20
May
08

Mises

Mises is a brand more than anything, a brand spread through http://www.mises.org. Like all good brands, those that are familiar with Mises (or the austrian school of economics as it is sometimes known) have certain associations with the name… most of us just think they are wack jobs. Basically, Mises is the school of thought that if you just completely remove government intervention from society everything will be magically better. They like to say things like “Taxation is force”. They are, in a word, idiots.

The theory falls apart under even the most casual scrutiny. Even the Mises folks mostly agree that providing police and defense is the job of the government, but they don’t want to pay taxes. They also want to have private roads that you pay a toll to drive (or not, at the owners discretion), private fire services, private healthcare, private education, private everything. It has even taken me some effort to get a few of them to agree to publicly funded police forces. In short, they believe in the power of the “Invisible Hand” of market forces and when anyone refutes them they claim ideal conditions weren’t achieved (for instance: if you claim that privatization of power infrastructure didnt work, they claim it’s because the government was still invovled and if true de-regulation had happened it would have worked, and besides, that’s not the point… it’s my goddamned money and no good for nothing lazy immigrant welfare case is going to get any benefit from it).

They fail to realize that almost universally the privatization of large scale utilities has failed, no matter how you try to do it. The one example everyone on the right likes to trot out is water privatization, a dismal failure by any regards. Oddly enough, big utility projects tend not to turn a profit, and don’t have any chance of turning a profit for a very, very long time after the intial infrastructure investment. Of course, the mises people I have talked to have an answer for that, force the utilities who built the infrastructure to lease their infrastructure to other companies via regulation…

The closest to home example I have of this is power. When I was a child, winters in Nova Scotia were pretty harsh. Lots of storms and snow, very few power outages. The power lines were maintained stringently. Since then Nova Scotia Power was privatized. The first thing they did was to cut back on maintenance crews, since crews are an expense. Last year several thousand people were without power due to heavy fog. Heavy fog! This is Nova Scotia, where there is fog almost every morning. At the same time, Nova Scotia Power is losing money hand over fist. They just aren’t that efficient and costs are going up. Of course, there has been talk about opening up the market, but the problem is that you would have to use Nova Scotia Powers infrastructure, and they make more money without leasing it out, after all, right now they are using all of the capacity and making money off all of it. In a free market situation, NSP becomes a natural monopoly because no-one else can make money in the same arena. This applies to roads (to have an even moderately efficient roadway you need central planning, and that means that for it to scale you need to have the kind of money that only government has), air travel (I know, there is a myth that air travel is a success of privatization, but all airlines are subsidized and airports tend to be government projects), power, water, telephone (again, a hell of a lot of government money went into developing the infrastructure… and privatization has just been so good for all of us right?), police, military, firefighting, space travel, scientific research (name a single innovation that came out of private industry… not a drug that treats a symptom, a real innovation). Private industry has its place, but to think it is the ultimate example of human achievment is simply naive.

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13 Responses to “Mises”


  1. 1 Pankaj
    September 25, 2008 at 3:59 am

    “Even the Mises folks mostly agree that providing police and defense is the job of the government, but they don’t want to pay taxes”

    Like I figured – WRONG! They do not want govt to do anything – that includes providing police and defense. And IF there is GOING to be a (IDEAL) govt, the minimum they expect is police and law enforcement in the benefit of people. Unfortunately every single govt has failed that.

    “It has even taken me some effort to get a few of them to agree to publicly funded police forces”

    Ok so where did you get the idea you mentioned in the first quote? Besides, there is a difference voluntarily funded police force and a publicly funded police force.

    “if you claim that privatization of power infrastructure didnt work, they claim it’s because the government was still involved and if true de-regulation had happened it would have worked, and besides, that’s not the point… it’s my goddamned money and no good for nothing lazy immigrant welfare case is going to get any benefit from it”
    There is a difference between govt & privatization and NO GOVT and privatization, in the later case, there is no need to privatize, because everything will start out as private. And yes, please look at Somalia. There has been no govt for 14 years. Check out what happened there after the international forces left Somalia alone AND the local forces failed to create a govt. There is peace and people are doing just fine – AND there are actual pricewars going on between multinational companies to sell products to the Somali people – and people can afford products like airline travel. So there is an example of a NO govt at work – and it works.

    “They fail to realize that almost universally the privatization of large scale utilities has failed, no matter how you try to do it.”
    Misunderstanding – they understand it just fine. For they also understand that govt is the tool at the disposal of big businesses – and if govt stays out – big business will collapse or live under its competitiveness, hence consumers win. Isn’t that what you want?

    “Oddly enough, big utility projects tend not to turn a profit, and don’t have any chance of turning a profit for a very, very long time after the intial infrastructure investment. Of course, the mises people I have talked to have an answer for that, force the utilities who built the infrastructure to lease their infrastructure to other companies via regulation…”
    I don’t know which Austrian economists you have talked to – but the anarcho-libertarian mises will never advocate regulation, cause it is contradictory to their basic principle as you say in your opening para – no govt = better living conditions. Yes, large utility projects tend to not turn a profit – but that is the risk entrepreneurs take. Individual entrepreneurs may or may not join such a venture, depending on their own risk assessment.
    Please give me which example you have seen not work, and I can produce a detailed report on what exactly happened there, if my effort is going to get any serious consideration from you.

    “In a free market situation, NSP becomes a natural monopoly because no-one else can make money in the same arena”
    Completely and utterly wrong. You notice that they are loosing money. This means they will go out of business unless govt keeps helping them (which I bet they are, not sure, just a hunch). In a free market, other competitors will either build their own infrastructure OR buy out NSP and then use their infrastructure OR deliver power through completely different means. Since people are facing conditions worse than tolerating a little smoke, Locally located powerplants sound like a great idea, especially if consumers are located in suburban or rural setting. If consumers are located in a urban setting, municipal corporations etc can decide to own infrastructure or allow a new entity to build a local power infrastructure – spending their own money that is.

    Check these conditions for me – These are my guesses – let me know if I am wrong.

    If you (citizen or non-citizen) want to start a power company in NS, you cannot just setup shop, do a one (or ten) page paperwork at one govt window basically telling them “hey I am starting a power company” and start it up, even if you have the necessary capital. There will be a huge paper trail and bureaucratic mess you have to go through to start one, and then there is heavy taxation and price control on power/energy in NS.
    OR
    NS govt has a history of nationalizing private businesses.

    The above conditions are probably true in NS – but that is just my hunch. I don’t live anywhere near NS or Canada, but I can bet money that I am right.

  2. September 25, 2008 at 12:29 pm

    Pankaj:
    The biggest problem with Mises is the one that exists with all economic theory… I can show you ways in which the communist government of the Soviet Union actually helped to mitigate the suffering of the populace post soviet collapse (and all that with policies that were no longer in effect). There is simply no way to prove that the theories of the Austrian school of economics work in the real world, and a lot of ways to disprove them. The number one way is that whenever you have a power vacuum, some body moves in to fill it.
    The odd person who follows Austrian economics who argues (as you do) for private police and courts is really not cognizant of the facts. Private police are a great idea, except in the instance where one body has more resources by a significant margin. In that instance, they can either co-opt the police force to do their bidding or hire a larger and better equipped police force. That is the basis of most warlord states by the way… they tend to come up when there is no impartial government to make them not come up.
    Courts are another example. Courts only work if there is an impartial police force, and if the court is also impartial. There is simply no reason for a person who owns a police force to submit to the will of a court he doesn’t control… so the chooses to do contract law in a court that he owns. Other people may choose not to be bound by the decisions of that court, but the person who controls the police controls the court.
    Mises, much like communism, works in theory. In truth, any time there is a shortage the whole theory behind Mises falls like a house of cards, as one person co-opts the entire system. Basically government is a set of checks and balances on society. It sets up health care that doesn’t kill a lot of people (the classic argument of if a doctor proves to be incompetent no-one will go to him ignores the fact that a lot of people will probably die in the period of time before the incompetence is discovered… or simply doesn’t care about it).
    The railroads example of private industry is not flawed, the conclusions drawn from it are however. What they reflect is that private industry is good at local projects on a small scale. There is no evidence that private industry is good at large scale projects.
    The example you mentioned of no regulation towards the leasing of power lines… of course Austrian economics rejects it, which doesn’t mean it isn’t the only way large scale power companies would be likely to end up sharing their infrastructure.
    Finally, I will take on the power generation myth. The myth of the free market is that a free market will allow for things like local power generation and that is better by default than government. The regulations around power generation are simply based on public safety. See, it turns out that you need a certain degree of expertise to operate a generating station. In a perfect Mises world the free market would mean that in order to make a profit the generating station would have to be well engineered, but it fails to take into account the fact that someone who makes a lot of money in one sphere may try to enter another sphere without expertise and may (due to human nature) try to take short cuts. This means that you may have an incredibly dangerous power generating station in the middle of a crowded city. You may have someone who convinces someone who has money that they are an expert… it happens all the time, and takes the money while shortcutting the project left right and centre.
    Austrian economics is simply unable to come up with solutions to these problems (and no, the theories they list for how to deal with it are not adequate… private certification doesn’t deal with people who ignore it for example).
    Austrian economics is in essence the theory that my right to keep my money trumps your right to live. It is a profound philosophical disconnect with most of human history and culture, and is morally bankrupt.

  3. 3 Pankaj
    September 25, 2008 at 5:04 pm

    It maybe be because I am running a fever or that your statements about austrian theory of economics is so baseless – but your entire post seems like a sense of vapid mumblings of the statists. So kindly excuse me if I am harsh here.

    Here is a way to decide – do you agree on anything with Milton Friedman either? He is a Keynesian, NOT an Austrian. BUT he is strongly in favor of voluntary cooperation and non-centralized economy. Now do note, that while he was alive he remained the undefeated champion of free markets. He has a nobel prize and thousands of followers. Did he get it wrong too?

    And who do we have on your side? Some Statists who would not admit that they have no clue about power generation. Putting up a few high output diesel engines in the middle of the city is “incredibly dangerous power generating station”? This is the exact thing I am talking about. Besides you do know that most medium to large scale hospitals, any hospital with an operating room basically – utilize these “incredibly dangerous power generating stations”, right? And yes without a impartial (really? impartial? Is govt impartial towards itself too? Try writing something against the govt calling for its abolition.), people would die.. Exactly what happened at Chernobyl? Lack of Govt?

    Here is the final blow – if you really think we are looking out for the interests of the masses – make taxes voluntary. I am sure the masses knowing how GOOD the govt is and how much it does for them – will keep paying the taxes. Will never happen, because in your world the minority should be allowed to coerce the majority to pay for their expenditures, with ZERO accountability.

  4. September 25, 2008 at 5:47 pm

    Calling me a statist… usually it takes longer than this.
    Yes, Milton Friedman got a lot of things wrong.
    As to diesel generators… why are they used only for backup power generation? Do you have any idea at all? I mean, if they were practical for even medium scale power generation, don’t you think that hospitals would use them as their primary power source, not as a backup in case of emergency? For some reason that never happens.
    The masses don’t know how good government is for them… if they did you and I would not be having this discussion. In fact, given a choice between having a couple of bucks in their pocket or not… most people will choose to have a couple of bucks in their pocket. This is a fundamental failure of most human beings to understand abstraction. I’m afraid you are a particularly bad example of this failure… something I have seen in many of your posts.
    I note that you sidestep the issue of courts and policing. That has been a common thread in my conversations with people who are in favour of Austrian economics. In fact, that is usually where they eventually agree that some limited role exists for government… but keep it as small as possible.
    Now, I haven’t really even touched on things like deregulation leading to an inevitable boom/bust cycle and the concentration of wealth being re-balanced by social collapse (at one point an average of every thirty years). You will probably make the argument that all taxation is force at some point, telling me how this is forced redistribution of wealth and that it is no different than armed robbery. Actually, it is the social contract that makes humans a successful species. Without the social contract we never develop towns, shared resources, specialization. That leaves us back in the cave. Now, obviously we aren’t heading back to the cave, but that social contract that you abhor as immoral is to me the height of human morality… we probably aren’t going to see eye to eye on that.

  5. 5 Pankaj
    September 25, 2008 at 6:50 pm

    “Yes, Milton Friedman got a lot of things wrong.”
    Like? I have my disagreements with him on the origin of currency, but being a mises student, you would know why and what the disagreement is.

    “why are they used only for backup power generation?”
    Because govt subsidized energy is cheaper than energy generation itself. The other reason is that the focus of hospitals is on providing medical services, so it does not want to bother maintaining fuel levels, engine maintenance and other electrical distribution related activities. A private power generation company will have no other business than taking care of these things. BUT, they still use large diesel engines. Tell me how are they “incredibly dangerous”. Another aspect of this is that govt keeps hindering the development of fuel generation business – which would make the power generation much cheaper than it is right now (not to mention inflation of currency etc.)

    “In fact, given a choice between having a couple of bucks in their pocket or not… most people will choose to have a couple of bucks in their pocket.”
    OK so you are smarter than the rest of us, we are just greedy. Nice! Do tell who elects the politicians in a democratic system? You or the masses? Is it possible that you are wrong and people have it right?

    “I note that you sidestep the issue of courts and policing”
    Please point out where I have side stepped the issue. If you want I can explain to you in much detail how private courts and police will work, but like I said I am not feeling well right now – hence my misery of words. Remind me to come back to it, when we are done with the power generation and we shall discuss that too.

    “eventually agree that some limited role exists for government… but keep it as small as possible.”
    The reason most austrians see the role of govt is mostly psychological. Since people have been so used to having govt and apparently feel safe with a god like figure – no matter how foolish that belief is – I say yes, have govt if you want, just pay for it yourself.

    “Actually, it is the social contract that makes humans a successful species.”
    Wrong again. We are born humans (homosapiens) to be exact. I never signed a social contract, neither have you. One was imposed on you, and face it – there is nothing you can do about it.

    “Without the social contract we never develop towns, shared resources, specialization. ”
    If you really want a social contract, write it down and get it signed. Here is a question – what if Big brother changes the terms on the contract? What can you do about it? Who is going to enforce it? You have a problem with the imbalance of power between the groups of people – tell me what is your defense budget and what is that of your state? How can you ever fight the state if it decides to change and exploit the so-called social contract?

  6. September 25, 2008 at 7:14 pm

    Diesel power generation is not done (even in countries that do not subsidize power and have no regulations preventing it) because it is not well suited to sustained running as a power generation method. You tell me you have worked in the third world… why, in my fathers village, is there a central power station that is large enough to serve the whole ares? Fuel transportation costs to each of these smaller stations are large, made larger because they have to made by surface vehicle, not by pipeline. Yes, you could build a pipeline, but then you are back to major infrastructure costs (somewhere in the area of a thousand dollars a foot in urban areas). State power is cheaper because the infrastructure costs are already paid. There is simply no way to eliminate them and have an electrical grid of any size. Those rosy images that Mises and the like paint of early power generation? That power was only for the wealthy. It took major infrastructure projects on the scale that only governments could achieve before it reached the masses.
    The social contract is not what makes us human, and I never claimed it was, I claimed that it was what made humans successful as a species (from the point of view of controlling most of the world and being the only species ever to exist simultaneously on all continents and the only species to leave the planet). No, you can’t opt out of it and still live in an area where it exists. That is how a social contract works. If it wasn’t, then those who don’t need it (the very wealthy) would mostly leave, even though much of their wealth came from the labour of those who do need the social contract.
    I have never had a practical suggestion that deals with the courts and police issues. Many that deal with it if there is no concentration of wealth, but no mechanism in the free market actually hinders the concentration of wealth.
    If you are able to come up with something I haven’t seen, I will be interested in it. For now, Austrian economics continues to fail to impress me. That has a lot to do with the fact that it ignores humans tendency (and it is a tendency which we all share, but usually can’t see while we are in the middle of it) of doing stuff that helps us in the short term and screws us in the long term.

  7. September 25, 2008 at 7:32 pm

    Oh, Pankaj:
    I have a new post that is relevant to this discussion on the front page of this site.

  8. 8 Pankaj
    September 25, 2008 at 10:14 pm

    “even though much of their wealth came from the labor of those who do need the social contract.”
    REALLY?! Are you going to tell me next that you believe in communism?

    Let me tell you something else that I see in your argument that is a self-contradiction in your argument.
    If the wealth of the wealthy cam from the labor of others, would that not mean that if they leave, they will stop earning wealth? Obviously, unless they toil themselves in farms and factories, they won’t be able to hold on to the wealth they have already accumulated. Which will mean that they will have to spend their accumulated wealth while not earning as much back. Which means they will soon be poor. So tell me why do they not need the social contract..
    On the other hand, a man who has to work for his living – will always find work, because someone somewhere wants to become wealthy – and now the wealthier entreprenuers have left. This means, he will succeed much easier in the market thus generating jobs for his fellow laborers. Which will mean that, the worker will always have jobs, IF you let the talent of the budding entreprenuer live on and not smash it with govt control. So why does the working “class” man need a social contract? All he needs is a job or an entrepreneurial spirit (lead or follow), he can find one.

    So there, the contention that it is the wealthy that Don’t need social contract while the working majority do – is not true. In fact it is the other way around. The wealthy (but not so entrepreneurial anymore) need and can always be seen colluding with govt to benefit from tax money spending, be it defense contracts or social programs. I have seen this happen personally for 20 years and then for 5 years, the socialist govt started to loose grip of economic institutions.. and lo-n-behold, people’s living standards sky rocketed.

    Besides as long as this so called social contract is not readable, but implied, what makes it valid or moral to enforce it on anyone? Would you enter a unwritten contract with a business entity, that has the power to kill you if you resist or default on it?

    “it ignores humans tendency”
    Glad that you brought that up – and what is that human tendency? Please be explicit. Also please try and explain how the mighty politicians who hold the reins of the nation for a limited amount of time avoid being human during that period of time. Because if they don’t they now have loaded guns to the heads of an entire populace. And with control of education, they can easily shape public perception by making small and seemingly good, but decisively bad (for example) the “pledge of allegiance” on unsuspecting kids, who repeat it so many times that they actually start to believe it.

    If you think the USA was “one nation, under God” OR “indivisible”, you have been OWNED. Of course you are a Canadian, so you wont, but just ask any American who thinks that it is so and you will have an idea of how govt can convince people of untrue and blatantly false ideas.

  9. September 25, 2008 at 11:14 pm

    Actually, I think that if you think a little deeper about your first example you will realize that you are completely wrong in it. If you have the option of leaving the social contract without leaving the society (in other words, you can withdraw your money from the tax pool without leaving the country or giving up your business) then you don’t open up a vacuum, you just reduce the amount of funds available.
    Look at feudalism. In the feudal system the landowner owed a certain tribute to the king and the workers owed a tribute to the landowner. There was no official government, merely people who had more power and others who had less. This was, in fact, a completely free market system. The person who owned the company (the dukedom or barony) could engage in any form of trade that they wished, but they were required to send a bit of money to the franchise holder. This isn’t the state as you talk about it. Yes, there was an implied, but unenforced, obligation to the serfs. One of the wonderful excesses of this time actually occurred in Russia (if you think the state was bad in Russia, you should check out the czarist system) was that one of the landowners (and remember that was the condition of being noble, simply owning land. You charged rent to serfs that involved the sum total of what they could earn) would go hunting. Their feet would be cold when they got home, so they would slit open the stomach of a serf and place their feet inside the body to warm them.
    This is the truth of Austrian economics. Without some sort of controls that go beyond enlightened self interest feudalism is inevitable. Feudalism wasn’t all bad, but it sure as hell wasn’t something I would like to live under, and I have never seen anything from anyone regarding Austrian economics that would explain how the outcome would be unlike feudalism.
    What of men (and women) who are unemployable? They do exist. They are the crazy people you see on the street. Some of them are my friends. Charity has never served these people. In some places and times they were seen as demons and killed, but mostly they were broke and homeless. The church often provided them with a bit of food (enough to prevent them from starving to death) and the wealthy never provided anywhere near enough charity.
    What of the LHC? That has no commercial value at this point, and the cost is so great that I can’t imagine it being a hobby project. There was no point in history where the wealthy did fund projects like that. What of NASA. I know that the actual space exploration budget is only a few billion a year, but that provided that the foundation for modern satellite networks. Private industry never took on a project of that type (can you imagine, a company starting a project that will literally never turn a profit). It was government that put a human on the moon and that feet has never even been replicated by private industry… there is actually nothing preventing a company from doing so. There is an international treaty that says no nation can own the moon, but nothing regarding commercial exploitation. The often proposed solution of consortium of science fans voluntarily putting their money into these projects has actually never shown any prospect of workability.
    And no, I don’t believe in one nation under god. I am a Canadian atheist and I also know that under god was added in the bloody fifties anyway.
    Government needs to have checks and balances, but, having worked for some extremely large companies, so does private industry. The government provides checks and balances on private industry, different branches of government provide checks and balances on other branches, and before de-regulation and the abandonment of the social obligation the media provided checks and balances on government.

  10. 10 Pankaj
    September 26, 2008 at 2:41 am

    “This (fuedal) was, in fact, a completely free market system”
    No. For the people had no choice but to work for the landowner. That is not a free market. In a free market any individual is the owner of his labor and not obligated to provide it to the specific landowner. Also, the appropriation of land was allowed to the king through force and violence. Which is not in accordance to the principles of the free market system. Another aspect of it was that the masses/laborers were convinced of the superiority of the nobles through a carefully orchestrated scheme (not much different than unlike the one of today) where the govt (the landowner, nobility and kings) were falsely portrayed as generous benefactors – although once the hardships hit, people did question and realize the authenticity (or lack) of this feeling. Do note that there was a limited sharing of the monopoly of force. The kings maintained national armies while the nobles maintained their own, commoners did not possess any means to defend themselves, and wherever they did – they succeeded in ending the feudal system.

    “If you have the option of leaving the social contract without leaving the society”
    Then tell me what country allows voluntary relinquishment of tax participation? I would love to move there AND pay my taxes as I deem fit.

    “Their feet would be cold when they got home, so they would slit open the stomach of a serf and place their feet inside the body to warm them”
    Can you tell me where you got this interesting tit-bit of information? Any possibility that it was from a book written by a communist?

    “It was government that put a human on the moon and that feet has never even been replicated by private industry… there is actually nothing preventing a company from doing so.”
    Except commonsense and sense of utility. It has been 30 years since the govt man stepped on the moon, after guzzling down lives and trillions of taxpayer monies. And nothing has been accomplished from that, except trinkets. What a great acheivement it is… isn’t it?!
    As for “Science fans” – they aren’t stupid either – the technology is not ready. Only someone as stupid as a govt can decide to spend away useful resources to pursue as vain as landing on the moon. Hey, I don’t care to land in Switzerland if it is on my money.. why should I care if someone else landed on the moon, that too on the earnings of millions of other people?

    “Government needs to have checks and balances”
    Checks and balances.. who checks the govt? Shotgun/handgun/hunting rifle armed populace? Or do you trust the govt itself? Being the noble body that it is (reminds me of the stomach splitting nobility) I am sure that the hand and the mouth can keep the foot in control. I think not, but I am sure you have evidence of that happening… could I take a look at it?

    “What of men (and women) who are unemployable? They do exist. They are the crazy people you see on the street. Some of them are my friends. Charity has never served these people. In some places and times they were seen as demons and killed, but mostly they were broke and homeless. The church often provided them with a bit of food (enough to prevent them from starving to death) and the wealthy never provided anywhere near enough charity.”
    What happens to unskilled people today? Well the exact same thing will happen. Except that because they will be cheaper to hire due to no minimum wage laws, they will compete with the rest of the people just using a different advantage. They will learn how to function with the limited abilities and earn their own living, live life with dignity. Who knows they may exceed the normals in their jobs and command higher wages. I personally know of many handicapped artists whose paintings are very highly regarded and earn a heavy bounty. Not to mention those amazing abilities of some autistic people. You see people will be resources, but in a free market system, they will earn the benefits of their labor – rather than being shunned away from a system that shuns away young able bodied men, the disabled don’t stand a chance, that is other than begging and charity – of the rich or religious or govt.

    By the way, when are we getting back to the power generation issue? Or Are you going to practice evasion, hysteria and then illogical pursuits to avoid a point by point refutation?

  11. 11 Pankaj
    September 26, 2008 at 2:50 am

    An interesting tit-bit you forgot to mention about the feudal system – the laborer did not care who the king was. In a way this was freedom from govt, except that the man was not allowed to keep his earnings, or spend them the way he wanted. This is a major refutation of a free market system existing in a feudal system.

    All your arguments about the efficacy of a govt – I am assuming you are talking about a democratic govt – remind me of a well written statement by a very educated anarchist.

    A democratic govt is the idea that only MEN with funny hats and guns can get US to do, what WE tell THEM, to get US to do.

  12. September 26, 2008 at 3:30 am

    I never argued that there was a country where you could opt out of the social contract, you proposed that as an idea, I explained why it was a bad idea.
    You see, you are an anarchist. You believe that the free market can create the kind of social controls we have now on its own. It created feudalism… feudalism is the inevitable result of no government (or something that looks a lot like feudalism). Constitutional democratic republics seem to be the inevitable result of feudalism (but there still isn’t enough data) and the call for no government seems to be an inevitable result of constitutional democratic republics. If you people went back a littler further in history you would see the shape of what you are proposing, and you would see, first hand, all the ways it fails. I point out power generation… you ask me for specifics. I explain the specifics (to do the kind of power generation that makes sense you need infrastructure) and you talk about diesel generators. I explain why diesel generators are simply not used for that kind of generation (you need an infrastructure to fuel the generators and it costs a bloody fortune) then you ask me for specifics. You are exactly like a religion. Facts? Why would we pay attention to those?
    Have you ever met a paranoid schizophrenic? What kind of work would you suggest my friend Ray do? At the moment he is able (through social programs) to be clothed, fed, and even to have a place to stay when it gets so cold he can’t sleep outside. He has a couple of issues. He believes that he is the lost heir of the British empire (the mafia wing) and that our local phone company is tapping his brain. If he is forced to be indoors against his will he becomes extremely violent as he believes the phone company can track him more easily. I use him as an example, but there are hundreds like him in this city, I personally know a few dozen.
    The checks and balances on government are failing… ironically enough due to the relaxation of an inconvenient regulation. The free press is supposed to take on that role, but it doesn’t do a great job here in North America. This is mostly because it is in the hands of a few corporate giants, and the provision that broadcast networks provide information to the people was ditched in the eighties (look it up, I can’t remember the name of the bill off the top of my head).
    We had a tightly regulated money market from the 40’s until the eighties and the boom/bust cycle was suspended. There were small recessions but nothing on the scale of what we are facing now. This collapse is not due to the fed (seriously, it’s not) it is due to a relaxation of oversight on investment and banking.
    When I worked for Morgan Stanley, there were a lot of bankers who hated SOX regs (Sarbanes Oxley) and wanted it gone. In fact, if SOX had been better enforced the current credit crisis would not have happened. Hell, if Reagan, Bush, Clinton and Bush hadn’t changed the way government measured economic indicators this crisis would not have happened, but all of them changed things and deregulated. Finally, interest rates are a real issue. They were kept artificially low… but banks don’t have to charge the fed’s rate… they lend at prime plus whatever arbitrary percentage seem to work best for them. They could have charged prime plus 10 if they had wanted to… the fed is the rate that the banks themselves borrow at. Using it as the be-all end-all of what is wrong with economics is disingenuous in the extreme.

  13. 13 Pankaj
    September 26, 2008 at 5:30 am

    No I do not believe the free market will create the kind of social controls we have now. I believe they are unnecessary and oppressive. Feudalism was created by the religously propagated belief that the King was the divine rulers and the landowners were the enforcers. It was also created by a voluntary imbalance of force. Name me a time and place where there was no govt, no tax collector and then try telling me that the people there suffered..
    I have responded to your idea of specifics. I have even asked you for the few govt factors that influence the market force to back down and let consumers suffer (which you seem to blame the free markets for!). You need roads to transport gasoline and diesel, just as well as you need grain and medical supplies. i.e. no extra infrastructure. The price to transport a 20,000 gallon tank of diesel isn’t all that high (absent govt regulations) – heck if you are going to buy that amount of fuel it will be delivered at your doorstep! All you have are blanket statements and assertions, amazing that the delivery of fuel for cars and trucks has never been a problem. The delivery of fuel for coal plants has never been a problem and yet for some out of this world reason that you seem to know, but would not state – transporting diesel is expensive?

    I ask you for figures and sources, and you respond with more claims about facts! facts! facts!
    Look at your own post – there are no facts there – just assertions – this is expensive, that is fuedalism, that is free market… Just the same old statist socialist song!

    .. Do you even know how diesel engines operate? Or how much fuel they consume? Heck there are commercial gas turbine power plants which even the poor of India can afford! Tell me how much does it take to transport a semi-load of diesel for a 1000 miles in Canada.. maybe I can start a trucking business there

    What kind of work would your friend Ray do? Leave that to the market, they will figure it out – he is an unused resource for some entreprenuer out there… maybe he can write conspiracy novels..

    The checks and balances are failing because the govt knows the people cannot fight back. The ultimate authority to keep govt in check is not govt.. its people – well armed people. This is why the 2nd amendment has turned into a self-defense/hunting gun platitude. Yes, you are right that control of things have been and are being transferred to the super corporations.. but, look who is transferring the control! GOVERNMENT! A govt which was NEVER meant to have the authority or control in the first place!

    SOX … what authority does the govt have to enforce such a law? Maybe in Canada they do, not in the USA. And I oppose the indicators too – but I am not going to blame just those that manipulated them – but those that put them there in the first place. The central planning committee – Greenspan, Bernanke, as well as the clown Paulson are all responsible, but they are simply milking the cow that was stolen long time ago. If there was no fed, if the banks had been maintaining a full gold standard, the housing market, the great depression and the boom/bust cycles that you blame the free market for would never have happened. Lastly if the GOVT had NOT gotten involved in regulation of the economy, there would be no standardized interest rates – hence no bank would have dared to loan out money as they did – because there would be no FED to bail them out.

    Arbitrary percentage? Do you even know how economics works? Jeez, IGNORANCE, what a lovely gift of socialism! Let me try and explain – So lets say, your friend Ray is the FED, he starts loaning out you and me money (he prints it up) at 2%. Both you and I can loan this money out to everyone else at whatever interest rates we deem fit. Note that Ray has said that as far as we pay him his 2% interests, he can supply cash from a bottomless pit. You can charge 12% interest, I will charge 2.5% making only .5%, but rapidly handing out cash loans making up for the low rate with high volume. So while you sit with your first $1000, I can loan out millions and start earning that 0.5%. Now tell me which bank would have taken your position? And what is wrong with mine? Answer is NOTHING. The problem lies in the fact that Ray can print up as much money as he wants.

    This is precisely why gold backing or commodity backing would have limited the expansion of the welfare-warfare state – but alas, politicians are humans too – just like those stomach splitting feudal land owners.

    Is it ever the fault of the central planners? In your opinion, is there any area of civilian life that govt must NEVER interfere with?

    And Mises was wrong? Milton Friedman was wrong? Hayek was wrong? (“Road to serfdom” – read it if you can, you may actually like it) and YOU – my friend are right? Let me dig a hole to bury that arrogance of yours and then I can continue debating you. Lets see – I have a choice here – Go with Mises who single handedly stopped the spread of socialism in Austria, alongside him are Milton Friedman and Hayek who are world renowned economic scholars, not to forget the great scholar – Rothbard. On the other hand I have a man who for most of his life writes on a blog and has no facts and figures at hand to prove anything. Who do you think I should believe?


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