.

Why the Left Is Losing the Argument over the Financial Crisis

By Peter J. Wallison and Edward Pinto 27/12/2011 11:40

Filed under: Big Ideas, Economic Policy, Government & Politics

Fair-minded people are persuaded by facts, not invective.

The day before Christmas, Joe Nocera did it again—wasted a perfectly good column with another attack on us, Peter Wallison and Ed Pinto.

It's somewhat implausible that two guys at a Washington think-tank could create a widely accepted alternative to the conventional liberal narrative that the financial crisis was caused by the greed and lack of regulation of Wall Street.

The SEC findings add $219 billion and 1.43 million loans to our original Fannie and Freddie subprime and Alt-A totals, bringing the combined subprime and Alt-A total to $2.041 trillion and 13.37 million loans.

Fannie and Freddie subprime and Alt-A totals as of June 30, 2008

(All numbers de-duped to eliminate inclusion in more than one category.)

Table in billions of dollars

Peter J. Wallison is the Arthur F. Burns Fellow in Financial Policy Studies and Edward Pinto is a resident fellow at the American Enterprise Institute.

The "Mystery" of the Endowment Effect

2011-12-28T09:43:00.001-08:00

FROM MISSES ORG.

The "Mystery" of the Endowment Effect

Mises Daily: Wednesday, December 28, 2011 by Per Bylund

The development of modern neoclassical economics is the story of how a discipline lost its way. Before the mathematization of economics, economists tried to explain prices and macro patterns in the market place from individual human action. But modern "mathonomics" has evolved into a subfield of mathematics with no obvious ties to the real economy. Assuming "perfect" conditions and general equilibrium, the conclusions of economic analysis follow directly from the premises — as one would expect from solving mathematical equations — and are hence of little scientific interest. It follows that phenomena in the real economy that do not seem to fit the "perfect" models should be dismissed as imperfections; what remains to explain is the causes of action rather than its effect. The task of economics has therefore shifted from explaining the effect of human action to tracking the causes of it.

This radical shift suggests that we already know all there is to know about markets (at least to the limited extent predicted by mathematical models), while it provides a breeding ground for analysis of behavior instead of action. In other words, in order to track the ultimate causes of our mathematically precise economic models, economists shift focus toward psychology and the identifying building blocks of actors' perception of self. Economists have moved from being experts at explaining economic phenomena and the market process to being at best run-of-the-mill mathematicians and second-rate psychologists.

Considering this development, it is no wonder that economists are puzzled by phenomena like the "endowment effect." Indeed, I have myself experienced statements by established economist scholars about this psychological effect that is assumed to be a mystery. In layman terms, the endowment effect is

a hypothesis that people value a good or service more once their property right to it has been established. In other words, people place a higher value on objects they own than objects that they do not. In one experiment, people demanded a higher price for a coffee mug that had been given to them but put a lower price on one they did not yet own. (from Wikipedia)

From a mathematical-economic point view, the endowment effect demonstrates the inability of formal economics to explain what drives human action. Indeed, the endowment effect seems to shift an actor's indifference curves, and thus his subjective valuation of goods and services, depending not on qualities in the good itself or its price but on the contextual, circumstantial characteristics and psychological state of the instant and situation. The economic explanation to market valuation is therefore at odds with real valuation and the models need to be expanded to include psychological drivers of subjective valuation. And therefore economics must embrace behavioral studies and neuroscience.

From an Austrian point of view, however, there is no problem and never was one. The "endowment effect" is but an illusory problem that arises due to the confusion of means and ends in modern economics. The only reason economists today find bewilderment in such an "effect" is that they have adopted precise mathematics as the end of economic analyses rather than seeing it as one of its possible means. In fact, the endowment effect, while literally impossible in mathematical analysis and assumed away in indifference-curve analysis, is necessary in any type of exchange. Both Menger and Böhm-Bawerk were well aware of this, and neither they nor any later Austrians ever recanted — and for good reason.

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Let us borrow an illustration from Böhm-Bawerk's Positive Theory of Capital (pp. 143–47), in which a farmer "has just harvested five sacks of corn." These sacks are to keep him alive until the next harvest and therefore he makes plans for how to use them. Böhm-Bawerk writes,

One sack he absolutely requires for the sustenance of his life till the next harvest. A second he requires to supplement this bare living to the extent of keeping himself hale and vigorous. More corn than this, in the shape of bread and farinaceous food generally, he has no desire for. On the other hand, it would be very desirable to have some animal food, and he sets aside, therefore, a third sack to feed poultry. A fourth sack he destines for the making of coarse spirits. Suppose, now, that his various personal wants have been fully provided for by this apportionment of the four sacks, and that he cannot think of anything better to do with the fifth sack than feed a number of parrots, whose antics amuse him. (p. 150)

The farmer therefore dedicates each sack to a certain use intended to give him the most possible satisfaction. The sacks are substitutes, which means that it does not matter to this farmer which particular sack is used to distill brandy or feed the parrots. Indeed, to this farmer the sacks can be used interchangeably, and the loss of one sack of grain (no matter which one) will always mean (assuming the farmer's preferences do not change) the parrots will have to find food on their own or find another benevolent farmer with grain in excess of his personal needs. At any loss of grain, the farmer will readily reorganize the stock at hand so that he maximizes his utility.

Imagine if this farmer somehow loses two of his sacks so that he has only three sacks left. Obviously, he will use the three sacks for food but will have no grain to distill brandy or feed parrots. And if he were to increase his stock by one sack, he would distill brandy — the parrots would always (under the aforementioned preferences) have to wait until the farmer has a total of at least five sacks on hand.

Let us assume this farmer has some money under his mattress and the opportunity to purchase a fourth sack of grain. The economic problem is what the price of that fourth sack would be. From the farmer's perspective, it is obvious that he could give up some value to get his hands on the extra grain. How much? He would only purchase the sack of grain if it makes him better off, that is to say that he will not give up a higher value for the sack of grain than the value he would receive in using it. In fact, since he intends to use this fourth sack of grain to distill brandy, he would be willing (and, we have assumed, able) to pay anything less than the value he attributes to that brandy. Were he to pay more than this value, then he would be worse off; were he to pay an equal value, then going through with the exchange means nothing to him — so why would he do it? The only way this farmer would go through with the exchange is if he gives up less value than he receives. And the same goes for the seller — he or she will sell a sack of grain to the farmer only if the value of it is perceived as lower than the value of the payment for it.

This means both the buyer and seller gain from trade, which is an age-old economic truth. But it also means that the price, in terms of the actors' subjective valuation, is necessarily (a) lower than the value of the good purchased for the buyer, and (b) higher than the value of the good sold for the seller.

Let us assume the farmer (we'll call him A) has already purchased the fourth sack of grain and that he paid eight silver coins for it. Another farmer (let's call him B) visits and wishes to purchase a sack of grain. What price would A require in order to sell the sack to B? Neoclassical economics assumes indifference and therefore that the price of this fourth sack of grains is eight silver coins. But this is not true — we have already shown that A was willing to pay eight silver coins for the sack of grains because he valued the sack of grains at more than eight silver coins. He would not have chosen to give up those coins if he did not place a lesser value on them than the grain. Farmer B would have to pay farmer A a price that exceeds the value A sees in using the grain to distill brandy, perhaps ten silver coins (and, for the sake of simplicity, we can say that he values the brandy at nine silver coins).

The endowment effect is the price difference between eight and ten silver coins. To neoclassical economists, it is supposedly a mystery that farmer A, when having only three sacks of grain, is willing to pay the price of eight silver coins for an additional sack of grain, but when he has acquired it, he is not willing to sell it for less than ten silver coins!

$45.00 $42.00

But there is no mystery to the endowment effect — and there is no effect. Indeed, farmer A does not value the fourth sack of grain differently depending on whether he wishes to acquire it or if he considers selling it — he values the sack of grain exactly the same. Throughout this example, the value of the fourth sack to the farmer is his use of it to distill brandy. The value is not the price he is willing to pay to acquire it, and it is not the price he is willing to accept to give it up. Exchange is not the result of an equality in valuation, as indifference-curve analysis assumes, but a result of inequality in the parties' valuation. The seller must value that which he gains through the exchange more than what he gives up, just as the buyer must value that which he gains more than that which he gives up. Only when this is the case is exchange possible and expected.

The bewilderment due to the endowment effect is only because neoclassical economics has sacrificed economic truth for the sake of the mathematical means in economic analysis. In a strictly mathematical analysis the conclusions follow directly from the assumptions. Those using such frameworks in economic analyses need to look somewhere outside the framework to find causes and explanations, because math is tautological and does not identify causes or provide explanations — only illustrations.

The obvious solution to this shortcoming in the framework is to replace it with something better and more realistic, not persist in seeking explanations elsewhere.

Per Bylund is a PhD candidate in economics at the University of Missouri and senior fellow at the Ludwig von Mises Institutet i Sverige. Visit his website. Send him mail. See Per Bylund's article archives.

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Fuente: http://mises.org/daily/5839/The-Mystery-of-the-Endowment-Effect

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Politics without Romance

2011-12-27T14:25:00.001-08:00

Politics without Romance

A causal glance at the morning newspaper shows how much government does. "U.S. War in Iraq Declared Officially Over." Down a bit we read "Lawmakers Offer Bipartisan Plan to Overhaul Medicare." Meanwhile a huge spending bill involves political struggles over "travel to Cuba. Abortions in the nation's capital. Energy efficiency standards for light bulbs." All that and no mention of Social Security, the largest federal program!

Why does government do so much? Here's one common answer. Problems develop in society and come to public attention. Many Americans think "that's a problem, government should do something about that." Former President George W. Bush put this folk wisdom succinctly: ""We have a responsibility that when somebody hurts, government has got to move." Government spending (and taxing) are desired responses to public problems, responses that most all Americans endorse.

Economists provided a more rigorous account of why government should act through the theory of "market failure." Markets are judged by the standard of efficiency which means satisfying as many preferences as possible at a given time. But, it is said, markets fail to be efficient. Sometimes they do not offer goods or services - national defense, lighthouses - that everyone wants. Government should then provide such "public goods." At other times, market exchanges between two parties have effects on third parties (and more). Sometimes these "externalities" are negative: think of pollution. It is also argued that free exchanges sometimes do not produce as much of a good as society could produce. Free exchange, for example, is said to foster too little spending on education. Government spending on education could lead to a better outcome, a "positive externality." Economists have come up with other examples of "market failure," but you get the idea: markets fail, government succeeds.

Until the 1960s, the theory of market failure dominated economics and policymaking. Since then, a subfield of economics "public choice" has raised questions about the claim "government succeeds." Public choice economists have explored the idea of "government failure." In other words, they focus on testing the unexamined premise of the theory of market failure: the idea that government can do better than markets at serving the general welfare.

Public choice extends the assumptions of economics to government action. Market failure theorists assumed government officials (or voters, for that matter) were beneficent and acted for the common good. In contrast, public choice economists offered "politics without romance." Public choice began by assuming that all individuals, including everyone in politics and government, were self-interested and acted accordingly. Why would the butcher, baker, and candle maker change when they became a bureaucrat, lobbyist, or voter? Other questions seemed implicit in this starting point for public choice. What did the rational pursuit of private interest lead to in the public realm? Was it really true that if markets fail, government succeeds by the standard of efficiency?

Over the next few weeks I plan to write some brief explanations of the central concepts of public choice. These ideas are important to libertarianism. Why? The economist William A. Niskanen explains:

In evaluating proposed changes in government institutions and policies, we now have the opportunity to compare imperfect markets with imperfect government and thus avoid the biases inherent in assuming perfection in either institution.

Public choice, he continued, "often strengthens the case for a libertarian political economy." It may be, in other words, that policymakers should conclude: markets fail, government fails, choose markets.

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The Competitiveness Distraction

2011-12-27T11:33:00.001-08:00

The Competitiveness Distraction

Mises Daily: Tuesday, December 27, 2011 by T. Norman Van Cott

Does the ongoing failure of US elementary and secondary education bode ill for US international competitiveness? What about government regulation run amok along with a host of other maladies? Business and economic commentators uniformly answer yes without ever getting specific about the meaning of competitiveness. They apparently view competitiveness and the national maladies as one and the same. Evidence about the maladies is prima facie evidence about competitiveness, at least for the commentators.

To be sure, things like failing public education sap overall US production potential. However, overall production potential does not determine competitiveness, at least as economists have defined the term for close to 200 years tracing back to David Ricardo in 1821. For economists, competitiveness traces to the apportionment of production capabilities across goods and services, not overall capabilities. Apportionment of capabilities determines producers' alternative earning opportunities — their opportunity costs, the final arbiter of competitiveness. When it comes to competitiveness, living standards are a distraction.

Take the case of a professional athlete like Albert Pujols, long-time slugging first baseman for the St. Louis Cardinals who will be playing for the Los Angeles Angels next year. The skills that make him such a tremendous baseball player — upper and lower body strength, eye-hand coordination, and quickness — would undoubtedly make him a phenomenal mower of lawns. Indeed, it is no exaggeration to say that Mr. Pujols could probably cut more lawns per day than anyone in St. Louis, Los Angeles, or anywhere else for that matter.

Would Mr. Pujols's lawn-cutting prowess translate into competitiveness in lawn-cutting circles? Nope. Just the opposite. He is surely among the highest-cost lawn cutters wherever he lives. That's because his cost for cutting grass depends on what he can earn were he not cutting grass — in this case, playing baseball. He will reportedly earn about $155,000 per game next year. Assuming he could cut, say, 40 lawns per day, that translates into an opportunity cost of close to $4,000 per lawn. So is the fastest mower of lawns in the country serious competition for other lawn cutters? Duh.

Can Mr. Pujols's lawn-care competitiveness ever change? Sure, but it takes a change in his baseball earnings relative to his lawn-cutting abilities. Looking at only one activity tells us nothing. Likewise, positing that both abilities fall (or rise) tells us nothing absent knowledge about how his abilities are changing relative to each other.

It is the latter error writ large to a whole country that ensnares commentators. Unless changes in a country's overall production abilities are skewed, its competitiveness — that is, opportunity cost — doesn't change.

Am I am overstating the commentators' position? No. Consider World Economic Forum's (WEF) "Global Competitiveness Report," issued annually for over 30 consecutive years, usually to much media acclaim. Its most recent report (more than 500 pages!) claimed to rank the competitiveness of 142 countries, defining competitiveness as "the set of institutions, policies, and factors that determine the level of productivity of a country." In econospeak, productivity is merely another term for overall production potential or living standards. The WEF offered no hint of opportunity-cost thinking when discussing competitiveness.

Some might think that the fact that people in wealthier countries sell lots of things to people in other countries supports the idea that international competitiveness traces to living-standard differentials. Not true. After all, the same people that sell a lot abroad also buy lots of things from people in other countries. Do we want to say that higher living standards simultaneouslyundermine competitiveness? That would be silly. In the final analysis, wealthier nations buy lots of things from the rest of the world because they're wealthier. These purchases provide foreigners the wherewithal to buy things from them. So people from wealthy nations sell and buy a lot abroad because they're wealthier. The composition of what is sold and bought turns on the arbiter of competitiveness: opportunity costs, not wealth.

The competitiveness gurus' lack of attention to economic fundamentals leads them to polar opposite competitiveness "stories" in other venues. For example, it is common to hear pundits intone about people in poor economies having a competitive advantage when they sell in the United States. Say the pundits, lower foreign living standards mean foreigners work for less, dooming any Americans who try to compete with them.

$25.00$20.00

This story is completely at odds with the commentators' maladies story. To wit, how can Americans becoming poorer make Americans less competitive, but foreigners being poorer make foreigners competitive? Hint: it can't. Being poorer can't reduce competitiveness for some and increase it for others. That's because competitiveness doesn't turn on overall production capabilities. Think Albert Pujols and lawn cutting.

So does this mean that levels and changes in living standards are unimportant? Not at all! Living standards obviously matter. They measure the effectiveness of economic systems and policies. However, positing a link between living standards and competitiveness is asking living standards to answer a question they can't answer. If systems and policies cause a nation's residents to be poorer, just say so. Competitiveness rhetoric is a distraction.

T. Norman Van Cott, an adjunct scholar with the Indiana Policy Review Foundation, is professor of economics at Ball State University, Muncie, IN. Send him mail. See T. Norman Van Cott's article archives.

Fuente:http://mises.org/daily/5835/The-Competitiveness-Distraction

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Lew's Big Idea

2011-12-26T11:15:00.001-08:00

Lew's Big Idea

Mises Daily: Monday, December 26, 2011 by Doug French

Going on 30 years ago Lew Rockwell had an idea. The idea was to form an institute to celebrate the works of a forgotten scholar — Ludwig von Mises — and promote the study of Austrian economics, a school of economic thought that recognized freedom as paramount if society is to be prosperous, a school of thought that had been long forgotten, a school of thought that recognized the damage that government intervention causes.

For three decades Lew's big idea has carried on with the help of donors like you. Ideas may be free; however, teaching those ideas and implementing them are not. In 2011, Mises.org has enjoyed 1.2 million unique visitors each month. Lives and minds are changed by the thousands each and every day by Mises.org. And while the vast resources contained online at Mises.org are free to its users, the cost to keep it running 24 hours a day, 365 days a year is far from free.

The 800 articles, the 100 audio dailies, the 337 lectures and interviews in media, the 80 live video webcasts that were added just this year could not be created out of thin air the way the Fed creates money. Donors must forgo consumption and care enough about liberty and freedom to make all of this possible — and they have done so for three decades.

Many in the mainstream must believe that Austrian economics — Rothbard, Mises, Hazlitt, and Ron Paul — appeared from nowhere. Of course they haven't. It's taken 30 years of hard work by the Mises staff and sacrifice from our donors to elevate the ideas of liberty to the national stage.

Now is our time. Now is the time for the ideas of liberty to take hold. There is more interest in our ideas than ever before. The Institute held 16 conferences in 2011, attended not just by enthusiastic followers and students but those curious about ideas they hadn't heard about before: something other than the same old government prescriptions to solve the same old problems caused by government itself.

Book sales are a good indication of the interest level, and books sales continue to be strong. However, the Institute must work hard to keep up with consumer tastes. The world has changed. Not everyone prefers big, hardcover books. With the help of donors we've created new audiobooks, including editions of Human Action and Man, Economy and State. We've published over 150 ebooks and a number of new (and old) titles have been introduced or reintroduced in cheaper pocket formats to educate a new generation.

The Institute's newest program, the Mises Academy, has been a smashing success with over 30 classes offered, many with enrolments of over 200 students tuning in for lectures from all over the world.

None of this can occur for free. Although the message of free markets can be spread more efficiently and effectively than ever before, resources are required. Now is not the time to rest on our laurels. The ideas of Mises and Rothbard have captured the world's attention, and we must seize this moment.

Please help us make 2012, the Mises Institute's 30th anniversary, our most successful and productive year yet, leaving no stone unturned to advance the cause of free markets and liberty. With your help we can move mountains for freedom; and now is the time!

Please give generously.

Douglas French is president of the Mises Institute and author of Early Speculative Bubbles & Increases in the Money Supply and Walk Away: The Rise and Fall of the Home-Ownership Myth. He received his master's degree in economics from the University of Nevada, Las Vegas, under Murray Rothbard with Professor Hans-Hermann Hoppe serving on his thesis committee. French teaches in the Mises Academy. See his tribute to Murray Rothbard. Send him mail. See Doug French's article archives.

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LAWYERSCHILE>: Free Speech and Occupy Wall Street

2011-12-21T07:51:00.001-08:00

Free Speech and Occupy Wall Street

Mises Daily: Wednesday, December 21, 2011 by George Reisman

The Occupy Wall Street protesters were allowed to remain in New York's Zuccotti Park for two months, against the will of its private owners. They were clearly trespassers, indeed, much worse than garden variety trespassers, who almost always quickly leave. They were there prepared to stay indefinitely. In effect, they were literally attempting to steal the park from its lawful owners.

Nevertheless, they were allowed to remain, in the belief that to eject them would somehow constitute a violation of their freedom of speech. They had seized the park in order to denounce capitalism. Ejecting them, would have ended their use of the park for that purpose and thus, according to virtually everyone with a public voice, from New York's Mayor to the lowliest media reporter, would have violated their freedom of speech.

A major lesson to be learned from the occupation is that hardly anyone nowadays understands the meaning of freedom of speech. Contrary to the prevailing view, freedom of speech is not the ability to say anything, anywhere, at any time. Actual freedom of speech is consistent with respect for property rights. It presupposes that the speaker has the consent of the owners of any property he uses in speaking, such as the land, sound system, or lecture hall or radio or television studio that he uses.

Had the owners of Zuccotti Park invited the protesters to camp on their land and propound their ideas, and then the police had ejected them, the protesters' freedom of speech would in fact have been violated. But that was not the case. The only actual violation of freedom present was the protesters' violation of the freedom of the owners of Zuccotti park to use their property for their own purposes. The protesters did not violate specifically the freedom of speech of the owners, but they certainly did violate their freedom in general with respect to the use of Zuccotti Park. Had the owners wanted to invite some other person or group for the purpose of speaking, then the protesters would have violated the freedom of speech specifically, by means of their presence and their activities.

Nevertheless, by the logic of the prevailing view of freedom of speech, protesters in the future will be able to storm into lecture halls and/or seize radio and television stations in order to deliver their message and then claim that their freedom of speech is violated when the police come to eject them, even though the police in such cases would in fact be acting precisely in order to uphold the freedom of speech. Indeed, since the days of the so-called Free Speech Movement at Berkeley, back in the 1960s, disruptions of speeches delivered by invited guests have occurred repeatedly on college campuses, in the name of the alleged freedom of speech of the disrupters. No attention has been paid to the actual violation of the freedom of speech of the invited speakers.

The prevailing view of freedom of speech is a major threat to freedom of speech. Not only does it provide justification for actual violations of freedom of speech of the kinds just mentioned, but it also makes freedom of speech appear to be a fundamental enemy of rational communication. Speakers cannot address audiences, professors cannot lecture to students if disrupters are permitted to drown them out and then hide behind the claim that they do so in the name of freedom of speech. If the prevailing view of freedom of speech were correct, the ability of speakers to speak and professors to lecture would require accepting the principle of the need to violate freedom of speech.

$50.00 $25.00

Of course, the prevailing view is totally incorrect. Actual freedom of speech, based on respect for property owners' rights to use their own property as they see fit, is the guarantor of rational communication. If the property rights of the owners of parks, lecture halls, and radio and television stations are respected, the disrupters will be ejected and very soon will no longer even bother to appear. Rational communication will then proceed without incident.

Upholding freedom of speech and rational communication requires a policy of no tolerance for the occupation of property against the will of its owners. Any such occupation is in violation of the owners' freedom, including their freedom of speech. Protester-occupiers are enemies of freedom, including, above all, freedom of speech.

George Reisman, Ph.D., is Pepperdine University Professor Emeritus of Economics and the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996). His web site is www.capitalism.net. His blog is at georgereismansblog.blogspot.com. Send him mail. (A PDF replica of the complete book Capitalism: A Treatise on Economics can be downloaded to the reader's hard drive simply by clicking on the book's title, immediately preceding, and then saving the file when it appears on the screen.) See George Reisman's article archives.

Fuente: http://mises.org/daily/5842/Free-Speech-and-Occupy-Wall-Street

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North Korea: Kim Jong-il’s Death and the Coming Succession Struggle

2011-12-20T10:40:00.001-08:00

North Korea: Kim Jong-il's Death and the Coming Succession Struggle

Posted by Doug Bandow

North Korea's "Dear Leader" Kim Jong-il is dead. There is now no prospect of negotiating and implementing a new nuclear agreement with the North in the near future. The so-called Democratic People's Republic of Korea is likely to be consumed with a power struggle which could turn violent. Washington's best policy option is to step back and observe.

After his stroke three years ago, Kim anointed his youngest son, Kim Jong-un, as his successor. However, the latter Kim has had little time to establish himself. The previous familial power transfer to Kim Jong-il took roughly two decades. There are several potential claimants to supreme authority in the North, and the military may play kingmaker.

Some observers hope for a "Korean Spring," but the DPRK's largely rural population is an unlikely vehicle for change. Urban elites may want reform, but not revolution. If a North Korean Mikhail Gorbachev is lurking in the background, he will have to move slowly to survive.

During this time of political uncertainty no official is likely to have the desire or ability to make a deal yielding up North Korea's nuclear weapons. The leadership will be focused inward and no one is likely to challenge the military, which itself may fracture politically.

Nor is China likely to play a helpful role. Beijing views the status quo as being in its interest. Above all else, China is likely to emphasize stability, though it may very well attempt to influence the succession process outside of public view. But China does not want what America wants, preferring the DPRK's survival, just with more responsible and pliable leadership.

Washington can do little during this process. The United States should maintain its willingness to talk with the North. American officials also should engage Beijing over the future of the peninsula, exploring Chinese concerns and searching for areas of compromise. For instance, Washington should pledge that there would be no American bases or troops in a reunited Korea, which might ease Beijing's fears about the impact of a North Korean collapse.

Most important, the Obama administration should not rush to "strengthen" the alliance with South Korea in response to uncertainty in the North. The Republic of Korea is well able to defend itself. It should take the steps necessary to deter North Korean adventurism and develop its own strategies for dealing with Pyongyang. America should be withdrawing from an expensive security commitment which no longer serves U.S. interests.

Kim Jong-il imposed unimaginable hardship on the North Korean people. However, what follows him could be even worse if an uncertain power struggle breaks down into armed conflict. Other than encourage Beijing to use its influence to bring the Kim dynasty to a merciful end, the United States can—and should—do little more than watch developments in the North.

Doug Bandow • December 19, 2011 @ 9:31 am
Filed under: Foreign Policy and National Security
Tags: China, dprk, east asia, kim jong il, kim jong-un, North Korea

Fuente: http://www.cato-at-liberty.org/north-korea-kim-jong-il%E2%80%99s-death-and-the-coming-succession-struggle/#utm_source=Cato+Institute+Emails&utm_campaign=d53f801658-Cato_Today&utm_medium=email&mc_cid=d53f801658&mc_eid=3489ba4509

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Emersonian Individualism

2011-12-16T05:54:00.001-08:00

Emersonian Individualism

Mises Daily: Friday, December 16, 2011 by Allen Mendenhall

Ralph Waldo Emerson (1803–1882)

Ralph Waldo Emerson is politically elusive. He's so elusive that thinkers from various schools and with various agendas have appropriated his ideas to validate some activity or another. Harold Bloom once wrote, "In the United States, we continue to have Emersonians of the Left (the post-Pragmatist Richard Rorty) and of the Right (a swarm of libertarian Republicans, who exalt President Bush the Second)."[1] We'll have to excuse Bloom's ignorance of political movements and signifiers — libertarians who exalt President Bush, really? — and focus instead on Bloom's point that Emerson's influence is evident in a wide array of contemporary thinkers and causes.

Bloom is right that what "matters most about Emerson is that he is the theologian of the American religion of Self-Reliance."[2] Indeed, the essay "Self-Reliance" remains the most cited of Emerson's works, and American politicians and intellectuals selectively recycle ideas of self-reliance in the service of often disparate goals.

Emerson doesn't use the term "individualism" in "Self-Reliance," which was published in 1841, when the term "individualism" was just beginning to gain traction. Tocqueville unintentionally popularized the signifier "individualism" with the publication of Democracy in America. He used a French term that had no counterpart in English. Translators of Tocqueville labored over this French term because its signification wasn't part of the English lexicon. Emerson's first mention of "individualism" was not until 1843.

It is clear, though, that Emerson's notion of self-reliance was tied to what later would be called "individualism." Emerson's individualism was so radical that it bordered on self-deification. Only through personal will could one realize the majesty of God. Nature for Emerson was like the handwriting of God, and individuals with a poetical sense — those who had the desire and capability to "read" nature — could understand nature's universal, divine teachings.

Lakes, streams, meadows, forests — these and other phenomena were, according to Emerson, sources of mental and spiritual pleasure or unity. They were what allowed one to become "part and parcel with God," if only one had or could become a "transparent eyeball." "Nothing at last is sacred," Emerson said, "but the integrity of your own mind." That's because a person's intellect translates shapes and forms into spiritual insights.

We cannot judge Emerson exclusively on the basis of his actions. Emerson didn't always seem self-reliant or individualistic. His politics, to the extent that they are knowable, could not be called libertarian. We're better off judging Emerson on the basis of his words, which could be called libertarian, even if they endow individualism with a religiosity that would make some people uncomfortable.

Emerson suggests in "Self-Reliance" that the spontaneous expression of thought or feeling is more in keeping with personal will, and hence with the natural world as constituted by human faculties, than that which is passively assumed or accepted as right or good, or that which conforms to social norms. Emerson's individualism or self-reliance exalted human intuition, which precedes reflection, and it privileged the will over the intellect. Feeling and sensation are antecedent to reason, and Emerson believed that they registered moral truths more important than anything cognition could summon forth.

Emerson's transcendentalism was, as George Santayana pointed out in 1911, a method conducive to the 19-century American mindset.[3] As a relatively new nation seeking to define itself, America was split between two mentalities, or two sources of what Santayana called the "genteel tradition": Calvinism and transcendentalism.

The American philosophical tradition somehow managed to reconcile these seeming dualities. On the one hand, Calvinism taught that the self was bad, that man was depraved by nature and saved only by the grace of God. On the other hand, transcendentalism taught that the self was good, that man was equipped with creative faculties that could divine the presence of God in the world. The Calvinist distrusted impulses and urges as sprung from an inner evil. The transcendentalist trusted impulses and urges as moral intuition preceding society's baseless judgments and prevailing conventions.

What these two philosophies had in common was an abiding awareness of sensation and perception: a belief that the human mind registers external data in meaningful and potentially spiritual ways. The Calvinist notion of limited disclosure — that God reveals his glory through the natural world — played into the transcendentalists' conviction that the natural world supplied instruments for piecing together divinity.

The problem for Santayana is that transcendentalism was just a method, a way of tapping into one's poetical sense. What one did after that was unclear. Santayana thought that transcendentalism was the right method, but he felt that Emerson didn't use that method to instruct us in practical living. Transcendentalism was a means to an end, but not an end itself.

According to Santayana, Emerson "had no system" because he merely "opened his eyes on the world every morning with a fresh sincerity, marking how things seemed to him then, or what they suggested to his spontaneous fancy."[4] Emerson did not seek to group all senses and impressions into a synthetic whole. Nor did he suggest a politics toward which senses and impressions ought to lead. Santayana stops short of accusing Emerson of advancing an "anything-goes" metaphysics. But Santayana does suggest that Emerson failed to advance a set of principles; instead, Emerson gave us a technique for arriving at a set of principles. Emerson provided transportation, but gave no direction. This shortcoming — if it is a shortcoming — might explain why Bloom speaks of the "paradox of Emerson's influence," namely, that "Peace Marchers and Bushians alike are Emerson's heirs in his dialectics of power."[5]

For Emerson, human will is paramount. It moves the intellect to create. It is immediate, not mediate. In other words, it is the sense or subjectivity that is not yet processed by the human mind. We ought to trust the integrity of will and intuition and avoid the dictates and decorum of society.

"Society," Emerson says, "everywhere is in conspiracy against the manhood of every one of its members." Society corrupts the purity of the will by forcing individuals to second-guess their impulses and to look to others for moral guidance. Against this socialization, Emerson declares, "Whoso would be a man, must be a nonconformist."

Emerson's nonconformist ethic opposed habits of thinking, which society influenced but did not determine. Emerson famously stated that a foolish consistency is the hobgoblin of little minds. What he meant, I think, is that humans ought to improve themselves by tapping into intuitive truths. Nature, with her figures, forms, and outlines, provides images that the individual can harness to create beauty and energize the self. Beauty therefore does not exist in the world; rather, the human mind makes beauty out of the externalities it has internalized. Beauty, accordingly, resides within us, but only after we create it.

Here we see something similar to Ayn Rand's Objectivism stripped of its appeals to divinity. Rand believed that reality existed apart from the thinking subject, that the thinking subject employs reason and logic to make sense of experience and perception, and that the self or will is instrumental in generating meaning from the phenomenal world.

Like Emerson, who did not want to deny the self by sacrificing it to social criteria for moral rightness or propriety, Rand believed that the self was the basis of ethics. The moral purpose of the individual, for her, entailed the rational pursuit of self-interest and happiness. This pursuit is possible only in certain systems of human organization, and the one Rand deemed most suitable for human flourishing was capitalism (which arguably is not a system but a result of spontaneous orders or a framework enabling spontaneous orders). In capitalism, art prospers because human creativity prospers; capitalism enables beauty, images, and shapes that help us to refine our metaphysics and to represent "the real."

Even Ludwig von Mises seems to have been influenced, if not directly by Emerson, then by those who were influenced by Emerson. Mises criticizes the "doctrines of universalism, conceptual realism, holism, collectivism, and some representatives of Gestaltpsychologie" for maintaining that "society is an entity living its own life, independent of and separate from the lives of the various individuals."[6] When Mises criticizes universalism and collectivism as "systems of theocratic government,"[7] he turns to William James, himself an Emersonian and one who influenced Henry Hazlitt.[8] James supplies Mises with an argument for distinguishing religion from theocracy, and Mises seems to support James's notion of religion as, in Mises's words, "a purely personal and individual relation between man and a holy, mysterious, and awe-inspiring divine Reality."[9] Although Mises never cites Emerson in Human Action, Mises does trope Emerson by discussing the "Creative Genius," the man "whose deeds and ideas cut out new paths for mankind."[10]

Art and beauty have the potential to stimulate sensation and emotion; they have the potential to substantiate the extraordinary powers of human intellect. Just as Rand believed in the heroism of the individual, so Emerson believed that a self-reliant mind with a poetical sense could not only trust his impressions about the external world, but also act upon that trust. That does not mean that the individual is necessarily unbounded, only that the individual establishes his own boundaries and sets his own priorities.

Emerson and Rand celebrate the ability of the human mind to create beauty, to generate meaning, to produce tangibles from intangibles, and to construct realities based on which and because of which we are prepared to act. This function of the imagination — is it too much to call it genius? — is not realized by everyone. Some go through life without self-examination and without questioning their surroundings or envisioning new surroundings, new possibilities, and new ways of thinking. These individuals lack or repress imagination and creativity. Even writers like Walt Whitman never demonstrate the powers of selfhood, the sheer strength of human will.

Whitman obstructed the will to make himself receptive to everything and everyone. He buried the will beneath a mountain of abstractions and random experiences. Santayana explains that in Whitman "democracy is carried into psychology and morals" insofar as the "various sights, moods, and emotions are given each one vote; they are declared to be all free and equal, and the innumerable commonplace moments of life are suffered to speak like the others."[11] The slave driver is as much a part of Whitman as the slave.

Whitman never distinguishes between good and bad, right and wrong, practical and impractical, reality and fancy. He never discriminates. He becomes, in Santayana's words, an "unintellectual," "lazy," and "self-indulgent" pantheist because he merely internalizes all things, accords them equal weight, refuses to challenge their validity or viability and so expresses poetry that is presentist and value-free, so much so that it degenerates into gushes of arbitrary feeling.[12]

Emersonian individualism is not arbitrary in this sense. It is purposeful. It differentiates and distinguishes between people and groups, good and evil, referents that are conducive to poetry and referents that are not. Whitman delighted in popularity. Emerson delighted in standing apart from others. "It is easy in the world to live after the world's opinion," Emerson once said, adding, "it is easy in solitude to live after our own; but the great man is he who in the midst of the crowd keeps with perfect sweetness the independence of solitude."

If we take Emerson at his word, he does not seem to care whether he is misunderstood. Indeed, he submits that Pythagoras, Copernicus, Galileo, and Newton were misunderstood. "Is it so bad, then, to be misunderstood?" Emerson asked, and then answered, "to be great is to be misunderstood."

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Emerson is still misunderstood, but his influence on American thought is unmistakable. He refused to tacitly accept inherited and imported orthodoxies, although he was bent on validating traditional notions of truth using new methods. Those who have inveighed against Emerson too often misconstrue or misrepresent his nuanced philosophy.

Emerson is not easy to understand. His texts demand many rereadings. His essays experimented with new techniques for clarifying old ideas, to which he gave exhilarating expression in the vocabularies of individualism and self-reliance. Perhaps the most telling legacy of this winsome philosopher is that so many people claim that "Emerson was one of us." The term "us" suggests that there's still more to learn from Emerson, that the ethic of self-reliance continues to struggle against presumptions and habits of thinking. To say that Emerson is "one of us" is to miss the points Emerson made. One ought to read Emerson not because one is told to do so, but because one wills oneself to do so.

Allen Mendenhall is a PhD student in English at Auburn University. He's a writer, attorney, and adjunct law professor. He holds a BA from Furman University, MA and JD from West Virginia University, and LLM from Temple University Beasley School of Law. Visit his website at AllenMendenhall.com. Send him mail. See Allen Mendenhall's article archives.

You can subscribe to future articles by Allen Mendenhall via this RSS feed.

Notes

[1] Harold Bloom. Where Shall Wisdom Be Found? (Riverhead Books, 2004), p. 190.

[2] Bloom at 190.

[3] See George Santayana, "The Genteel Tradition," in The Genteel Tradition in American Philosophy and Character and Opinion in the United States," edited by James Seaton (Yale University Press, 2009), p. 9.

[4] Santayana at 9.

[5] Bloom at 198.

[6] Ludwig Von Mises. Human Action. The Scholar's Edition. Auburn, AL: Ludwig Vone Mises Institute, 1998) at 145.

[7] Mises at 150-51.

[8] See Allen Mendenhall. "Henry Hazlitt, Literary Critic." Mises Daily. June 6, 2011.

[9] Mises at 156.

[10] Mises at 138.

[11] Santayana at 12.

[12] Santayana at 12-13.

Fuente: http://mises.org/daily/5832/Emersonian-Individualism

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The Power of Ideas at Work

2011-12-15T06:36:00.001-08:00

The Power of Ideas at Work

Mises Daily: Thursday, December 15, 2011 by Doug French

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Dear Friend,

Remember the promises of economic recovery? Two presidents have now made them and spent (and printed) many trillions to see them come true. There was QE1, QE2, Operation Twist, and thousands of other tricks.

And yet the economy is sinking ever more. Incomes are falling more now than two years ago. Job prospects for young people are in the pits. This entire fiasco represents one of the great failures of the state and the economic theories the state has tried. They promised a dream and delivered disaster.

The Mises Institute has been the one consistent voice of opposition from the very beginning of this crisis. We stood nearly alone against Bush's bailout schemes and continued that opposition through the Obama years. Not only that: our editorials and publications had warned of the crisis before it happened.

We've prepared for this opportunity for 30 years with conferences, books, fellowships, and programs of every sort. We had every technology in place and many thousands of intellectuals around the world who have learned from what the Mises Institute does.

This is why this crisis has brought all new attention to the Austrian School of economics, as represented in the writings of Mises, Rothbard, Hayek, Hazlitt, and their entire tradition. This is the power of ideas at work — and good ideas are more effective than all the propaganda that the state can dish out.

This is why we hope we can count on your most generous donation going forward into next year. We cannot miss this opportunity. We want to do more than we've ever done before to flood the world with truth.

Truly, for the first time, the Austrians are leading the debate. We've seized the moment to educate the world about the economics of liberty. Mises's name and the Austrian School in general are in the press. Even contenders for the GOP nomination are scrambling to identify with the Austrians so they can keep up with the intellectual appeal of Ron Paul.

What's more, the Keynesians are under fire. Chairman Ben Bernanke was supposed to be a world-renowned expert of the Great Depression. Only two years ago, he was TIME's Person of the Year. The politicians gave him a free hand to do what he needed to do.

What's the excuse now? We are told that the central bankers just haven't done enough yet. They just haven't pulled the right monetary lever or pushed the right liquidity button. The money masters will stumble onto the right equation soon. People just have not been cooperating with the models.

Who believes this anymore? Unemployment was supposed to end two years ago, and yet one in five people in this country is unemployed. Nearly 50 million Americans obtain their groceries with food stamps.

Even now, Washington is living high on the hog. There is plenty of money sloshing around Wall Street.

"The Austrian School isn't just part of the conversation; it is the conversation."

Who has the answers? The Chicago School isn't on the tip of anyone's tongue. Neoclassical economics isn't a part of the debate. No, it's all Austrian that matters this time. The Keynesians vs. the Austrians is the fight of the century, playing out day after day on television and in print media.

How could this be? Thirty years ago the Austrian School was nearly forgotten. As Murray Rothbard explained in an interview 20 years ago, an entire generation of Austrians had been wiped out by the New Deal. When Rothbard was writing Man, Economy, and State, he was a young man in his twenties and completely alone. At the same time, Mises was in his sixties, while Hayek and Hazlitt were in their fifties. There was no one in between.

Murray's work made the Austrian School survive through the 1980s and beyond. It could have been lost again during Obama's Newer Deal, but it has not and will not: because of your support for the Mises Institute. The Institute will turn 30 next year. And for three decades Lew Rockwell and the Mises Institute have fought against the Keynesians and the statists that preach on college campuses and in Washington, DC.

The Institute has stuck to its guns and it's paying off. The Austrian School isn't just part of the conversation; it is the conversation. Mises Institute staff and scholars are explaining the free market from the Austrian perspective on television, at congressional hearings, in academic journals, on films, and in articles that appear around the world every single day. Radio appearances and articles in mainstream print media by Institute staff, faculty, and former fellows are too numerous to count.

The Federal Reserve is under pressure like never before. Did you ever expect that in your lifetime there would be protest rallies in front of Federal Reserve offices? It's remarkable. And if you talk to the people behind them, they will tell you: their inspiration comes from the Mises Institute. Not since Andrew Jackson took down the Second Bank of the United States have America's central bankers felt such heat.

But we must keep the heat on. While the media is starting to pay attention, the Keynesian doctrine of more government spending, manipulated lower interest rates, and central planning of the economy is still the paradigm in the nation's classrooms and the back rooms where government policy is made.

The state and its apologists will not go away easily. The facts will not get in their way.

More and cheaper money benefits those in government. The idea that academics can manage an economy appeals to campus Keynesians who have never run a business or made a payroll. The real economy of voluntary exchanges is foreign to them and fraught with danger. They are convinced that government must police the market, taking care of the weak and controlling the strong.

"Because of you, the Mises Institute has breathed life back into the Austrian School."

The donors to the Mises Institute know that it is actually the free market, with people spending their own money as they please, that makes for a prosperous and free world. Our supporters know that capital and savings cannot be created with a printing press. They know students must learn that only the forgoing of consumption creates the capital needed to finance future prosperity.

A recent study found that the majority of high-school students have no economic education at all. For example, they believe that the government sets the prices of all goods. They have never been introduced to the concept of supply and demand and the mutual satisfaction of trade. Public schools indoctrinate young people into believing that government is omnipotent and that their best options in life amount to jobs as government bureaucrats.

Sadly, this ignorance can continue through college and even graduate school, unless they are introduced to sound economics. Young people must be taught that it is entrepreneurs, like so many supporters of the Institute who own their own businesses, who create wealth and jobs for everyone. Those making a million dollars a year should be cheered and thanked, not slapped with surtaxes to decrease their incentive to produce.

Because of you, the Mises Institute has breathed life back into the Austrian School. And it is the Austrians who stand alone in the fight against Keynesian statism. If not for the Austrians, there would be no answer to the Keynesians. Because the monetarists and neoclassicals are just Keynesian Lite, believing their equations can predict and their government policies will work.

That's why it's left to us to educate young students in the Misesian and Rothbardian tradition. It is not enough to seek kinder, gentler bureaucrats and better monetary policy. What we need is free markets and sound money without compromise.

In 2011, we held more teaching events than ever, including our famous Mises University program. Our website hosted 1.4 million visitors every month. We published books and articles as never before. The media appearances were constant. Our offices were busier than ever, the very center of the global resistance to statism and the global font of economic truth.

We want to do this again in 2012 and even step it up. We cannot rest. But we also need resources to continue this pace. We've never faced this opportunity in our lifetimes, and we do not know how long it will last. This is the time to act. We hope we can have your highest possible level of support.

Gifts of $100, $500, $1,000 are fantastic. But consider making the biggest investment possible in the work of liberty with a more substantial gift. We need your help to achieve the dream of every great thinker who has ever worked for liberty.

The Mises Institute is the real thing: not pulling any punches or backing away. Now is the time to strike a blow for liberty. We can't let this moment pass. We have the Keynesians on the run. Now is the time to deliver the knockout blow to every form of statism. We have the ideas that are needed to build a future of liberty.

Please give generously.

Douglas French is president of the Mises Institute and author of Early Speculative Bubbles & Increases in the Money Supply and Walk Away: The Rise and Fall of the Home-Ownership Myth. He received his master's degree in economics from the University of Nevada, Las Vegas, under Murray Rothbard with Professor Hans-Hermann Hoppe serving on his thesis committee. French teaches in the Mises Academy. See his tribute to Murray Rothbard. Send him mail. See Doug French's article archives.

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Rodrigo González Fernández
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