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Free Will and the Market Place

Free will is the starting point of all ethical thinking and it plays an equally important part in the business of making a living. If man were not endowed with this capacity for making choices, he could not be held accountable for his behavior, any more than could a fish or a fowl — an amoral being, a thing without a sense of morals. So, if man were devoid of this capacity, his economics would be confined to grubbing along on whatever he found in nature. It is because man is capable of taking thought, of making evaluations and decisions in favor of this or that course, that we have a discipline called economics.

In making his ethical choices, man is guided by a code believed to have the sanction of God; and experience has shown that the good life to which his instinct impels him can be achieved only if he makes his decisions accordingly. The Ten Commandments have been called the Word of God; they can also be described as natural law, and natural law has been described as nature’s way of applying means to ends. Thus, we say that nature in her inscrutable ways had determined that water shall always run down hill, never up; that is a natural law, we say, because it is without exception, inevitable, and self-enforcing. Therefore, when we decide to build ourselves a house, we set it at the bottom of the hill so as to avail ourselves of a supply of water. If we put the house at the top of the hill, nature will not cooperate in our obstinacy and we shall not have any water in the house; unless, of course, we discover and make use of some other natural law to overcome the force of gravity.

That is to say, nature is boss and we had better heed her teaching when we make decisions or we shall not achieve the ends we desire. But, her teaching is not freely given; we must apply ourselves diligently to a study of her ways to find out what they are. The prerequisite for a successful investigation is to admit that nature has the secret we are trying to uncover; if we begin by saying that in this or that field nature has no laws, that humans make their own way without reference to nature, we shall end up knowing nothing.

If, for instance, we discard the Ten Commandments, declaring them to be mere manmade conventions changeable at will, we end in chaos and disorder — evidence that we are on the wrong track. Likewise, if we declare that God in his infinite wisdom chose to disregard economics, that in ordering the world he overlooked the ways and means for man’s making a living, that in this particular field man has to work out his own formulae, we will end up with a poor living.

“Economics” without Principles

And that is exactly what has happened in the study of economics; many experts in this field are of the opinion that nature can tell us nothing about the business of making a living; it’s all a matter of human manipulation. That is why economics is so often a meaningless hodgepodge of expediencies, leading us to no understanding and no good end. I might add that the incongruities of ethical life, such as divorce, juvenile delinquency, international friction, and so on, are largely the result of the current conceit that there is no warrant for ethics in nature, no positive laws for moral behavior; but that is another subject.

I shall try to present some evidence that nature has her own rules and regulations in the field of economics, indicating that we had better apply ourselves to learning about them if we would avoid the obviously unsatisfactory results from relying on man’s ingenuity. Come with me into the laboratory of experience, which is the source of much understanding.

The First Pioneer

Let us cast our mind’s eye back to the time when there was no Madison, Wisconsin, or any other city west of the Alleghenies, when only the seed of a later social integration was planted here — when a lone frontiersman decided to settle on this spot of earth. The primary consideration which influenced his decision was the possibility of making a living here. He selected what later became Madison because the land was fertile, water was plentiful, the forests abounded with wood for his comfort, meat for his sustenance, and hides for his raiment. This was the workshop from which he could expect good wages for his efforts. Without benefit of economic textbooks, he hit upon a couple of economic laws: (1) that production, or wealth, consists of useful things resulting from the application of human labor to natural resources; (2) that wages come from production.

These laws, these precepts of nature, are still in force and always will be despite the efforts of some “experts” to rescind them. Often the yearning for manna from heaven obscures the fact that only by the application of labor to raw materials can economic goods appear, but the yearning is so strong that men ask government to play God and reproduce the miracle of the wilderness.

Government, of course, can produce nothing, let alone a miracle; and when it presumes to drop manna on its chosen people, it simply takes what some produce and hands it over to others; its largess is never a free gift. And as for wages, they still come from production, even though there are sectarians who maintain that wages come from the safety vaults of a soulless boss. The consequences of disregarding these two dictates of nature are too well known to call for discussion.

Returning to our first pioneer, his initial wages are meager. That is because he is compelled by the condition of his existence to be a jack-of-all-trades, proficient in none. He produces little and therefore has little. But he is not satisfied with his lot for, unlike the beasts in the forest or the fish in the sea, man is not content merely to exist.

And here we hit upon a natural law which plays a prime role in man’s economic life: He is the insatiable animal, always dreaming of ways and means for improving his circumstances and widening his horizon. The cabin built by the pioneer to protect himself from the elements was castle enough in the beginning; but soon he begins to think of a floor covering, of pictures on the wall, of a lean-to, of a clavichord to brighten his evenings at home and, at long last, of hot-and-cold running water to relieve him of the laborious pumping. Were it not for man’s insatiability, there would be no such study as economics.

A Neighbor Arrives

But the things the pioneer dreams about are unattainable as long as he is compelled to go it alone. Along comes a second pioneer, and his choice of a place to work is based on the same consideration that influenced his predecessor. What wages can he get out of the land? However, as between this location and others of equal natural quality, this one is more desirable because of the presence of a neighbor. This fact alone assures a greater income, because there are jobs that two men can perform more easily than can one man alone, and some jobs that one man simply cannot do. Their wages are mutually improved by cooperation. Each has more satisfactions.

Others come, and every accretion to the population raises the wage level of the community. In the building of homes, in fighting fires and other hazards, in satisfying the need of entertainment or in the search for spiritual solace, a dozen people working together can accomplish more than twelve times what each one, working alone, can do. Still, the wage level of the community is rather low, for it is limited by the fact that all the workers are engaged in the primary business of existence on a self-sustaining, jack-of-all-trades basis.

At some point in the development of the community it occurs to one of the pioneers that he has an aptitude for blacksmithing; and if all the others would tum over to him their chores in this line, he could become very proficient at it, far better than any of his neighbors. In order for him to ply this trade the others must agree to supply him with his needs. Since their skill at blacksmithing is deficient, and since the time and effort they put into it is at the expense of something they can do better, an agreement is not hard to reach. Thus comes the tailor, the carpenter, the teacher, and a number of other specialists, each relieving the farmers of jobs that interfere with their farming. Specialization increases the productivity of each; and where there was scarcity, there is now abundance.

Specialists with Capital

The first condition necessary for specialization is population. The larger the population the greater the possibility of the specialization which makes for a rising wage level in the community. There is, however, another important condition necessary for this division of labor, and that is the presence of capital. The pioneers have in their hams and pantries more than they need for their immediate sustenance, and are quite willing to invest this superfluity in other satisfactions. Their savings enable them to employ the services of specialists; and the more they make use of these services the more they can produce and save, thus to employ more specialists.

This matter of savings, or capital, may be defined as that part of production not immediately consumed, which is employed in aiding further production, so that more consumable goods may become available. In man’s search for a more abundant life he has learned that he can improve his circumstances by producing more than he can presently consume and putting this excess into the production of greater satisfactions.

Respect for Property

Man has always been a capitalist. In the beginning, he produced a wheel, something he could not eat or wear, but something that made his labors easier and more fruitful. His judgment told him what to do, and of his own free will he chose to do it. That makes him a capitalist, a maker and user of capital. The wheel, after many centuries, became a wagon, an automobile, a train, and an airplane — all aids in man’s search for a better living. If man were not a capitalist, if he had chosen not to produce beyond requirements for immediate consumption — well, there would never have been what we call civilization.

However, a prerequisite for the appearance of capital is the assurance that the producer can retain for himself all he produces in the way of savings. If this excess of production over consumption is regularly taken from him, by robbers or tax-collectors or the elements, the tendency is to produce no more than can be consumed immediately. In that case, capital tends to disappear; and with the disappearance of capital, production declines, and so does man’s standard of living.

From this fact we can deduce another law of nature: that security in the possession and enjoyment of the fruit of one’s labor is a necessary condition for capital accumulation. Putting it another way, where private property is abolished, capital tends to disappear and production comes tumbling after. This law explains why slaves are poor producers and why a society in which slavery is practiced is a poor society. It also gives the lie to the promise of socialism in all its forms; where private property is denied, there you will find austerity rather than a functioning exchange economy.

The Trading Instinct

The possibility of specialization as population increases is enhanced by another peculiarly human characteristic — the trading instinct. A trade is the giving up of something one has in order to acquire something one wants. The trader puts less worth on what he possesses than on what he desires. This is what we call evaluation.

It is not necessary here to go into the theory, or theories, of value except to point out that evaluation is a psychological process. It springs from the human capacity to judge the intensity of various desires. The fisherman has more fish than he cares to eat but would like to add potatoes to his menu; he puts a lower value on fish than on potatoes. The farmer is in the opposite position, his ham being full of potatoes and his plate devoid of fish. If an exchange can be effected, both will profit, both will acquire an added satisfaction. In every trade — provided neither force nor fraud is involved — seller and buyer both profit.

Only man is a trader. No other creature is capable of estimating the intensity of its desires and of giving up what it has in order to get something it wants. Man alone has the gift of free will. To be sure, he may go wrong in his estimates and may make a trade that is to his disadvantage. In his moral life, too, he may err. But, when he makes the wrong moral choice, we hold that he should suffer the consequences, and hope that he will learn from the unpleasant experience.

So it must be in his search for a more abundant life. If in his search for a good life the human must be allowed to make use of his free will, why should he not be accorded the same right in the search for a more abundant life? Many of the persons who would abolish free choice in the market place logically conclude that man is not endowed with free will, that free will is a fiction, that man is merely a product of his environment. This premise ineluctably leads them to the denial of the soul and, of course, the denial of God.

Those who rail against the market place as if it were a den of iniquity, or against its techniques as being founded in man’s inhumanity, overlook the function of the market place in bringing people into closer contact with one another. Remember, the market place makes specialization possible, but specialization makes men interdependent. The first pioneer somehow or other made his entire cabin; but his son, having accustomed himself to hiring a professional carpenter, can hardly put up a single shelf in a cabin. And today, if some catastrophe should cut off Madison from the surrounding farms, the citizens of the city would starve. If the market place were abolished, people would still pass the time of day or exchange recipes or bits of news; but they would no longer be dependent on one another, and their self-sufficiency would tend to break down their society. For that reason we can say that society and the market place are two sides of the same coin. If God intended man to be a social animal, he intended him to have a market place.

Traders Serve One Another

But, let us return to our imaginary experiment. We found that as the pioneer colony grew in numbers, a tendency toward specialization arose. It was found that by this division of labor more could be produced. But this profusion from specialization would serve no purpose unless some way were found to distribute it. The way is to trade. The shoemaker, for instance, makes a lot of shoes of various sizes, but he is not interested in shoes per se; after all, he can wear but one pair and of one particular size. He makes the other shoes because other people want them and will give him in exchange the things he wants: bread, raiment, books, what not — the things in which his interests naturally lie. He makes shoes in order to serve himself, but in order to serve himself he has to serve others. He has to render a social service in order to pursue his own search for a more abundant life.

In our lexicon we refer to a business undertaking by the government as a social service; but this is a misnomer, because we can never be certain that the service rendered by the government business is acceptable to society. Society is compelled to accept these services, or to pay for them even if un-wanted. The element of force is never absent from a government-managed business. On the other hand, the private entrepreneur cannot exist unless society voluntarily accepts what he has to offer; he must render a social service or go out of business.

Profits Come from Patrons

Let us suppose that this shoemaker is especially efficient, that many people in the community like his service and therefore trade with him. He ac-quires what we call a profit. Has he done so at the expense of his customers? Do they lose because he has a profit? Or, do they not gain in proportion to the profit he makes? They patronize him because the shoes he offers are better than they could make themselves or could get elsewhere, and for that reason they are quite willing to trade with him. They want what they get more than they want what they give up and therefore profit even as he profits.
If he goes wrong in his estimate of their requirements, if he makes the wrong sizes, or styles that are not wanted, or uses inferior materials, people will not patronize him and he will suffer a loss. He will have no wage return for the labor he puts in and no return for the capital — the hides and machinery — which he uses in making his unwanted product. The best he can do under the circumstances, in order to recoup some of his investment, is to hold a bargain-basement sale. That is the correlative of profits-losses.

No entrepreneur is wise enough to predetermine the exact needs or desires of the community he hopes to serve and his errors of judgment always come home to plague him. But, the point to keep in mind is that when an entrepreneur profits, he does so because he has served his community well; and when he loses, the community does not gain. A business that fails does not prosper society.

The Distributive Function

The market place not only facilitates the distribution of abundances — including the abundances that nature has spread all over the globe, like the coal of Pennsylvania for the citrus fruit of Florida, or the oil of Iran for the coffee of Brazil — but it also directs the energies of all the specialists who make up society. This it does through the instrumentality of its price-indicator. On this instrument are re-corded in unmistakable terms just what the various members of society want, and how much they want it. If the hand on this indicator goes up, if higher prices are bid for a certain commodity, the producers are advised that there is a demand for this commodity in excess of the supply, and they then know how best to invest their labors for their own profit and for the profit of society. A lower price, on the other hand, tells them that there is a superfluity of a certain commodity, and they know that to make more of it would entail a loss because society has a sufficiency.

The price-indicator is an automatic device for recording the freely expressed wishes of the community members, the tally of their dollar ballots for this or that satisfaction, the spontaneous and noncoercive regulator of productive effort. One who chooses to tamper with this delicate instrument does so at the risk of producing a scarcity of the things wanted or an overabundance of unwanted things; for he disturbs the natural order.

Beneficiaries of Competition

One more social function of the market place needs mentioning. It is the determinant of productive efficiency, provided, of course, it is permitted to operate according to the unimpeded motive power of free will. In the primitive economy we have been examining, one shoemaker can take care of the shoe needs of the community. Under those conditions, the efficiency of that server is determined by his skill, his industry, and his whim. He alone can fix the standard of the service he renders his customers, or the prices he charges. Assuming that they can go nowhere else for shoes, their only recourse if they do not like his services or his prices is either to go without or to make their own footwear.

As the community grows in size, another shoe specialist will show up to share the trade with the first one. With the appearance of a second shoemaker the standard of efficiency is no longer determined by one producer. It is determined by the rivalry between them for the trade of the community. One offers to fix shoes “while you wait,” the other lowers his prices, and the first one comes back with a larger assortment of sizes or styles. This is competition.

Now the beneficiaries of the improved services resulting from competition are the members of society. The more competition and the keener the competition, the greater the fund of satisfactions in the market place. Oddly enough, the competitors do not suffer because the abundance resulting from their improved efficiency attracts more shoe customers; “competition,” the old adage holds, “is good for business.”

If, perchance, one of the competitors cannot keep up with the improving standard of performance, he may find himself out of business; but the increased productive activity resulting from the competition means that there are more productive jobs to be filled, and in all likelihood he can earn more as a foreman for one of the competitors than he could as an entrepreneur. Even those physically unable to care for themselves and dependent on others are benefited by competition; when there is an abundance in the market place, charity can be more liberal.

Immutable Laws Prevail

I am not attempting here a complete course in economics. What I have tried to show is that in economics, as in other disciplines, there are inflexible principles, inevitable consequences, immutable laws written into the nature of things. Exercising his free will, man can attempt to defy the law of gravitation by jumping off a high place; but the law operates without regard for his conceit, and he ends up with a broken neck.

So, if the first pioneer had set up with force of arms a claim to everything produced in the Madison area, other pioneers would not have come near, and the community known as Madison would never have been born. Or, if he could have collected tribute, also by force of arms, from every producer in the area, he would have driven prospective specialists to places where private property was respected. If the first shoemaker had established himself, with the help of law, as a monopolist, barring competition, the shoes that Madisonians wore would have been of poor quality, scarce, and costly; the same result would have followed any legal scheme to subsidize his inefficiency at the expense of taxpayers. If early Madisonians had decreed to abolish the market place with its price-indicator, specialization and exchange would have been thwarted and the economy of Madison would have been characterized by scarcity.

The laws of economics, like other natural laws, are self-enforcing and carry built-in sanctions. If these laws are either unknown or not heeded, the inevitable eventual penalty will be an economy of scarcity, a poor and uncoordinated society. Why? Because the laws of nature are expressions of the will of God. You cannot monkey with them without suffering the consequences.

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The Economic Basis of Culture

[From the 2006 Commerce and Culture Seminar, presented by Paul Cantor.]

Now that Marxists have lost the economic arguments, culture is now the last battleground between Marxism and free markets.

Marxists say mass production of anything ruins it. But this is elitist thinking. In Marxist thinking, there is a bias against commercial culture.

But, art and culture depends on a division of labor. Without attaining a certain sophisticated level of economic development, cannot have what we now think of as culture.

Up until 1800, the world was too poor to care about art. The triumph of capitalism created a mass audience for art and books. Art is an example of spontaneous order. Art is like the market. Art and culture are messy and experimental. Academics would like art to be predictable, but it cannot be. Art improves from being part of a market.

Lecture 1 of 10 from Paul Cantor’s Commerce and Culture.

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Indians and the Confederacy, Part 1: “Civilizing” The Five Nations

Season 3, Episode 31. In 1861, the Five Civilized Tribes — the Cherokees, Creeks, Chickasaws, Choctaws, and Seminoles — would be faced with the decision of staying neutral or choosing a side in the Civil War. To understand their decision, Chris Calton takes a look at the long history of Indians becoming, in the eyes of Americans, “civilized”.

Chris Calton recounts the controversial history of the Civil War. This is the 31st episode in the third season of Historical Controversies. You may support this podcast financially at Mises.org/SupportHC.

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Venezuela Has Hyperinflation. Now What?

Venezuela is the fifty-seventh country to encounter hyperinflation in modern history. The economist Steve Hanke estimated — using the doctrine of purchasing power parity (PPP) — that the country’s monthly inflation exceeded 50 percent for more than thirty days in November 2016. Therefore, it entered the list of Hanke-Krus hyperinflations.The International Monetary Fund (IMF) estimates that Venezuela’s annual inflation will reach 1,000,000 percent by the end of 2018, and the country’s National Assembly recently estimated that it would reach 4,000,000 percent.

Notwithstanding the estimates, predictions made in hyperinflationary periods are always erroneous because inflation volatility increases along with inflation rates.


As shown in the graph above, annual inflation calculated on October 2 was more than 56,000 percent. If we look at the average volatility calculated thirty days prior, it increases at the same time.

This runaway inflation is the other side of the coin of the exponential increase of the price of the Venezuelan bolivar in terms of dollars (VEF/USD) as measured by the movement of the exchange rate between the bolívar in terms of Bitcoin and the dollar in terms of Bitcoin. If we analyze the inverse of the exchange rate, we can see how the bolivar has lost more than 99 percent of its purchasing power against the dollar in a matter of a few years.



The creation of new denominations of the Venezuelan currency and the new monetary cone do not seem to have helped abate inflation and will probably not do so in the future.

On August 20, the new monetary cone, the bolivar soberano, came into circulation at an exchange rate of 100,000 bolivares fuerte (Bs.F) for every bolivar soberano (Bs.S).1

Even though the money supply has multiplied by 100,000, the great inflation that this country has suffered has caused its real stock of money to fall by a factor of eight in the last seven years. Currently, there are $500 million worth of bolivars in circulation, compared to the $4,000 million that were circulating at the end of 2010. The fall in the stock of money is a typical effect of hyperinflations.2


If we look at the monetary aggregates M0 and M2, we can see that they have had an exponential expansion. The quantitative theory of money would indicate that this large monetary issue would be the cause of the hyperinflation that Venezuela is experiencing.


The money multiplier (M2/M0) has plummeted during the last few years. This indicates that the broader money supply measured as M2, is converging toward the monetary base (M0). This has caused a liquidity crisis. Almost all liquidity (95 percent) is in electronic money (demand deposits and transferable deposits). Only a small part of the money supply (5 percent) is physical.


Because there are not enough bills in circulation, the price of products paid for in cash can be up to four times lower than if they are paid for by transferring demand deposits. Because of the lack of cash, banks have been forced to introduce a bank freeze (corralito) in which only 10 Bs.S per person per day can be retrieved from an ATM or a bank account. Furthermore, because of a lack of payment terminals and because almost all payments are made by debit card, large lines form in retail establishments.

Despite the enormous wealth of this oil-producing country, the fall in the price of crude oil, the drop in production, and the great expense of the social programs it has implemented throughout the years have caused it to move from a trade surplus to a trade deficit of 30 percent in 2017, according to IMF estimates.


Part of this deficit has been financed through international reserves, which have been shrinking alarmingly for years, as can be seen in the graph.


Can we be sure that the large issuance of money along with the stock of international reserves is what has been used to pay the country’s trade deficit? Everything seems to indicate so. If we use Peter Bernholz’s model, we can see that the correlation is almost perfect (see graph below).3


We use a logarithmic scale to better visualize the data. The coefficient of determination R2 and the slope of the linear regression line were obtained before applying the logarithmic transformation. The equation Ṁ=wṘ+Ḋ expresses that the variation of international reserves (Ṙ) converted according to the exchange rate (w) into Bs. and added to the variation of the deficit (Ḋ), is equal to the monetary variation (Ṁ). In other words, the equation indicates whether the increase in a country’s stock of money and its change in international reserves—presumably negative—has been used to pay the trade deficits that are incurred each year. This matches almost perfectly with the annual data we have. Therefore, we can conclude that the increase in the stock of money and the decrease in Venezuela’s international reserves have been used almost completely to pay the trade deficit generated by the government.

The future of the country is more than black. International reserves will be depleted, the monetary expansion will not serve to pay the deficit, and inflation will continue to rise. In the future, Venezuela must obey the fundamental laws of economics. The damage has been high: it has provoked the Bolivarian Revolution, the Chávez-Maduro regime, the worst crisis in the history of the country, and the largest migratory movement in the history of the American continent.

Originally published at UFM Market Trends
  • 1. Gaceta Oficial N° 41.460. Dated August 14, 2018.
  • 2. Monetary Regimes and Inflation, Edward Elgar Publishing” Peter Bernholz (2015).
  • 3. “Currency Competition, Inflation, Gresham’s Law and Exchange Rate,” Journal of Institutional and Theoretical Economics Vol. 145, No. 3 (September 1989), pp. 465-488, Peter Bernholz. 
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How to Resolve the De-Platforming Problem

Is enacting anti-discrimination legislation the answer to social media de-platforming?

Many right-wing commentators are justifiably concerned about social media censorship of controversial content creators. Unfortunately, they advocate for state-based solutions promoting equal access and anti-discrimination measures. Ironically, these conservative pleas are calling cards of the political Left. The reflexive impulse to turn to the State may seem like a quick fix in the short-term. Government interventions, however, always have nasty implications decades after passage.

Unbeknownst to them, these well-intentioned conservatives are playing into the State’s hands. Once in power, there is nothing to keep leftist bureaucrats from using a new free speech bureaucracy for their own political ends. In order to solve this riddle, we must first understand that Big Tech’s behavior is not the product of spontaneous actions on the free market. In fact, it is the result of the U.S.’s overly politicized economy.

Recognizing the Enemy: Participatory Fascism

For starters, we must recognize that the current tech environment is not operating under a free market. There is plenty of government privilege being spread around.

Big Tech’s relationship with the State is Exhibit A of participatory fascism—the public-private smorgasbord of government interference and nominal private ownership of property. Economist Robert Higgs expands upon the concept of participatory fascism:

For thirty years or so, I have used the term “participatory fascism,” which I borrowed from my old friend and former Ph.D. student Charlotte Twight. This is a descriptively precise term in that it recognizes the fascistic organization of resource ownership and control in our system, despite the preservation of nominal private ownership, and the variety of ways in which the state employs political ceremonies, proceedings, and engagements—most important, voting—in which the general public participates.

In the case of Big Tech, it’s clear the State does not own the means of production, but it does exercise indirect pressure through threats to fine companies or pass draconian laws. Unfortunately, many on the right wing overlook this and fall for the siren song of government control.

The State’s perverse incentives also stretch into matters of platform liability. In his article, Challenging the Lords of the Internet , Justin Raimondo goes into how the Federal Communications Decency Act shields social media platforms from potential torts. By claiming to be “carriers,” many of these social media giants can’t be held liable for defamation, libel, or criminal activities taking place on their platforms. This creates a two-tiered system where Big Tech enjoys cartel-like privileges, and other traditional publishers like Antiwar.com or Mises can still be held liable or criminally responsible for illegal activities allegedly taking place on these sites.

A blogger, Bionic Mosquito, piggybacks off of Raimondo’s points:

Raimondo goes on to discuss the other unique protections offered by the government to these platforms – protections not available to sites like his own. Protections that are offered to a common carrier, like the phone company, which are not liable for the content that passes over their lines or networks.

These social media internet firms are sheltered from liability regarding the content – just as if they were common carriers. Yet, unlike common carriers, they are allowed to (and now, under threat by the government, required to) censor content. But they are not liable for the content that they censor, nor are they liable for the content that they allow. How is this the free market? Is this typical for private property? Heads I win, tails you lose.

A private company may censor content and also be liable for its decisions. Do these social media platforms really fit the definition of a private company? I would say that Raimondo nailed the point that these companies do not qualify as private property.

The privileges Big Tech enjoys are real, and are not the product of a free market. Facebook’s partnership with government-backed think tanks like the Atlantic Council and Silicon Valley’s cozy relationship with the military-industrial complex are lurid illustrations of how Silicon Valley has deviated from its relatively free market origins.

The Solution is Still Free Markets

To solve the issue of de-platforming, we would ideally have a separation of economy and State. That means a repeal of the Communications Decency Act, no regulation of so-called hate speech on the Internet, and less government barriers to entry. A daunting set of tasks indeed.

On a more positive note, there are 21st century tools available to help content creators maneuver their way out of Big Tech’s censorship mine field.

Email marketing and personal branding are providing individuals new outlets to earn a living online. Thanks to these innovations, individuals can make money anywhere in the world. Better yet, people now have the ability to make money without having to deal with politically correct bosses or government censors. Libertarian content creators like Tom Woods have mastered email marketing to build their own brands online without government funding or having to rely on politically correct corporations for a paycheck.

In a similar vein, alternative social media platforms like Gab have emerged to fulfill the desire for a censorship-free social media platform. That being said, Gab does face considerable challenges in overcoming the network effects other established platforms like Facebook and Twitter have enjoyed. It also doesn’t help that businesses like payment processor Paypal and hosting company Joyent are breaking ties with Gab.

But not all is doom and gloom. Certain payment protocols like the Lightning Network allow users to conduct transactions without fear of government interference or being cut off by traditional payment processors like Paypal. In the same token, decentralized storage systems like Gaia facilitate the hosting of content in a way that is free from government censors’ grasp and corporations’ PC agenda.

It’s the State Stupid

The key is that the State not be involved in social media in the first place. In fact, the State is arguably the biggest obstacle in preventing the arrival of Big Tech’s next competitor. This is not a discussion about what platform is going to be the “next Facebook”. What we should really be talking about is a wholesale upgrade to the current social media market. Ideally, this upgrade would come with decentralized features.

The future is decentralized and if we want to speed up this process, the State must butt out of our economic activities.

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The Brutality of Slavery

In a slave system, threats of brutality underlay the whole relationship.

Narrated by Floy Lilley. This article is excerpted from Conceived in Liberty, Volume 1, Chapter 6, “The Social Structure of Virginia: Bondservants and Slaves”.

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The Brutality of Slavery

[This article is excerpted from Conceived in Liberty, volume 1, chapter 6, “The Social Structure of Virginia: Bondservants and Slaves”. An MP3 audio file of this article, narrated by Floy Lilley, is available for download.]

Until the 1670s, the bulk of forced labor in Virginia was indentured service (largely white, but some Negro); Negro slavery was negligible. In 1683 there were 12,000 indentured servants in Virginia and only 3,000 slaves of a total population of 44,000. Masters generally preferred bondservants for two reasons. First, they could exploit the bondservants more ruthlessly because they did not own them permanently, as they did their slaves; on the other hand, the slaves were completely their owners’ capital and hence the masters were economically compelled to try to preserve the capital value of their human tools of production. Second, the bondservants, looking forward to their freedom, could be more productive laborers than the slaves, who were deprived of all hope for the future.

As the colony grew, the number of bondservants grew also, although as servants were repeatedly set free, their proportion to the population of Virginia declined. Since the service was temporary, a large new supply had to be continually furnished. There were seven sources of bondservice, two voluntary (initially) and five compulsory. The former consisted partly of “redemptioners” who bound themselves for four to seven years, in return for their passage money to America. It is estimated that seventy percent of all immigration in the colonies throughout the colonial era consisted of redemptioners. The other voluntary category consisted of apprentices, children of the English poor, who were bound out until the age of twenty-one. In the compulsory category were: (a) impoverished and orphaned English children shipped to the colonies by the English government; (b) colonists bound to service in lieu of imprisonment for debt (the universal punishment for all nonpayment in that period); (c) colonial criminals who were simply farmed out by the authorities to the mastership of private employers; (d) poor English children or adults kidnapped by professional “crimps”—one of whom boasted of seizing 500 children annually for a dozen years; and (e) British convicts choosing servitude in America for seven to fourteen years in lieu of all prison terms in England. The last were usually petty thieves or political prisoners—and Virginia absorbed a large portion of the transported criminals.

As an example of the grounds for deporting political prisoners into bondage, an English law in force in the mid-1660s banished to the colonies anyone convicted three times of attempting an unlawful meeting—a law aimed mostly at the Quakers. Hundreds of Scottish nationalist rebels, particularly after the Scottish uprising of 1679, were shipped to the colonies as political criminals. An act of 1670 banished to the colonies anyone with knowledge of illegal religious or political activity, who refused to turn informer for the government.

During his term of bondage, the indentured servant received no monetary payment. His hours and conditions of work were set absolutely by the will of his master who punished the servant at his own discretion. Flight from the master’s service was punishable by beating, or by doubling or tripling the term of indenture. The bondservants were frequently beaten, branded, chained to their work, and tortured. The frequent maltreatment of bondservants is so indicated in a corrective Virginia act of 1662: “The barbarous usage of some servants by cruel masters being so much scandal and infamy to the country… that people who would willingly adventure themselves hither, are through fears thereof diverted”—thus diminishing the needed supply of indentured servants.

Many of the oppressed servants were moved to the length of open resistance. The major form of resistance was flight, either individually or in groups; this spurred their employers to search for them by various means, including newspaper advertisements. Work stoppages were also employed as a method of struggle. But more vigorous rebellions also occurred especially in Virginia in 1659, 1661, 1663, and 1681. Rebellions of servants were particularly pressing in the 1660s because of the particularly large number of political prisoners taken in England during that decade. Independent and rebellious by nature, these men had been shipped to the colonies as bondservants. Stringent laws were passed in the 1660s against runaway servants striving to gain their freedom.

In all cases, the servant revolts for freedom were totally crushed and the leaders executed. Demands of the rebelling servants ranged from improved conditions and better food to outright freedom. The leading example was the servant uprising of 1661 in York County, Virginia, led by Isaac Friend and William Clutton. Friend had exhorted the other servants that “he would be the first and lead them and cry as they went along who would be for liberty and freed from bondage and that there would be enough come to them, and they would go through the country and kill those who made any opposition and that they would either be free or die for it.”1 The rebels were treated with surprising leniency by the county court, but this unwonted spirit quickly evaporated with another servant uprising in 1663.

This servant rebellion in York, Middlesex, and Gloucester counties was betrayed by a servant named Birkenhead, who was rewarded for his renegacy by the House of Burgesses with his freedom and 5,000 pounds of tobacco. The rebel leaders, however,—former soldiers under Cromwell—were ruthlessly treated; nine were indicted for high treason and four actually executed. In 1672 a servant plot to gain freedom was uncovered and a Katherine Nugent suffered thirty lashes for complicity. A law was passed forbidding servants from leaving home without special permits and meetings of servants were further repressed.

One of the first servant rebellions occurred in the neighboring Chesapeake tobacco colony of Maryland. In 1644 Edward Robinson and two brothers were convicted for armed rebellion for the purpose of liberating bondservants. Thirteen years later Robert Chessick, a recaptured runaway servant in Maryland, persuaded several servants of various masters to run away to the Swedish settlements on the Delaware River. Chessick and a dozen other servants seized a master’s boat, as well as arms for self-defense in case of attempted capture. But the men were captured and Chessick was given thirty lashes. As a special refinement, one of Chessick’s friends and abettors in the escape, John Beale, was forced to perform the whipping.

In 1663 the bondservants of Richard Preston of Maryland went on strike and refused to work in protest against the lack of meat. The Maryland court sentenced the six disobedient servants to thirty lashes each, with two of the most moderate rebels compelled to perform the whipping. Facing force majeure, all the servants abased themselves and begged forgiveness from their master and from the court, which suspended the sentence on good behavior.

In Virginia a servant rebellion against a master, Captain Sisbey, occurred as early as 1638; the lower Norfolk court ordered the enormous total of one hundred lashes on each rebel. In 1640 six servants of Captain William Pierce tried to escape to the Dutch settlements. The runaways were apprehended and brutally punished, lest this set “a dangerous precedent for the future time.” The prisoners were sentenced to be whipped and branded, to work in shackles, and to have their terms of bondage extended.

By the late seventeenth century the supply of bondservants began to dry up. While the opening of new colonies and wider settlements increased the demand for bondservants, the supply dwindled greatly as the English government finally cracked down on the organized practice of kidnapping and on the shipping of convicts to the colonies. And so the planters turned to the import and purchase of Negro slaves. In Virginia there had been 50 Negroes, the bulk of them slaves, out of a total population of 2,500 in 1630; 950 Negroes out of 27,000 in 1660; and 3,000 Negroes out of 44,000 in 1680—a steadily rising proportion, but still limited to less than seven percent of the population. But in ten years, by 1690, the proportion of Negroes had jumped to over 9,000 out of 53,000, approximately seventeen percent. And by 1700, the number was 16,000 out of a population of 58,000, approximately twenty-eight percent. And of the total labor force—the working population—this undoubtedly reflected a considerably higher proportion of Negroes.

How the Negro slaves were treated may be gauged by the diary of the aforementioned William Byrd II, who felt himself to be a kindly master and often inveighed against “brutes who mistreat their slaves.” Typical examples of this kindly treatment were entered in his diary:

2-8-09: Jenny and Eugene were whipped.

5-13-09: Mrs. Byrd whips the nurse.

6-10-09: Eugene (a child) was whipped for running away and had the bit put on him.

11-30-09: Jenny and Eugene were whipped.

12-16-09: Eugene was whipped for doing nothing yesterday.

4-17-10: Byrd helped to investigate slaves tried for “High Treason”; two were hanged.

7-1-10: The Negro woman ran away again with the bit in her mouth.

7-15-10: My wife, against my will, caused little Jenny to be burned with a hot iron.

8-22-10: I had a severe quarrel with little Jenny and beat her too much for which I was sorry.

1-22-11: A slave “pretends to be sick.” I put a branding iron on the place he claimed of and put the bit on him.

It is pointless to criticize such passages as only selected instances of cruel treatment, counterbalanced by acts of kindness by Byrd and other planters toward their slaves. For the point is not only that the slave system was one where such acts could take place; the point is that threats of brutality underlay the whole relationship. For the essence of slavery is that human beings, with their inherent freedom of will, with individual desires and convictions and purposes, are used as capital, as tools for the benefit of their master. The slave is therefore habitually forced into types and degrees of work that he would not have freely undertaken; by necessity, therefore, the bit and the lash become the motor of the slave system. The myth of the kindly master camouflages the inherent brutality and savagery of the slave system.

One historical myth holds that since the slaves were their masters’ capital, the masters’ economic self-interest dictated kindly treatment of their property. But again, the masters always had to make sure that the property was really theirs, and for this, systematic brutality was needed to turn labor from natural into coerced channels for the benefit of the master. And, second, what of property that had outlived its usefulness? Of capital that no longer promised a return to the master? Of slaves too old or too ill to continue earning their masters a return? What sort of treatment did the economic self-interest of the master dictate for slaves who could no longer repay the costs of their subsistence?

Slaves resisted their plight in many ways, ranging from such nonviolent methods as work slowdowns, feigning illness, and flight, to sabotage, arson, and outright insurrection. Insurrections were always doomed to failure, outnumbered as the slaves were in the population. And yet the slave revolts appeared and reappeared. There were considerable slave plots in Virginia in 1687, 1709–10, 1722–23, and 1730. A joint conspiracy of great numbers of Negro and Indian slaves in Surry and Isle of Wight counties was suppressed in 1709, and another Negro slave conspiracy crushed in Surry County the following year. The slave who betrayed his fellows was granted his freedom by the grateful master. The 1730 uprising occurred in five counties of Virginia, and centered on the town of Williamsburg. A few weeks before the insurrection, several suspected slaves were arrested and whipped. An insurrection was then planned for the future, but was betrayed and the leaders executed.

Joint flight by slaves and servants was also common during the seventeenth century, as well as joint participation in plots and uprisings. In 1663 Negro slaves and white indentured servants in Virginia plotted an extensive revolt, and a number of the rebels were executed. The colonists appointed the day as one of prayer and thanksgiving for being spared the revolt. Neither slave nor indentured servant was permitted to marry without the master’s consent; yet there is record of frequent cohabitation, despite prohibitory laws.

It has been maintained in mitigation of the brutality of the American slave system that the Negroes were purchased from African chieftains, who had enslaved them there. It is true that the slaves were also slaves in Africa, but it is also true that African slavery never envisioned the vast scope, the massive dragooning of forced labor that marked American plantation slavery. Furthermore, the existence of a ready white market for slaves greatly expanded the extent of slavery in Africa, as well as the intensity of the intertribal wars through which slavery came about. As is usually the case on the market, demand stimulated supply. Moreover, African slavery did not include transportation under such monstrous conditions that a large percentage could not survive, or the brutal “seasoning” process in a West Indies way station to make sure that only those fit for slave conditions survived, or the continual deliberate breaking up of slave families that prevailed in the colonies.

From the earliest opening of the New World, African slaves were imported as forced labor to make possible the working of large plantations, which, as we have seen, would have been uneconomic if they had had to rely, as did other producers, on free and voluntary labor. In Latin America, from the sixteenth century on, Negro slavery was used for large sugar plantations concentrated in the West Indies and on the north coast of South America. It has been estimated that a total of 900,000 Negro slaves were imported into the New World in the sixteenth century, and two and three-quarter million in the seventeenth century.2

Negroes came into use as slaves instead of the indigenous American Indians because: (a) the Negroes proved more adaptable to the onerous working conditions of slavery—enslaved Indians tended, as in the Caribbean, to die out; (b) it was easier to buy existing slaves from African chieftains than to enslave a race anew; and (c) of the great moral and spiritual influence of Father Bartolome de Las Casas in Spanish America, who in the mid-sixteenth century inveighed against the enslavement of the American Indians. Spanish consciences were never agitated over Negro slavery as they were over Indian; even Las Casas himself owned several Negro slaves for many years. Indeed, early in his career, Las Casas advocated the introduction of Negro slaves to relieve the pressure on the Indians, but he eventually came to repudiate the slavery of both races. In the seventeenth century two Spanish Jesuits, Alonzo de Sandoval and Pedro Claver, were conspicuous in trying to help the Negro slaves, but neither attacked the institution of Negro slavery as un-Christian. Undoubtedly one reason for the different treatment of the two races was the general conviction among Europeans of the inherent inferiority of the Negro race. Thus, the same Montesquieu who had scoffed at those Spaniards who called the American Indians barbarians, suggested that the African Negro was the embodiment of Aristotle’s “natural slave.” And even the environmental determinist David Hume suspected “the Negroes to be naturally inferior to the whites. There scarcely ever was a civilized nation of that complexion, nor even an individual, eminent either in action or speculation. No ingenious manufacturers amongst them, no arts, no sciences. On the other hand, the most rude and barbarian of the whites… have still something eminent about them…. Such a uniform and constant difference could not happen, in so many countries and ages, if nature had not made an original distinction between these breeds of men.”

Contrary to the views of those writers who maintain that Negroes and whites enjoyed equal rights as indentured servants in Virginia until the 1660s, after which the Negroes were gradually enslaved, evidence seems clear that from the beginning many Negroes were slaves and were treated far more harshly than were white indentured servants.3 No white man, for example, was ever enslaved unto perpetuity—lifetime service for the slave and for his descendants—in any English colony. The fact that there were no slave statutes in Virginia until the 1660s simply reflected the small number of Negroes in the colony before that date.4 From a very early date, owned Negroes were worked as field hands, whereas white bondservants were spared this onerous labor. And also from an early date, Negroes, in particular, were denied any right to bear arms. An especially striking illustration of this racism pervading Virginia from the earliest days was the harsh prohibition against any sexual union of the races. As early as 1630 a Virginia court ordered “Hugh Davis to be soundly whipped, before an assembly of Negroes and others for abusing himself to the dishonor of God and shame of Christians by defiling his body in lying with a Negro.” By the early 1660s the colonial government outlawed miscegenation and interracial fornication. When Virginia prohibited all interracial unions in 1691, the Assembly bitterly denounced miscegenation as “that abominable mixture and spurious issue.”5

Other regulations dating from this period and a little later included one that forbade any slave from leaving a plantation without a pass from his master; another decreed that conversion to Christianity would not set a slave free, a fact which violated a European tradition that only heathens, not Christians, might be reduced to slavery.

By the end of the seventeenth century, the growing Virginia colony had emerged from its tiny and precarious beginnings with a definite social structure. This society may be termed partly feudal. On the one hand, Virginia, with its abundance of new land, was spared the complete feudal mold of the English homeland. The Virginia Company was interested in promoting settlement, and most grantees (such as individual settlers and former indentured servants) were interested in settling the land for themselves. As a result, there developed a multitude of independent yeomen settlers, particularly in the less choice up-country lands. Also, the feudal quitrent system never took hold in Virginia. The settlers were charged quitrents by the colony or by the large grantees who, instead of allowing settlers to own the land or selling the land to them, insisted on charging and trying to collect annual quitrents as overlords of the land area. But while Virginia was able to avoid many crucial features of feudalism, it introduced an important feudal feature into its method of distributing land, especially the granting of large tracts of choice tidewater river land to favorite and wealthy planters. These large land grants would have early dissolved into ownership by the individual settlers were it not for the regime of forced labor, which made the large tobacco plantations profitable. Furthermore, the original “settlers,” those who brought the new land into use, were in this case the slaves and bondservants themselves, so it might well be said that the planters were in an arbitrary quasi-feudal relation to their land even apart from the large grants.

Temporary indentured service, both “voluntary” and compulsory, and the more permanent Negro slavery formed the base of exploited labor upon which was erected a structure of oligarchic rule by the large tobacco planters. The continuance of the large land tracts was also buttressed by the totally feudal laws of entail and primogeniture, which obtained, at least formally, in Virginia and most of the other colonies. Primogeniture compelled the undivided passing-on of land to the eldest son, and entail prevented the land from being alienated (even voluntarily) from the family domain. However, primogeniture did not exert its fully restrictive effect, for the planters generally managed to elude it and to divide their estate among their younger children as well. Hence, Virginia land partly dissolved into its natural division as the population grew. Primogeniture and entail never really took hold in Virginia, because the abundance of cheap land made labor—and hence the coerced supply of slaves—the key factor in production. More land could always be acquired; hence there was no need to restrict inheritance to the eldest son. Furthermore, the rapid exhaustion of tobacco land by the current methods of cultivation required the planters to be mobile, and to be ready to strike out after new plantations. The need for such mobility militated against the fixity of landed estates that marked the rigid feudal system of land inheritance prevailing in England. Overall, the wealth and status of Virginia’s large planters was far more precarious and less entrenched that were those of their landowning counterparts in England.

  • 1. Abbot E. Smith, Colonists in Bondage.
  • 2. Over the seventeenth and eighteenth centuries, only about one-fifteenth of the total Negro imports into the New World arrived in the territory of what is now the United States. That the slaves fared even worse in the Latin American colonies is seen by the far higher death rate there than in North America.
  • 3. Cf. Winthrop D. Jordan, “Modern Tensions and the Origins of American Slavery,” Journal of Southern History (February 1962), pp. 17-30.
  • 4. Ibid. Jordan cites many evidences of Negro slavery—including court sentences, records of Negroes, executions of wills, comparative sale prices of Negro and white servants—dating from 1640, before which time the number of Negroes in Virginia was negligible.
  • 5. “Spurious” in colonial legislation meant not simply illegitimate, but specifically the children of interracial unions.
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Coffee Sellers Are Not Fundamentally Different from Banks

With the 2007-8 financial crisis came a splendid alphabetical soup of central bank interventions to stimulate financial markets, lower interest rates, provide astonishing amounts of liquidity to banks and, allegedly, prevent another Great Depression. Likening the failure of big banks to falling elephants crushing even the smallest grass, former Fed Chairman Bernanke argued that consequences from bank failures would have caused much more havoc to the economy than the liquidity provision and bailouts his Fed oversaw.

Now, do banks really deserve special consideration in this sense? Let me illustrate by comparing the fates of two imaginary entrepreneurs:

Our first entrepreneur — let’s call him John — sees an opportunity in the beverage business. Specifically, he’s convinced that he can source high-quality Brazilian coffee beans, roast and serve impeccably aromatic coffee in downtown Manhattan. He draws up the business plan, estimates what he believes coffee-craving New Yorkers would be willing to pay for his coffee and assesses how many customers he could reasonably serve per day.

Setting his plan in action, he borrows some money from friends and family, rents an appropriate space, hires a construction team and interior designers to create the coffee-scented heaven he imagines, finds some competent baristas to staff it and finally opens his doors to hesitantly curious customers. From here, as in all entrepreneurial ventures, there are two paths John’s business may take:

  1. If customers love his coffee and willingly part with their dollars , enough so that John can cover costs as well as offer some return to his shareholders/creditors, we consider John’s venture successful. The profits describe the added value for consumers, regardless of whether you see John as a Misesian uncertainty-carrying and future-appreciating speculator or a Kirznerian arbitrageur, alert to discrepancies between prices of higher and lower-order goods.
  2. If customers scoff at his atrocious coffee-like concoction, and refuse to buy drinks in the amounts John estimated, we consider John’s venture unsuccessful. The losses he is bound to incur similarly describe the (negative) value his venture created by combining scarce producer goods into less-valuable consumer goods.

When John, under the second scenario, closes up shop, fire-sells his remaining inventory at prices far below those at which he bought them, defaults on his loans and outstanding rent obligations to his landlord, there are losses all around. His creditors lost the money they invested; the property owner lost the remaining unpaid rent, and the wholesale provider of coffee beans might not see his last invoice paid in full. We may call them and other losses externalities. Losses may bankrupt John’s suppliers. For example, John’s failed venture might drive other entrepreneurs out of business by ending their access to an important customer.) But we accept them as part of the creative flux of markets where profits and losses indicate consumer valuations, validating the entrepreneur’s prior and speculative actions. Even if these losses would be huge (say the wholesaler of coffee beans goes bankrupt and all her employees lose their jobs), we lament their personal fates, but don’t call for government to subsidize John, keep the wholesaler from bankruptcy, or provide liquidity so they can stay in business.

Enter our second entrepreneur — Jane. Jane is somewhat more financially savvy and spots an underappreciated opportunity in an entirely different market. Majoring in finance, she knows that the yield curve (the difference in yields between bonds of long maturity and bonds of short maturity) is generally upward-sloping. For a variety of reasons investors require a term premium for holding long-dated debt. Jane knows this, but believes that the input prices of her proposed business are still undervalued: she raises a sizable amount of money, offers slightly better short-term rates than prevailing in the market — by overbidding other entrepreneurs gains access to an even larger pool of funds — combines it all into an efficiently-staffed office with the latest credit-rating models and starts offering long-term loans to home-owners at attractive rates.

Careful not to make John’s mistake in his second scenario, she ensures that the margins between her input costs (what she pays her investors and wholesale funders in interest) and output prices (the annual interest rates she earns from her large and suitably diversified portfolio of mortgage lending) are markedly positive, earning a serious amount of income for herself and her shareholders.

Even though she is aware of the liquidity risk she incurs (“My clients won’t pay me back for a very long time: what happens if I can’t repay – roll over – my 3-month wholesale funding?”), she judges it a minor worry and decides not to take out any kind of interest-rate hedges or liquidity insurance. She’s confident that her initial disbelief at other market actors’ pricing is incorrect. In any case, she can always find new short-term funding at suitable rates should some of her funders refuse to roll over their loans.

At this point, let’s briefly summarize our two entrepreneurs: they both entrepreneurially speculated on an uncertain future, believing they could provide a product (coffee or loans) at certain prices above their cost of operation (office, overhead, employees) plus their input costs (coffee-beans wholesale or wholesale funding). The economic analysis, similarly, is no different: profit-and-loss statements indicate whether John and Jane serve their customers well, adding value through their business ventures. That’s also where the comparison allegedly ends.

For where John’s mistaken entrepreneurial decisions over coffee preferences, wholesale prices and consumers’ willingness to pay warrant no particular attention from governments, central banks and economists, Jane’s case is, for some unfathomable reason, entirely different.

When Jane one day wakes up to wholesalers refusing to rollover her funding and she’s urgently in need of liquid assets to pay the debt that’s falling due, the trust in profit-and-loss statements for revealing consumer value creation is entirely absent. Calls for alphabet-soup government agencies are heard from central bank offices to Treasury departments and New York Times columns: fire-selling Jane’s remaining assets (mortgage loans) at low prices will bankrupt her, not to mention all other Jane-like ventures that hold similar assets, creating a devastating downward spiral. Jane’s business is simply too important to go bankrupt. Letting her successful banking business go under would be catastrophic for all her employees, clients, suppliers as well as for the financial system.

The analytical mistake in arguing for public assistance to Jane — but not John — seems obvious, but well-read economists might still disagree, offering versions of the three following arguments:

  1. Jane’s business is solvent but illiquid, whereas John’s coffee store is insolvent.
  2. There is an externality aspect to Jane’s business model not present in John’s; when Jane’s assets are liquidated, the prices of all other such assets are likely to fall, thus hurting anyone who hold them, including innocent third parties.
  3. Jane’s employees have unique information about her clients; she knows their creditworthiness better than anyone, even other banks. Part of the value she creates is unique to her firm and cannot be sold as easily as the title to the assets she’s holding. Since this information is socially valuable, letting Jane’s bank fail would amount to a societal loss.

All of these claims are mistaken. First, like all banks, Jane’s business is to manage liquidity. Banks’ business model, in addition to appropriately evaluate clients’ creditworthiness, is to correctly manage the maturity transformation they are engaged in. The amount of liquidity risk a financial institution takes on is part of its entrepreneurial decision; it is not an accidental exogenous event as most of the banking literature seems to believe. Heavily exploiting the yield curve, earning hefty interest rate margins between illiquid long-dated assets and liquid short-term liabilities without (costly) risk-mitigating interest rate hedges, is no different from high entrepreneurial risk-taking in other industries.

The second reason equally applies for John: when he sells his left-over coffee inventory he greatly depresses the going market price of unused coffee beans, threatening all other wholesalers of coffee beans with bankruptcy; should John’s supply be large enough and the market for coffee beans thin enough, he could be depressing the prices for longer than those suppliers can stay in business. In the exact same way Jane’s fire-selling threatens other businesses “through no fault of their own,” John’s liquidation depresses prices for others, threatening their businesses. There is, in other words, no special reason why banks deserve public support for their business models when coffee stores do not.

As for the third objection, John’s coffee bean store also has particular enterprise-unique information; his baristas knows which variety of coffees their regular customers want. A new coffee store may only imperfectly replace the detailed and intricate coffee desires John satisfied. The fact that John’s store could not cover its costs is evidence enough that this unique knowledge was not sufficiently valuable.

In sum, banking and banks’ liquidity are not subject to other economic laws than are coffee stores, and they should not be given special consideration.

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Sorry, Stiglitz: It’s Socialism That’s Rigged — not Capitalism

Ever since winning the Nobel Memorial Prize in “Economic Science” in 2001, Joseph Stiglitz has been a one-man advocacy band for growth of the state. After 9/11, for example, he called for the formation of a federal agency to provide security for airline passengers, which he claimed would send a “signal” for quality. (Stiglitz won his prize for “proving” that free markets are “inefficient” and always result in less-than-optimal outcomes because of asymmetric information. Only government in the hands of Really Smart People like Stiglitz can direct production and exchange consistently to efficient and “just” results.)

More than a decade ago, Stiglitz lavished praise for the socialist government of the late Hugo Chavez in Venezuela, declaring:

Venezuelan President Hugo Chavez appears to have had success in bringing health and education to the people in the poor neighborhoods of Caracas, to those who previously saw few benefits of the country’s oil wealth.

He went on to claim that the Chavez policies of expropriating the capital structure of private oil companies in Venezuela would result in a more “equal” distribution of wealth in that country, something he believes is desirable everywhere. Interestingly, since Venezuela’s socialist “experiment” went south, complete with hyperinflation and one of the worst financial and economic crises ever seen in the Western Hemisphere, Stiglitz has been silent, at least when it comes to explaining why the so-called economic miracle in Venezuela was unsustainable.

Although Stigliz no longer is lavishing praise on Venezuelan socialism, he hardly is silent about his belief that only expanded state power can “save” the U.S. economy from self-destruction. In a recent article in Scientific American, he declares that “The American Economy is Rigged.” However, he adds in the title, “And what we can do about it.”

Those familiar with the public declarations of Stiglitz, Paul Krugman, and others in the “markets are internally destructive” camp, nothing Stiglitz writes in the article is surprising. For that matter, it is pure Stiglitz to have it in Scientific American, since he can claim he is engaged in scientific discourse, something he can prove with a lot of mathematical equations that “prove” free markets are bad :

From Stiglitz’s perspective, markets are rife with failure in processing and conveying information, and government must be ready to correct these failures. In his Nobel lecture, Stiglitz spoke of having “undermined” the free-market theories of Adam Smith, asserting that Smith’s “invisible hand” either didn’t exist or had grown “palsied.” He noted that major political debates over the past two decades have tended to focus on the “efficiency of the market economy” and the “appropriate relationship between the market and the government.” His approach favored government.

Furthermore, he declared in his Nobel lecture that “perfect competition is required if markets are to be efficient” (italics his). To Austrian economists, his statement raises the question as to why we are to assume that governments somehow possess the necessary information to produce “efficient” outcomes in economic exchanges, but Stiglitz never has tried to go there. He simply assumes governmental superiority regarding information and then runs with that assumption.

Stiglitz’s latest article lays out the theme that markets systematically produce inequality, and that over time we are faced with the situation in which only a privileged few people benefit from the capitalist system while the vast majority slip into the economic abyss. He writes:

In his celebrated 2013 treatise Capital in the Twenty-First Century, French economist Thomas Piketty shifts the gaze to capitalists. He suggests that the few who own much of a country’s capital save so much that, given the stable and high return to capital (relative to the growth rate of the economy), their share of the national income has been increasing. His theory has, however, been questioned on many grounds. For instance, the savings rate of even the rich in the U.S. is so low, compared with the rich in other countries, that the increase in inequality should be lower here, not greater.

An alternative theory is far more consonant with the facts. Since the mid-1970s the rules of the economic game have been rewritten, both globally and nationally, in ways that advantage the rich and disadvantage the rest. And they have been rewritten further in this perverse direction in the U.S. than in other developed countries—even though the rules in the U.S. were already less favorable to workers. From this perspective, increasing inequality is a matter of choice: a consequence of our policies, laws and regulations.

In the U.S., the market power of large corporations, which was greater than in most other advanced countries to begin with, has increased even more than elsewhere. On the other hand, the market power of workers, which started out less than in most other advanced countries, has fallen further than elsewhere. This is not only because of the shift to a service-sector economy—it is because of the rigged rules of the game, rules set in a political system that is itself rigged through gerrymandering, voter suppression and the influence of money. A vicious spiral has formed: economic inequality translates into political inequality, which leads to rules that favor the wealthy, which in turn reinforces economic inequality.

All of this results in what he calls a “feedback loop” that results in the downward spiral. We are to assume that the growth in income inequality will grow until we are at the Marxian state of “the reserve army of the unemployed,” or at least a reserve army of people that are unable to find work that will allow them to support themselves.

Like so many others who have claimed capitalism is destroying the middle class, Stiglitz turns to the policies created during the Great Depression and after World War II for salvation, seeing the time from the 1930s to the late 1950s as a supposed golden era of prosperity. He writes:

After the New Deal of the 1930s, American inequality went into decline. By the 1950s inequality had receded to such an extent that another Nobel laureate in economics, Simon Kuznets, formulated what came to be called Kuznets’s law. In the early stages of development, as some parts of a country seize new opportunities, inequalities grow, he postulated; in the later stages, they shrink. The theory long fit the data—but then, around the early 1980s, the trend abruptly reversed.

To reverse this trend of rising inequality – and rising poverty – Stiglitz calls for a return to the Depression-era policies of high marginal taxes and using the regulatory structure to recreate the financial and business cartels built by New Deal regulations that dominated American production, finance, and transportation at that time. Indeed, apart from the anti-discrimination laws that now are part of the modern legal landscape, Stiglitz believes that the only hope for our future is to return to the past:

…we need more progressive taxation and high-quality federally funded public education, including affordable access to universities for all, no ruinous loans required. We need modern competition laws to deal with the problems posed by 21st-century market power and stronger enforcement of the laws we do have. We need labor laws that protect workers and their rights to unionize. We need corporate governance laws that curb exorbitant salaries bestowed on chief executives, and we need stronger financial regulations that will prevent banks from engaging in the exploitative practices that have become their hallmark. We need better enforcement of antidiscrimination laws: it is unconscionable that women and minorities get paid a mere fraction of what their white male counterparts receive. We also need more sensible inheritance laws that will reduce the intergenerational transmission of advantage and disadvantage.

Challenging Stiglitz’s Logic

Stiglitz hardly is the only modern economist that wants the American economy to be restructured to resemble how it looked in 1939. Paul Krugman many times called for a “New New Deal” and actually claims that the U.S. middle class didn’t even exist until President Franklin D. Roosevelt created it with his policies.

In reading the Stiglitz “we need” rant, it is clear that he sees the economy as both mechanistic and deterministic. Capital will have increasing returns because, well, capital has increasing returns, which means that over time, capital will increase the incomes of its owners and everyone else will become poorer. In fact, as one goes through the entire article, one can conclude that he believes, like Marx, that a market system is internally unstable and that it always will implode because a few people will see their incomes increase, but only at the expense of the masses, who will see their incomes decrease.

Indeed, if one follows Stiglitz to his logical conclusions, one would have to assume that the U.S. economy is a trap of exploitation and misery for American workers, as they toil longer hours and watch their standard of living slip away. He writes:

At the time of the Civil War, the market value of the slaves in the South was approximately half of the region’s total wealth, including the value of the land and the physical capital—the factories and equipment. The wealth of at least this part of this nation was not based on industry, innovation and commerce but rather on exploitation. Today we have replaced this open exploitation with more insidious forms, which have intensified since the Reagan-Thatcher revolution of the 1980s. This exploitation…is largely to blame for the escalating inequality in the U.S.

Like Krugman, Stiglitz uses an array of statistics and graphs to “prove” that before Ronald Reagan and Margaret Thatcher took power, the American and British economies were ensconced in “equality” and prosperity. For some unknown reason, however, free-market ideas suddenly emerged seemingly from nowhere to influence politicians to create a new economic system that undid the carefully-crafted structured post-New Deal economy which had created the American middle class and turned them into poverty-stricken serfs.

There is a problem with the Stiglitz analysis: It is wrong both theoretically and empirically. First, the 1970s were a decade both of inflation and economic decline in both the USA and Great Britain. In the USA, the economy wavered between inflationary booms (with inflation reaching well over 10 percent) and devastating busts, including the 1974-75 recession, and in Great Britain, the situation was even worse, as demonstrated in a 1977 “60 Minutes” broadcast, “Will There Always Be An England?”

The sad thing is that Stiglitz is trying to claim that Americans were better off economically in 1980 than they are now, which only can mean he believes Americans had a better standard of living 40 years ago than today. Yet, as pointed out by Philip Brewer, it is easy to confuse something like income equality to higher living standards. The so-called Golden Age of the 1950s was a time when a third of Americans lived in poverty. Writes Brewer :

In the 1950s and 1960s, a working man could support a family at a middle-class standard of living with just one income. It might surprise you to learn that one person working full-time, even at minimum wage, can still support a family of four at that standard of living. Nowadays we call that “living in poverty.”

Theoretically, Stiglitz holds that capital and resource owners over time receive increasing returns to capital which has the effect of raising the owners’ income over time, but only at the expense of everyone else. Thus, in his view, capital is the culprit, and as an economy accumulates increasing amounts of capital, income inequality — and poverty — logically follow. The only way to reverse this trend, he believes, is for the state to confiscate huge amounts of income from capital and resource owners and transfer it to lower-income people through welfare payments or availability of government services.

If Stiglitz is correct, it would be the first time in recorded history that capital accumulation gained through a profit-and-loss system would be responsible for decreasing the overall standard of living in an economy. Furthermore, Stiglitz seems to be oblivious to the economic role of capital: increase the supply of goods and services in an economy. By looking only at the income which capital owners gain and by failing to understand the real economic significance of capital accumulation, Stiglitz is left with applying a crabbed Marxist analysis in which the “rich” gain increasing shares of income, thus leaving everyone else with smaller income shares – with the result being an overall “glut” of goods that cannot be sold, leading to increasing numbers of layoffs, unemployment, and ultimate economic collapse. That economists from Jean Baptiste Say to Ludwig von Mises — and, may I add, the historical record — have debunked his arguments fails to keep Stiglitz from repeating them.

By publishing his article in Scientific American and couching his analysis in the language of science, Stiglitz wants us to believe that his viewpoints are systematic and have the aura of inevitability, as though he were describing the results of the Law of Gravity. In reality, Stiglitz simply repeats the fallacies of Thomas Malthus, Karl Marx, and John Maynard Keynes and presents a stiff, mechanistic, and utterly false view of how an economy works.

Throughout history, we have seen how socialism takes an economy backward, whether it is practices in the former U.S.S.R., Mao’s China, Cuba, and now Venezuela. He was unable to comprehend how Venezuela’s “socialist miracle” would fall apart, and now he intellectually is unable and unwilling to engage the truth as to why the deterioration of a socialist economy results in wealth for a few and real poverty for the masses. In other words, he cannot comprehend why the socialist economy is rigged.

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Why Ludwig von Mises Advocated for Liberal Nationalism Following WWI

In his criticism of imperialist policies in the service of socialism, labor-unionism, and the socialist war economy Ludwig von Mises could restate many conventional arguments. He faced an unprecedented task in confronting the claim that imperialism can enhance the welfare of a nation. His pioneering analysis brilliantly confirmed Carl Menger’s insight that methodological individualism is able to analyze even large collective phenomena.

The main thesis in the first chapter of Nation, State, and Economy is that governments are incapable of improving the condition of the nations they rule. The reason is that the origin, emergence, growth, flower, and decline of nations are subject to natural laws. The operation of these laws can be modified by government power but not abrogated, and any alteration will play out to the detriment of the nation. Mises proved his case by first analyzing nations in a free society and then turning to examine the impact of government power on their evolution. His practical conclusions called for the denationalization of the nation, or more precisely, for keeping government intervention as far as possible out of the life of language communities.

Following Scherer, Grimm, and Otto Bauer, Mises defined nations as language communities. He stressed that as far as democratic regimes are concerned, this definition is more than a mere convention. In democracies, communication—and thus language—is the primary political means. Language communities are therefore of critical political importance.12 What were the natural laws determining the rise and fall of language communities? Mises considered various objective factors determining their evolution.3 But his decisive considerations start from the fact that the membership in a language community is not something unalterable. Each human person can decide to leave his former nation and join another. In a free society, Mises stressed, nations would be purely voluntary associations:

No people and no part of a people shall be held against its will in a political association that it does not want. The totality of freedom-minded persons who are intent on forming a state appears as the political nation; patrie, Vaterland becomes the designation of the country they inhabit; patriot becomes a synonym of free-minded.4 

Liberalism knows no conquests, no annexations; just as it is indifferent towards the state itself, so the problem of the size of the state is unimportant to it. It forces no one against his will into the structure of the state. Whoever wants to emigrate is not held back. When a part of the people of the state wants to drop out of the union, liberalism does not hinder it from doing so. Colonies that want to become independent need only do so. The nation as an organic entity can be neither increased nor reduced by changes in states; the world as a whole can neither win nor lose from them.5

What, then, determines individual membership in a language community? Neglecting objective factors such as the familial, historical, cultural, and political environments of the individual, Mises focused on the voluntary factor of assimilation. He asserted that, for practical reasons, language minorities tend to assimilate to the language majorities with whom they are affiliated through trade and other forms of social intercourse. Therefore, local minority nations ceteris paribus tend to disappear in the course of time. Mises stressed that this assimilation process was dependent on individual membership in certain social classes because social contacts were class-dependent. Minorities could preserve a separate existence for as long as spatial and social mobility were heavily controlled through custom and laws. Things changed radically when classical liberalism abolished such laws. The result was a dramatic migration—both physical and social—that disrupted the established balances between nations. Mises gave special attention to the impact of the increased spatial mobility, which by the late nineteenth century had already reached a massive scale. These migrations constantly produced areas of mixed cultures, threatening the established groups with their disappearance through assimilation, thus prompting political rivalry and conflict.6

Mises did not believe these movements could be stopped because they reflected the self-interest of the migrants.7 What could be done, then, to alleviate the national conflicts that were the necessary consequence of those migrations? The only viable solution, Mises argued, was to reduce the role of the state within society, because the political conflicts between nationalities primarily concerned control of the state apparatus:

Of course, the struggle of nationalities over the state and government cannot disappear completely from polyglot territories. But it will lose sharpness to the extent that the functions of the state are restricted and the freedom of the individual is extended. Whoever wishes peace among peoples must fight statism.8

The way to eternal peace does not lead through strengthening state and central power, as socialism strives for. The greater the scope the state claims in the life of the individual and the more important politics becomes for him, the more areas of friction are thereby created in territories with mixed population. Limiting state power to a minimum, as liberalism sought, would considerably soften the antagonisms between different nations that live side by side in the same territory. The only true national autonomy is the freedom of the individual against the state and society. The “statification” of life and of the economy leads with necessity to the struggle of nations.9

Mises offered here a radical alternative to the prevalent models for solving national conflicts. Austria had the longest experience with national struggles within a common state, and its intellectual, political, and institutional history was therefore richer than that of any other country in analyzing and solving this problem.10 For example, the constitution of the Austrian great-dukedom of Siebenbürgen, which existed until 1848, provided for separate parliaments and administrations for Saxons (Germans), Hungarians, and Szeklers. Affairs of general interest were dealt with in a common parliament, which debated in Latin. The ugly side of this otherwise charming arrangement was that the Romanians, who were in the numerical majority in Siebenbürgen, had no representation.11 During the revolution of 1848, a promising approach was developed to overcome this and similar problems. On March 4, 1849 the deputies of the constitutive assembly (which had by then moved to the city of Kremsier) voted on the proposed Kremsier Constitution, the point of which was to abolish the old territorial units composing the empire (the “kingdoms and lands”) and to replace them with administrative counties, the boundaries of which would be drawn according to the national affiliation of the inhabitants. The German nationalists reacted on the very same day with a counter-proposal presented by Prince Schwarzenberg. From then on, the principle of equal legal treatment of the different languages was on the defensive and finally defeated.12

The failure of the revolution prevented the practical application of the Kremsier Constitution, but the idea lived on, especially in the various programs of the social-democratic party. At their 1899 convention in Brünn, the social democrats decided to tackle the problem of national conflicts by creating parallel state organizations along national lines. This approach, they believed, would ensure “national autonomy” to each nation and thus prevent struggles between the nations once and for all. To serve as a model for the rest of Austria, they transformed their own party, creating parallel national organizations.13 In the following years, its intellectual leaders, Karl Renner and young Otto Bauer, revived and refined and popularized the idea of replacing the old territorial units with new national counties.14 It turned out however, that nationalistic passions were too strong to be tamed even by the spirit of socialist solidarity. After the introduction of universal suffrage in 1907, the party quickly dissolved into national organizations and lost all impact on Austrian politics. With hindsight, and with the help of Mises’s theory, we can identify the root cause of these failures. All of his predecessors had tried to use government to solve the problem of national struggles. None of them recognized (or admitted) that coercive association—the sine qua non of the state—was the very source of national conflicts. A different government scheme cannot possibly be a solution for a conflict caused by the nature of government itself.

But how far could one go in keeping the state out of society? How far should one go? Mises argued that the only limits are of a technical-administrative nature:

The size of a state’s territory…does not matter. It is another question whether a state is viable when its population is small. Now, it is to be noted that the costs of many state activities are greater in small states than in large ones. The dwarf states, of which we still have a number in Europe, like Liechtenstein, Andorra, and Monaco, can organize their court systems by levels of jurisdiction, for example, only if they link up with a neighboring state. It is clear that it would be financially quite impossible for such a state to set up as comprehensive a court system as that which a larger state makes available to its citizens, for example, by establishing courts of appeal.15

Hence, Mises advocated a complete liberalization of society. There should be no political limits to this process. And it would in practice be limited only by banal technical considerations. In other words, Mises welcomed the unhampered competition among national territories, which in a free “inter-national” society would be a peaceful competition between language-based cultures, in which each individual, through his assimilation choices, would determine the fate of the various language communities. Mises sensed that the only dignified attitude toward the reality of cultural competition was national self-confidence:

A nation that believes in itself and its future, a nation that means to stress the sure feeling that its members are bound to one another not merely by accident of birth but also by the common possession of a culture that is valuable above all to each of them, would necessarily be able to remain unperturbed when it saw individual persons shift to other nations. A people conscious of its own worth would refrain from forcibly detaining those who wanted to move away and from forcibly incorporating into the national community those who were not joining it of their free will. To let the attractive force of its own culture prove itself in free competition with other peoples— that alone is worthy of a proud nation, that alone would be true national and cultural policy. The means of power and of political rule were in no way necessary for that.16

Mises argued not only that political rule is unnecessary to improve the condition of a nation, but also that it is incapable of doing so. In a free society people constantly migrate to those locations offering the most favorable conditions for production. Every individual has an incentive to migrate from a relatively poor area to a relatively rich area. These migrations would continue until wage rates and interest rates are equal in all locations.17 In a liberalized world, therefore, there would be a tendency away from differences in income. There would eventually be no rich or poor countries in the world. There would only be countries that are more densely populated, and other countries that are less so.

Mises pointed out that government intervention does not change anything about people’s motives to migrate from relatively poor areas into relatively rich ones. On the contrary, if government tries to keep its people in the land through a system of protective tariffs, it only exacerbates the problem. Protective tariffs might prevent the emigration of those who would be most affected by foreign competition, but they reduce the per capita income of all the other members of society, further multiplying the incentives for emigration. Again, a dispassionate suitability analysis comes out against government intervention. Mises concluded that the only rational approach in matters of political nationalism was to follow classical-liberal precepts: shrink the state, open borders, and face the cultural competition of international migrations.

Excerpted from Chapter 8 of Mises: The Last Knight of Liberalism
  • 1. See Mises, Nation, Staat und Wirtschaft, pp. 9f. He stated that a nation’s specific language generated specific “political constructions” and in particular specific foundational ideas determining the operation of their governments (Staatsgedanken); see ibid., pp. 12, 38, 41, 87.
  • 2. Mises did not argue that language communities are the only factor, or the most important one, in modern politics. He speculated that racial communities were far more important. The problem was that the sociology of race and of race relations was not sufficiently developed to warrant scientific statements. He acknowledged, however, that it had become a “principle of modern political world law” that it is “no longer acceptable to use force on peoples of the white race.” That is, the use of force against dark-skinned people in the European colonies was considered legitimate, but not the use of force against fellow-whites. German imperialism made enemies in all quarters by violating this distinction. See Mises, Nation, Staat und Wirtschaft, pp. 62, 64f.; Nation, State, and Economy, pp. 76, 79f.
  • 3. For example, he examined the role of written language and stated that it had played a crucial role in the competition between dialects. The first written dialect became the standard language. See Mises, Nation, Staat und Wirtschaft, pp. 17ff.
  • 4. Mises, Nation, Staat und Wirtschaft, p. 27; Nation, State, and Economy, p. 34.
  • 5. Mises, Nation, Staat und Wirtschaft, pp. 31f.; Nation, State, and Economy, pp. 39f.
  • 6. See Mises, Nation, Staat und Wirtschaft, p. 48
  • 7. En passant he mentioned his contribution to the economics of migration by highlighting the importance of relative overpopulation, in distinction to already-known absolute overpopulation. See Mises, Nation, Staat und Wirtschaft, pp. 45ff. He had developed the concept of relative over-population in his “Vom Ziel der Handelspolitik,” Archiv für Sozialwissenschaft und Sozialpolitik 42, no. 2 (1916): 576.
  • 8. Mises, Nation, Staat und Wirtschaft, p. 62; Nation, State, and Economy, p. 77.
  • 9. Mises, Nation, Staat und Wirtschaft, pp. 78f.; Nation, State, and Economy, p. 96.
  • 10. For surveys on Austrian language legislation, see Alfred Fischel, ed., Materialien zur Sprachenfrage (Brünn: Irrgang, 1902); idem, ed., Das österreichische Sprachenrecht, 2nd ed. (Brünn: Irrgang, 1910); Sieghart, Die letzten Jahrzehnte einer Grossmacht, pp. 421ff.
  • 11. See Eduard Bernatzik, Die Ausgestaltung des Nationalgefühls im 19. Jahrhundert (Hannover: Helwing, 1912), p. 30.
  • 12. See Sieghart, Die letzten Jahrzehnte einer Grossmacht, p. 323; RöskauRydel, “Galizien, Bukowina, Moldau,” p. 97.
  • 13. The social-democratic faction in the central parliament thereafter called itself “union of social-democratic deputies.” See Sieghart, Die letzten Jahrzehnte einer Grossmacht, pp. 351ff.
  • 14. See Otto Bauer, Die Nationalitätenfrage und die Sozialdemokratie (Vienna: Verlag der Wiener Volksbuchhandlung, 1907); translated as The Question of Nationalities and Social Democracy (Minneapolis: University of Minnesota Press, 2000). Before World War I, Karl Renner published his ideas on the nationality question under the pseudonyms “Synoptikus” and “Rudolf Springer.” See Synoptikus, Staat und Nation (Vienna: Dietl, 1899); Rudolf Springer, Die Krise des Dualismus und das Ende der Déakistischen Episode in der Geschichte der Habsburgschen Monarchie: eine politische Skizze (Vienna: published by the author, 1904); idem, Grundlagen und Entwicklungsziele der Österreichisch-Ungarischen Monarchie (Leipzig: Deuticke, 1906). At the end of World War I, he published under his true name: Das Selbstbestimmungrecht der Nationen: in besonderer Anwendung auf Oesterreich (Leipzig: Deuticke, 1918).
  • 15. Mises, Nation, Staat und Wirtschaft, pp. 66f.; Nation, State, and Economy, p. 82.
  • 16. Mises, Nation, Staat und Wirtschaft, p. 61; Nation, State, and Economy, p. 76.
  • 17. With this consideration Mises complemented the Ricardian analysis of free trade, which was based on the assumption that capital and labor were mobile only within the borders of the state. See Mises, Nation, Staat und Wirtschaft, pp. 51ff.
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