Tuesday, July 27, 2010

How do you read the Economy?

How do you read the Economy?
by Alex Merced

 Many people always ask me, since I'm so critical about using any type of statistics to measure whether the economy is doing well or bad, how would I measure the performance of the economy? I wouldn't, while I believe some economic environments are better than others, I don't really buy into measuring the economies performance as a whole for many reasons including;

1. Regional Differences in culture and resources
2. Does the country really have it's own economy? Aren't the borders just arbitrary lines? So what makes such a drastic difference being on one side of the line other than the governments?
3. Aggregating data smooths out outliers in the data, unlike somebody's grades those outliers can be very important economic events that effect peoples quality of life, which statistics erase with vast amount of aggregated data.

Albeit, even using that macro data, many Austrians have still been able to see standard free market principles hold up, but it seems fruitless. There is so much value in joy versus despair in peoples lives that can't be measured by wages, GDP, unemployment numbers which aggregate too much information to mean anything despite their sometimes questionable methodology.

Although, one of the things you can infer from data is how well is the market doing it's job, creating innovations and getting them widespread adoption. Happiness, that's our job, a good or bad economy is still world where you can be happy if you try. Although, it doesn't hurt to have new gadgets and tools to make my day to day life easier and free up my time to pursue that happiness... and that's the roll of a free market.

So if I'm assessing the economic environment on any level I ask myself many questions;

What is the most recent big innovations? (example: smartphones and e-readers)

What is the adoption of that product?

If the adoption is high, is savings increasing to provide capital to develop the next innovation?

If savings isn't increasing, is there another innovation or good that I'm missing?

I ask these questions because it's that adoption of new technologies to me is a much better sign of growing standard of life than most wage, employment, and GDP statistics. I know people who are perfectly content to stay unemployed in their parents basements with their gadgets, and they're happy. Not everyone can be rich, nor should they, the only benefit to being rich is having a say in what gets produced, which ends quick if you choose wrong.

So letting the market sort out the best people to wield power over capital, and allowing real incentives for people to save when there is no innovation to adopt is important to keep this real growth in the standard of life important.

Sunday, July 18, 2010

Rights and Principles and their roles in society

Rights and Principles and their roles in society
by Alex Merced

The big debate between Hamilton and Jefferson in the founding years of our country surrounded where our rights come from. Hamilton argued that rights came from the government, that without the government to protect us there'd be chaos, so it's up to the government which rights it's citizens have. Jefferson argued for natural rights, that rights are independent of government and are intrinsically connected with free will and humanity.

If one where to subscribe to the Hamiltonian view which is usually championed on the left end of the political spectrum you'd then have conflicts with many of the "rights" movements that come from people on the left such as fighting for the right of other people in other nations. If people rights come from government, how can you fight for rights of people in other nations for which their government has not granted them? Although, those people who fight womens rights in middle eastern countries due seem to understand that peoples rights are beyond what the government they live under saids is right and wrong. This would leave us to believe that the natural rights point of view to be the more consistent with peoples view of "rights violations"by government, cause a government could only violate rights if they were independent of government.

Natural Rights

Aristotle, Locke, Jefferson, Paine, many important individuals in the formation of Natural Rights as a philosophy and I recommend reading their work to understand it's origin since my take will be slightly different. If Natural Rights are intrinsic to being human, it can only encompass what an individual has true absolute control over which is their mind and their body, no decree or law can change the way you think or how you use your body but only set guidelines on how to punish you for using your natural right over your mind and body. People don't have absolute control over anything external to the individual, so things like property rights and the non-aggression theorem would be difficult to wrap in this theory of intrinsic human rights. Although, if you only organized society based on natural rights it'd be difficult for those who choose not to use their rights over their mind and body with non-aggression avoid tyranny from those who would use it from aggression, so this is why a framework of logical external principles come into place.


To me, property rights and the non-aggression axiom are not true natural rights, but frameworks of principles to help humans use the rights over their internal individual selves in the external world of other individuals with their own individual rights and help determine how establish who has a claim when the rights of two or more individuals collide.


The differentiation between internal and external is important, cause government can take away external factors from an individual but they cannot take the internal without taking their life which is the source of all their rights, cause once your life is gone you have no ability to exercise your individual rights at least in the mortal world as we know it.

Saturday, July 17, 2010

The Difference Between Inflation and Increasing Price Levels

The Difference Between Inflation and Increasing Price Levels
by Alex Merced

One of the biggest debates right now is the inflation versus deflation debate, and much of this debate hinges on the events in consumer goods prices, but can inflation occur even if prices drop? Can prices go up even if inflation hasn't occurred? Yes, and to understand this you need to have a proper definition of inflation As your baseline.

Inflation - Inflation is an increase in the money supply, not the mere act of rising price levels. The Money supply can increase and prices react in all sorts of ways across different sectors of the economy, no matter how they react the fundamental relationship between the demand for goods and the supply of money has changed and it will have it's effects on the economy.

Hyperinflation - Hyperinflation has more nuanced definition, it's not just merely that prices are increasing at super speeds, but that the faith in the money as a medium of exchange has broken. A good money requires people to believe that if they accept it that they can in turn use to trade with someone else, cause the seller usually has no interest in the money itself other than for trading. Although if the supply of money is expected to grow at large rates for the foreseeable future less people will accept the money due to the fear of the loss of purchasing power from the growing supply. If people have believe that the money in itself is stable measure of value they have no reason to stop using no matter what happens to prices due to innovation gains or natural increases in demands.

Cause of Hyperinflation in a Fiat World - So in a sense hyperinflation occurs when people lose faith in the money, not when prices are allowed to merely rise. In todays Fiat money world, if a governments budget gets larger than it's tax base it must participate in deficit spending. If the government can borrow domestically or from other countries the effect on the supply of money is minimal, but if it cannot find the demand for it's debt from willing lenders then it's central bank will create the demand by increasing the money supply, although this punishes the original domestic and foreign lenders by giving their investment purchasing power risk.

Because of this risk, those lenders in future financing will decide to lend less if not at all meaning the central bank will have to further increase the money supply at even larger quantities. Once a governments budget gets to the point that the only way of financing is through these liquidity injections with no end in sight, less people will begin willing to sell their foreign currency for the domestic currency, meaning foreign goods will begin rise in price dramatically. So as the world begins to lose faith in the domestic currency, the amount of the currency needed to exchange for goods cause of the wavering faith in the currency will see it's hyper inflationary crash. Thus it's crisis of faith in a currency, not a crisis in consumer good prices.

Price Increase and Decreases - While increased in the money supply (inflation) will have upward pressure on prices and a decrease in the money supply (deflation) prices can still go down and up in either environment for a variety of different reasons. Prices of technology go down in an inflationary environment cause of innovation in technology allowing to make the same good at lower prices, although inflation can erase much the nominal drop in price. Another you may see a drop in prices is a drop in demand which may be for a variety of reasons such as better alternatives, credit crunches, and more. Prices can increase in a deflationary environment cause demand for new goods is large, or special programs make credit available for certain goods such as housing or college tuition. Although all these price and increases/decreases would affect the consumer price index (CPI) although they have no fundamental bearing on weather the money itself is a stable medium of exchange. So essentially programs like fannie, freddie, and sallie may help create price bubbles it's really the money supply increases from the central bank that will lead to the destruction of the currency.

So how do I assess todays environment? - Well take the true monetary definition of inflation/deflation one must ask which one are we in? It really depend on which measure of the money supply you use, if you use the numbers like M1,M2, M3 which go beyond the base bank reserves and measure the circulating credit then it would appear as we've been spinning towards deflation. Since there's less credit available there is essentially less money available meaning demand will be limited causing price drops which clearly have been seen in goods such as clothing and other luxuries, although this doesn't really paint a picture of what's going on when the government finances it's budget.

If you take a look at the monetary base (bank reserves/dollars), this number has exploded has doubled and tripled at certain points. When the central bank injects liquidity to help finance the governments budget, the entry point is the monetary base and while credit hasn't been created on top of this base yet, it's still a sign to lenders of the future risk of their investments in US Treasuries (government debt). With many of the politically difficult to remove expenditures of the government budget, deficits seem to be perpetual and the amount of willing lenders has decreased to the point where the central bank is the largest holder of that debt. So while you may not see runaway prices increases you are seeing the faith in the dollar as stable medium of exchange eroding with only the fact that it's the reserve currency of the world, which is something that will take some time for the rest of the world to divest from, but it won't take forever.

Bottom Line: While credit contraction will have downward pressure on consumer prices, the increasing monetary base in order finance a growing government deficit will erode the faith in the currency to cause the inevitable hyperinflation.

Sunday, July 11, 2010

Understanding Social Policy

Understanding Social Policy
by Alex Merced

You may have seen my recent video discussing how people are socialized by institutions, and how all institutions fall into three categories. I then followed up about how this framework can be applied to understanding and combating institutional discrimination. I thought I'd recap much of what I said in a written article for those who prefer these ideas written.

Intersocial Institutions

Definition: These are institutions that are made of people with similar interests, goals, or other unifying interests that are not spiritual. Since these are not spiritual they cannot use to the fear of violence in the afterlife to accept customs, traditions and practices.

Examples: Family, Friends, Clubs, Jobs, etc.

How it enforces Customs: A intersocial institution can only use the fear of being no longer allowed to participate in the institution to keep members in line. These Institutions are voluntary and since they don't threaten violence only removal from the institution, it's the least influential and least destructive to individual liberty of the three types on institutions.

How to Reform: If certains customs or beliefs of the institution are discriminatory or offensive, one can choose to not to participate in these institutions and encourage others to withdraw as well which would destroy these institutions from within. No further coercive method is needed since these insitutions can only survive through voluntarism.

Spiritual Institutions

Definition: These are institutions organized by institutions that exploit the existance or belief in of spirituality.

Examples: Churches, Religons, Youth Groups

How it enforces Customs: A Spiritual Insitution uses FUTURE VIOLENCE as a threat to get participants to participate in it's customs and traditions. The threat that in the afterlife one may live the next life as an inferior being or be casted into eternal damnation are threats of post-life violence. Due to peoples TIME PREFERENCE* this threat of violence is typically less influential than the threat of violence from government.

How to Reform: If certains customs or beliefs of the institution are discriminatory or offensive, one can choose not to participate in these institutions and encourage others to withdraw as well which would destroy these institutions from within. No further coercive method is needed since these insitutions can only survive through voluntarism.

Governmental Institutions

Definition: Tese are insitutions created by a government which is monopoly of violence, and everyone who's governed by this government may or may not consent to be governed, so withdrawl from these institutions is not an option.

Examples: Internal Revenue Service, Department of Education, Federal Drug Administration

How it enforces Customs: A government insitution keeps all people participating through the threat of CURRENT VIOLENCE. If people choose not to obey laws, they are threatened with penalties, incarceration, and inevitably violence to comply. Due to time preference, this CURRENT VIOLENCE is a much stronger influencer than the FUTURE VIOLENCE of the spiritual institutions, on top no one chooses to participate in a governmental institution but are subject to it due to their location or other arbritrary factors

How to Reform: If certains customs or beliefs of the institution are discriminatory or offensive, one can't choose to withdraw so unlike intersocial or spiritual institutions which can be reformed by voluntarist means, a government institution can only be reformed by using the insitutions own power to reform it which means one must climb the power structure and then change the rules. Since this is the only way to reform this institution, it makes it the slowest institution to change and the more influential in keeping discriminatory and collectivist social structure in place for prolonged period of time even after attitudes and values have changed.

Conclusion: While Intersocial and Spiritual institutions both have their roll in discrimintation, violating liberty, and other social problems; they are fairly easy to deal with due to their voluntarist nature. The government on the other hand cannot be dealt with by voluntarist means and is structured in a way that can only serve to keep the status quo in place much longer than it is in the minds of individuals. This is why Libertarians and Anarcho-Capitalist focus so much on abolishing this particular type of institution versus allowing individual to reform the others through voluntarist means.

* Time Preference is a theory developed by Austrian Economist such as Carl Menger and Ludwig Von Mises that states people value present goods over future goods. Alex Merceds views on Sociology/Anthropology are based on an Indivudalist Philosophy (Isaiah Berlin, Murray Rothbard) with an sociological application of Time Preference theory to different threats of Violence.

Friday, July 2, 2010

The LGBT Community - Why We Should Embrace Them

 Everyone here in the movement call ourselves by many names such as Paleo-Conservatives, Calssical Liberals, Libertarians, and Anarcho-Capitalists but we all have some major things in common. Primarily, we believe that each person should be valued based on their own unique individual charachteristics, and no single charachteristic alone defines a person such as race, creed, gender, etc. This is why believe in free markets, because a free market is where individuals are free to be individuals and judged as such which gives us so many advantages in prosperity, but I don't write today about free markets or economics.

 While we champion individualism and detest collectivism whether it manifests itself in divisive forms such as racism and homophobia or in the supposedly uniting forms in the forms such as different group movements we feel it still promotes the same collective thinking that ignores the individual and complexity of the individual. The only way to fix this is to get people to embrace individuality, and to understand this we must educate on how collectivism causes the very things these collectivist movements are fighting against.

 So for example, an individualist would have problem with "Hate" crimes laws cause it implies that one murder is worse than another murder cause of intention, a murder in itself is a horrible offense on anyones individualism since it destroys the individual no matter what the motivation. So an individualist will criticize those who lobby government for laws to promote "equality" among groups. This institutionlizes the idea of different groups or collectives in one of the most dominant institutions in existance, Law, when most of the time much of intergroup hostility comes from collectivist thought and other Laws.

My question is... do these critiques and judgements prove counter productive?

 I am proud to think of myself as one of the anarcho-capitalist who is doing as much as possible to reach out the LGBT community to show them how individualism leads to the tolerance and acceptance that any social movement strives for. I have even created the facebook page for The Martini Party, a group for LGBT people and advocates to coalesce around Liberty and Individualism.

 I find that lot of people in the movement choose not to reach out to the LGBT community cause they feel like other social movements they intrinisically want to go to government for every problem, but the reason they do this is quite understandable if you take a moment, let's pose a quick analogy to set the stage:

 Imagine a bunch of kids playing on the playground having a great time, the last thing they would want is mother to come in to supervise and direct playtime. A child comes and wants to play with the other kids, but whatever reason the kids will not let them play so the kid goes to mother to tell the kids to let them play. All the kid wanted was to play with everyone else, but because they didn't mothers restrictive nature was conjured.

 If we don't want the Feminist, Civil Rights, and the LGBT community to embrace government and to instead embrace individualism we need to embrace them in return. If we don't make conscious effort that we want them to come play, then mother will be continued to be asked to fix the problem. Like socialism only would work with the creation of this "new socialist man", individualism and a state-less society can only work if we build a "new individualist man" that is tolerant, creative, and adaptive without no central power. If we create this coalition by embracing these communities in an individualist way by being good friends, co-workers, and overall caring; then we can see our movement advance fowards.

 Another thing that seperates the LGBT community is that they have legitimatley been outcasted from society, especially trangendered people which has led the prostitution and drug use among the community, that wouldn't have to be the case if we just all embraced one another. Women and Racial Minorities have already got over the largest walls in the path tolerance and now only need to shed away the construct of race and gender to move foward, but the LGBT community still has many preliminary walls to get over before they can truly shed the collectivist contructs of sexuality and just be themselves, and embrace their unique and beautiful individualism. Meaning, if we want any community to shed collectivism we need to break the outer cultural collectivism that forces them into these groups and let them be individuals and part of society.

For those who don't understand the altruistic motivations here's some political ones:

- The LGBT community due to the level hostility they get have really built a tightly wound parallel culture, media, and world that dwarfs the kind of grassroots infrastructure our movement has, having that on our side definetley has it's merits.

- This would be a blow to the heart of the Collectivist coalition, and be a big triumph for liberty and individualism, and a step towards world free of coercion and violence.

I have lot more to say on this, but I think I got the main point across, in order to build our ranks we need embrace individuals, and not just passivly but activly to show them love, tolerance, and cooperation that exists in an individualist world.

- Alex Merced


Founder of this blog is Alex Merced - Contact him at alexmerced@alexmerced.com

Endorsed Candidates: Rand Paul (KY - Senate), Clint Didier (WA - Senate), John Dennis (CA - Congress)

Mises Institute Daily Articles (Full-text version)


The Daily Caller - Breaking News, Opinion, Research, and Entertainment