Category Archives: Austrian Economics

Applauding Turkey and Brazil (and Russia and China too)

Recent sanctions leveled against Iran seem troublesome, and as some (like Ron Paul) have indicated, seem to be the last or next-to-last step before armed conflict in our relations.  In my case, trying to promote freedom and liberty by constricting it (to a country that would greatly benefit from it) seems counterproductive.  In the case of Iraq, crippling sanctions resulted in the deaths of half a million children and women in the 1990s.  Hardly justifiable.  Sanctions have also failed in North Korea, Cuba, and Venezuela.  No regime change is apparently imminent in either country.  Instead, some of the poorest and most repressed on the earth become even poorer as their trade with other countries is restricted.  A far better policy would be to follow the Golden Rule, treating other countries as we would want to be treated.  This method would lead to greater peace and prosperity, and would make America the “city on the hill” it aspires to be, rather than the “king of the hill” it sometimes appears to be.

However, there is some good news to be found.  For one, Turkey and Brazil tried to go the third-party enrichment route (Iran’s refusal was reportedly the US’s rationale for issuing the sanctions in the first place), and though they succeeded in getting Iran to agree to having its uranium enriched elsewhere, both countries were informed it was too late, and that the sanctions were going forward.  Both boldly opposed the sanctions.

Russia and China were both interested in softening the sanctions; and soften them they did.  What the UN passed was far from the “crippling sanctions” US Secretary of State Hillary Clinton promised to impose.  One of the biggest reasons was that China and Russia insisted on softening the sanctions, or they would not be passed.  I applaud such efforts to reduce the costliness of sanctions on a country that definitely could benefit from trade, especially at this juncture.

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Filed under Austrian Economics, foreign policy, politics, role of government, Ron Paul

GDP and a Culture of Consumption

Many have the misconception that a true advocate of the free market (a condition where individuals are free to exchange, invest, and economize without coercion) is necessarily an advocate of our consumer culture.  Nothing could be further from the truth.

Gross Domestic Product, or GDP, as it is commonly known, measures three indicators: consumption, investment, and government spending.  GDP is the most commonly used indicator of economic strength among the mainstream.  As consumption is a presumed sign of economic strength, governments around the world perpetually create schemes and concoct incentives to try and boost consumption, for according to this measurement system (which I strongly disagree with), as consumption increases, so does the overall economic health of the nation.

Our culture of consumption is not a product of the unfettered free market, but is largely a result of state interventionism, including unholy alliances between governments and businesses of all stripes.  This is nothing new: the Austrian School of Economics has been preaching this for decades.  Economists of various flavors have been preaching this for centuries, if not millenia.

I clearly do not support increased government spending as a measure of economic strength.  Quite the opposite.  Investment alone (this would include what we call “saving”) is the prime indicator of economic health, in my mind.  As the government can do nothing constructive to assist this (except to protect individuals from acts of aggression), there is really no constructive purpose to measuring GDP.

One argument against measuring investment alone is that investment is bad for the economy in the short-term.  In a sense, this is true.  A consumption-oriented culture and economic system has a capital structure centered around perpetual consumption.  When that ceases, it is true that jobs are lost and companies go under as the capital structure is modified.

As opposed to consumption, investment is a long-term, rather than a short-term objective.  In the long-term, investment leads to stable growth.

Money saved now (and not consumed) will one day be invested in some capital expenditure of value and benefit to society: a car, a house, an education, etc.  Unfortunately, our consumption-oriented corporatist culture diverts resources from where they are most useful (i.e. investment) and puts them in an area where they have short-term gains at the cost of long-term rewards.  That money is diverted from its proper use to purchase some expendable and often non-essential good.  (When such purchases are made on credit, the consequences are even worse.)

Would consumption exist in a country with a small government and no measurement of GDP?  Of course: people still need to eat, shower, brush their teeth, and enjoy recreation.  But there would be less frequent frivolous purchases and more long-term planning and saving.

In short, capitalism gets a bad rap for our government-encouraged corporatist, consumer-driven culture.  My advice: stop measuring GDP, get government out of the business of business, and let the market go to work. In other words, stop interfering with every transaction between individuals: and let them economize and exchange freely, rather than being bound and fettered by onerous regulation, heavy taxation, and myopic incentives.

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Filed under Austrian Economics, fiscal policy, Libertarian, Personal, politics, recession, role of government, Social Commentary

Bold Automotive Predictions

With President Obama’s proposed upgrade of car fuel efficiency standards (government-mandated standards, of course), I have a few bold predictions to make:

1. The administration’s estimate of an average increase of $1,400 per vehicle is far too low.  A more accurate estimate would be an extra $4,000 or $5,000, what one would pay extra (at least) for a hybrid car.

2. Materials in cars would move increasingly towards polymers (plastics) and aluminum and away from steel and cast iron.  Conventional illumination systems will be increasingly replaced by high-end, expensive LED systems.  This could be good news for some small companies in the South, West, and Northeast, but will probably hurt even more the rust belt, which still has a fair share of iron and steel plants which primarily serve the auto industry by producing low-cost, high-quality, ultra-reliable parts.  They will be driven out in a hurry.  Too swift a movement towards these lighter materials will likely mean a safety problem and almost certainly a quality compromise.

3. The value of some used cars will increase as their demand will as well.  A reliable gas guzzling vehicle purchased in 2014 may depreciate lower than one purchased in 2002.

Let it always be remembered that, as Henry Hazlitt would say, a good economist looks for all effects of a certain policy, and a poor economist looks at a narrow window of scope, ignoring the complete picture.  Sadly we have neglected wisdom and we continually look to our tunnel-vision minded political machine to set our course for us.

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Filed under Austrian Economics, fiscal policy, Paleoconservatism, politics, recession, role of government

Recession and the Austrian School

All is vanity. -Ecclesiastes 1:2

Who is right about the current recession?

Most economists from the Austrian School of Economics have been saying since the beginning (before most mainstream economists admitted we were even in a recession) that this economic downturn would be long and prolonged, likely a depression.  They are still saying this.  None of the failed Keynesian economic policies will change this for the better.  They will only prolong the agony, as Hoover and FDR’s interventions created and prolonged The Great Depression.

The Cold War taught us this: governments are not only unjust stewards of resources, but they are tragically inefficient as well.  Tens of millions died, for instance, due to Communist failures to allocate food properly.  If governments cannot even allocate food properly, the most basic of necessities, what makes us believe they are able to allocate capital, education, the environment, and health care (to name just four examples) more effectively than we as individuals are?

Mainstream economists have said, and some still say, that the recession will start to end this year.  This is tom-foolery.  We are already starting to see some mainstream shift in opinion (i.e. this news article).  This shift will only continue, validating the conclusions of the Austrian School of Economics.

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Filed under Austrian Economics, fiscal policy, Libertarian, monetary policy, politics, recession, role of government

300,000 Pounds and Ducks

I sometimes listen to Radio 2 Morning on CBC in the morning commute.  It’s the most entertaining radio show I have ever heard, both musically and in prose.  The songs are pure, simple, subtle, and sincere, both musically and lyrically, not overly sugary, forced, or over-the-top as I find some American music to be.

Prose is frequently entertaining.  Yesterday, radio host Tom Allen told about a scientific study, conducted by English scientists from the prestigious University of Oxford, which cost British taxpayers 300,000 pounds.  The study aimed to ascertain whether ducks preferred water in troughs, ponds, or rain.  The study pointed out that ducks preferred rain.

Many farmers in England, as you might imagine, have a difficult time with so much British taxpayer money being appropriated for such a silly purpose.  English farmers have known, colloquially, that ducks love the rain, for hundreds of years.  They did not need 300,000 pounds to tell them this.  They are understandably frustrated.

This is a silly story which brings up some important questions which are never discussed, but which should be:

Is it just to appropriate taxpayer money for scientific research?  Where in the U.S. Constitution is such explicity justified?  Did our Founding Fathers support such spending?  Why do taxpayers not have a say in where their money goes and how it gets spent?

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Filed under Austrian Economics, fiscal policy, Learning, politics, role of government

Responsibility Problems

We have a responsibility problem in this country.  It is everywhere, from the voters that voted for President Obama because he would pay their mortgage and utility bills for them (I do not recall him refuting this oft-repeated argument, by the way) to the auto bailouts to local and state governments clamoring for federal stimulus money.

I recently read this interesting and insightful statement in an article regarding record deficits and federal borrowing: “The deficits … are driven in large part by the economic crisis inherited by this administration,” budget director Peter Orszag wrote in a blog entry on Monday.

This follows the pattern: no responsibility.  The deficits are driven by government spending, pure and simple.  It may be true that such spending was seen as necessary by some.  However, to blame the economic crisis for irresponsible and reckless government spending is at least irresponsible and sounds nearly reckless.

Yesterday on the radio, I heard a story about how the Postal Service was needing to increase stamp rates (probably annually) to make up for lost revenue (over $1 billion this quarter alone).  At the end of the story, the reporter mentioned how that people who use email and make purchases online are largely to blame for this rate increase, but that such individuals will likely persist in their behavior.  Again, this sounds completely irresponsible.  Blame is shifted from who is truly responsible (the U.S. Postal Service for not providing a service whose costs are covered by individuals who will voluntarily pay) to those who are not (individuals acting freely, economizing to save money in hard times, or increase convenience in good times).

Lest you be concerned that I am pounding on democrats alone, I find that the GOP blame games which we have seen repeatedly over the years show a similar trend: the mainstream associated with both major parties shows major irresponsibility.

Contrast this with us, with you and I.  In a time of frozen credit and economic hardship, none of us can afford to make reckless personal economic decisions.  We can blame whoever we choose, but ultimately, it is our own individual responsibility to make sure that we are economically healthy.  None of us have the political clout and lobbying power to bend Washington to our will, nor should we.  Instead, we are to rely on tried and true principles of budgeting, economizing, and hopefully saving, consistent with provident living.

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Filed under Austrian Economics, fiscal policy, LDS Church, Libertarian, Mormonism, Paleoconservatism, politics, Prepare, recession, Social Commentary

President Obama on Science

President Obama has recently committed huge amounts of resources to science.  Is it bad to support science and scientific research?  Absolutely not.

However, the problem is that the funding mechanism for this scientific research is unconstitutional and unethical.  President Obama does not say to the American people, “You need to pay more for government-directed scientific research funding, and so we are at work now to determine the best way to take your money for this purpose; we will most likely increase our catastrophic indebtedness.”

He does not say this, and I do not think he means this, either.  President Obama, like most people, does not have a problem with a government of our size and cost.  In fact, he’d prefer it to be bigger.  Nor does he see taxation (including inflation) as inherently coercive and morally problematic, as I do, and as I believe our founding fathers did.

Another problem is that a false argument is constructed: you are either for us (our proposed government program) or opposed to scientific growth.

In reality, one can be opposed to the funding mechanism yet still highly supportive of voluntarily-funded (rather than coercively-funded) scientific research.

It is an unfortunate thing indeed for our allegedly post-partisan president to play such petty games.

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