Interventionism

Mises was a huge supporter of minimal government intervention in the market. I strongly agree with him on this subject. Interventionism is almost always detrimental, even if a policy's implemented with the best intentions.

For example, a minimum wage is put in place to benefit the lower income populace. However, a minimum wage not only hurts the employers, but it can have a negative affect on current employees and prospective individuals looking to enter the labor market. 

If an employer values a potential employee at a price that's lower than what the minimum wage is set at, then the employee will most likely not get hired even if he or she is willing to work at a lower wage. Also, raising the minimum wage results in forcing employers to allocate their funds however the government mandates them to. This can lead to a large number of people getting let go. Additionally, if an employee is worth a higher wage than the minimum wage, but the employer is forced to raise the wages of all the employees, then the higher producing individuals might not receive the raise he or she deserves.

All in all, government intervention might be enforced to help the impoverished, but generally it leads to a negative affect on the entire market.

People and Crime

Many times we as economist think about how to "fix" society's "problems". Many times we want to think about the most extreme issues like crime. Even further is the price of life whether that be behind bars or one that is taken. Is there a price on life? When thinking about crime and the idea of murder. Is there anyway to reduce or eliminate murder through means of an economic idea?

Today in the life in my Econ, I was confronted with the moral dilemma between whether I should give to the man on the street or rely on my government to provide a better life for him. Then after thinking further about it another thought came to me, why is this guy poor? Is there some big long back story that I would feel bad about and want to help or does that even matter? Is it one man's responsibility to take care of a less fortunate man? A sort of Darwinistic style of society? I m not sure what do you think?

Obamacare Why?

In the news lately I have seen more and more reports on the affordable care act (a very interesting name to give this law) or otherwise known as Obamacare. The Obama administration has tried to fix America's healthcare problem with government intervention. Now I think there could be much debate on whether he and his administration has done this with the best intentions or not, notably Gruber the MIT economist. Was this law the result of some misguided attempt to help the American people or to simply enrich rent seekers or some combination of the two? But whatever the administration intentions were I think the results we Americans will see based on my understanding of Austrian economics and the study of human action and the political economy will not be beneficial to the American people.

For starters if the government intervenes it means that it is limiting voluntary human action and thus interrupting the market system and as a consequence the discovery process that is so vital to finding the best result in almost every if not every other industry. The government must think that the healthcare industry suffers from an externality and/or a market failure. As Larry mentions in his class economist seem to think that everything is a market failure and needs government intervention to fix it. They (economists) are prone to jumping on the normative economic bandwagon and wish to touch the force. They wish to direct the economy in the most “efficient” direction that they can. Some of them however might just be rent seekers. Though I believe many of them are sincere in their belief that the American people should not be left to their own actions to get the “right” outcome. They believe that voluntary human action will not get the proper results so they choose to use force to get the correct results. We can see the true nature of the government and how it thinks and operates by the action of Gruber. He thinks the American people are too stupid to act in their best interest. So he has to act for them so they get the “best” possible result. He is acting as if he has a pretense of knowledge that he knows what will create the “best” possible outcome possible for everyone, without the market system working as the discovery process. My guess from listening to other professors is that he is using a benefit cost analyst to figure out what actions to take on the behalf of the American people.

The government seems to think the only way to fix a problems is with government action but never with human action, the market system, and the largest network in the world. They beg to believe that the answer is no, the problem can only be fixed with the help of force. What it (the government) doesn't seem to realize is that the government interventions will require more and more government interventions, or maybe they do realize this! We can see this clearly with Obamacare already, with people losing their doctors. The government already has had to fix this problem with and another bill (aka another government intervention) that grandfathers people in. But that doesn’t fix any of the new problems. If we look back into history many of the problems we face today are the results of government action in the past. So I don’t hold out much hope that Obamacare will fix the problems we now face in the healthcare industry.

But I do think there is hope, Many Americans are upset that they have been lied to about Obamacare and wish to act. To stand up and show the government that voluntary human action and the market process is the best discovery method we have to finding out what works best. I wish the government will catch up to what the American people are finding out and what Austrian economists have known for a while. I wish that they would take a cue from the world of Austrian econ and learn that the best way to fix a problem is let people fix it and for the government to stick to what’s its best at, protecting property rights.

http://www.washingtontimes.com/news/2014/nov/12/obamacares-jonathan-gruber-caught-on-second-tape-c/

http://www.mediaite.com/tv/fox-airs-new-gruber-video-voters-too-stupid-to-understand-the-difference/

http://www.foxnews.com/opinion/2013/11/20/biggest-obamacare-lie-and-it-not-can-keep-your-doctor/

http://nation.foxnews.com/2013/12/08/obamacare-architect-if-you-your-doctor-you-can-pay-more

Automation is Progress

       In a debate with my mother the other night, she was one of the many people that thought machines and technology take away the jobs of people. This thought has slight logic but if looked at more in depth, it is wrong. Automation actually creates jobs. It can create jobs that never even existed before automation. Ludwig Von Mises would agree that innovation and technology are the keys to progress in an economy.
       Historically, automation has created far more jobs than it has taken away. It is true that automation does take away jobs directly, but can create far more. Look at computers for instance. Before computers, there were a lot of jobs for people who had to carry out tasks that a computer can now do with ease and in no time at all. Sure, those jobs were lost, but look how many jobs the invention and application of computers has produced. Millions!
       Not only does automation create jobs, it helps the economy and society progress and in doing so raises the standard of living for all. Again, look at computers. Before they were widely used, a college student would have to go to a library and manually skim through pages to find what he/she's looking for. That could take hours. Now, a quick Google search will give the answer you were looking for and much more in seconds. So now that that college student has saved hours on that hypothetical project, he can use that time for a business start-up. Many billion dollar companies were start-ups that were started in college. What if those people didn't have the extra time?
       Clearly automation and innovation are very good for the economy, society, and the standard of living assuming you want the most progress for all three. Mises was highly in favor of this idea and it still proves concrete in todays world.

Government Intervention

I would like to address the idea of an economy and how the Government contributes to that economy. It has always baffled me this idea of an economy. What is an economy and how can we study it and ultimately cause change? It seems much more gray than black and white.

I have learned through Austrian Economics, Neo-classical economists treat an Economy is treated like its own entity. The Government constantly refers to the economy as if it functions on its own. The economy is not a tangible thing that functions on its own. The decisions people make and the exchanges they partake in are this economy we study. So how is the Government really contributing? I wonder if the government has a mostly positive effect or a negative one.  We can see clearly that intervention from the Government only benefits the Government. Let us take a social program for example. Our paychecks are taxed in order to fund programs like social security, or welfare. If we did not have these social programs would we really have more elderly without the ability to support themselves? Or would private companies ban together to create a way of life for elderly people who do not have retirement savings or the capability to work.

The mistake we, and the government, make is we cannot decide what other people want. We don’t know each other’s preferences. What if Joe Bob didn’t want to have money locked up when he was 65? Who is anyone else to decide he needs an income supplement? If the government stopped funding all of the things they do, they would lose control. I do not think the government would handle that very well.

Something else the government likes to do is make up statistics to show how the economy is performing. When the “economy” is growing too fast the government must step in and adjust inflation. The government doesn’t seem to be able to wrap their heads around the idea people have individual behaviors and actions so why does government need to step in? Can you imagine the job creation and economic stimulus that would come from the addition of private companies who do everything the government tries to do? I feel like the possibilities are endless for what people are capable of doing. Entrepreneurial activity would skyrocket and maybe we could end the need for minimum wages because these new businesses would have to hire the people who are unemployed. I can actually picture a world with more jobs than there are people. My overall observation is the government contributes too much to the “economy.” We need to address individual action rather than the action of everyone as a whole.

Source: http://mises.org/library/how-macroeconomic-data-encourages-government-intervention

Immigration

"The coordination of mens activities through central planning or through voluntary cooperation are roads going in very different directions, the first to serfdom and poverty the second to freedom and plenty." Hayek

          Immigration has been a highly debated issue in our political economy. So important that our president addressed the nation regarding this issue just two weeks after the midterm elections last month. Laying out a four point plan, the president focused on continuing to strengthen our borders, streamlining the legal immigration process, providing a legal way to earn citizenship, and cracking down on undocumented workers. To quote the white house, "The President’s plan builds a smart, effective immigration system that continues efforts to secure our borders and cracks down on employers who hire undocumented immigrants." While the debate takes many positions across the political spectrum, most economist will agree that free labor mobility across borders will increase growth in the economy.

            In Liberalism, Ludwig von Mises makes a strong argument for immigration. Arguing for liberalism in the classic sense, Mises takes a starting point of property rights to argue for a system of completely free trade. Under this system, "capital and labor would be employed wherever conditions are most favorable for production." When, "it is discovered that there are sites more favorable for production than those currently being used, production shifts to these localities. Capital and labor tend to move from areas where conditions are less favorable for production to those in which they are more favorable." Mises goes on to say that the, "migration of capital and labor presupposes not only complete freedom of trade, but also the complete absence of obstacles to their movement from one country to another."

            Many workers follow the money to where real wages are the highest. This implies that they will migrate anywhere where they can obtain the most purchasing power with the recourses that are available. The direct result is wages in that particular industry will fall as more workers are available to fill those positions. Although we can take greater measures to secure our borders and increase requirements for immigrants, the end result is a higher cost to tax payers and immigrants alike. Increasing regulations and building a wall that surrounds our borders would do little in keeping out illegal immigrants and nothing to alleviate the catalyst causing the influx of immigrants to our country. Because of skill level, the previously low wages earned, and/or discrimination, immigrants are paid considerably less of a wage than their domestic counterpart. While many assume and argue this to be damaging and unfavorable to the American economy, considerable advantages exist. Primarily it provides opportunity for the average citizen to benefit themselves. These menial jobs being performed by immigrants drives the prices down in that particular industry. This allows for cheaper goods for the average citizen to make their way into the market and with more employees to choose from, the employer directly benefits. Further, it allows for the domestic citizen who would normally fulfill these jobs to focus on jobs that require a greater skill set, thus providing higher wages to the worker.

            The issue is that no comprehensive plan exists to combat the immigration problem and fix a defective system. While all sides are calling for a plan of action, this only exacerbates the problem. Making these uniformed decisions without the relevant information leads to second order consequences and any further legislation is only prolonging the dilemma, ultimately making it worse. There must exist freedom of movement across borders in order to alleviate the problem. Allowing these workers to live in the shadows and dodge the arm of the government permits for a drastic misallocation of resources and blinds the American public to how many undocumented workers are living here and particularly who they are. One example is within our already poor public education system. With thousands of cities around the country absorbing children of illegal immigrants into their local school systems, money gets diverted from other sectors to compensate for an already underfunded system. This could easily be solved by taxing the previously untaxed worker. By banning immigrants access to our country, we are raising the costs of the jobs they perform allowing more opportunity for others to import goods in those particular industries that could easily be produced within our borders.

What Ludwig von Mises would have thought of ISIS?

Talk about ISIS dominates the news media. How must we stop them? Are we too late? Why are we standing back? Questions like this are fruitful grounds for ethical debate, but when it comes to discussions about actual threat ISIS is to the United States or ISIS's longevity, author John Tamny from Forbes, proclaimed that Ludwig von Mises would be rather unconcerned about ISIS as a threat.

After all, what source of monetary income does ISIS have? What is their governmental framework? From what has been observed, governmental income of ISIS seems to be limited to exerting force to take wealth from proclaimed subjects in exchange for protection (which happens to be protection from ISIS themselves), which sounds similar to taxation. While there is existing wealth that can be accrued from the region of Iraq and Syria, what sources of income are there from this region? According to Tamny, none besides oil. But by strengthening the dollar, the US could effectively price out ISIS oil, so that source could be eliminated.

So, according to Tamny, any society with no source of increasing income cannot field a large threat due to monetary constraints. While it may seem scary to see ISIS's sudden acquisition of funds, those funds will not last forever. A government which expels all economic freedom or freedom of action by either legal means or through extortion of funds, or unjust taxation, will inevitably stifle the economic growth of that society or political realm.

But the amount of capital or money that ISIS has already gained would pose a sizable threat if it was used to its full potential. However, Tamny relates to an earlier quote by Mises in Socialism, "Only temporarily do the nations in a lower state of organization manage to co-operate for great military enterprises. Internal disunity has always dispersed their armies very quickly." This suggests that the funds ISIS can obtain will eventually be squabbled out among factions or leaders seeking access to those funds. Internal strife will occur when everybody wishes to seize ownership over a fixed amount of resources through use of force. In a free economy, resources and goods are always expanding, so there is room for a continually expanding wealth of its members without only taking it from other owners. It's safe to say that Mises would flip the channel and grumble and go for a snack when the news hysteria about ISIS's threats were aired.

http://www.forbes.com/sites/johntamny/2014/09/07/isis-and-austrian-school-economics-why-ludwig-von-mises-would-not-have-feared-islamic-state/

The House is Burning Down, But Let's Vacuum.

In order to understand why our current banking system and the individual statutes and practices that form it are in place it is first important to understand their origins. An understanding of history also provides explanation as to why we find alternatives  difficult to imagine while showing that such alternatives exist, and are feasible. One of the problems of existing in the present is believing that the current way is the only way things could be, or that the past was other than it was, be it better or worse. Because all modern systems are, at least, indirectly influenced by their previous iterations, it’s important to understand the problems, genesis, and benefits of these in light of our current system.

What stands out about the genesis of the modern banking system is that its reactionary character: what has become accepted as kosher and necessary is essentially a hackish band-aid for a hundred years of of failed policies.

Of the semester’s readings, I found particularly interesting Selgin’s “The Case for Free Banking: Then and Now.” Its detailed recounting and analysis of  alternatives to the Fed showed how historical banking and monetary systems of the United States functioned entirely differently from imagined in the common mind. It was anything but chaos, but instead a complex, and corrupt system of highly regulated organizations.

Prior to 1913, when modern central banking practices were created, many regulations and detrimental practices existed and nothing resembling a free market in money or banking was politically expedient or possible. My notion of monetary policy prior to the Fed was entirely incorrect. The fantasy of laissez faire monetary policy before contemporary monetary practices became orthodox never was. Despite the multitude of ineffective, and corrupt statutes prior to 1913, US monetary policy was just as much a mess then as it is now. Instead of addressing why policy makers completely misunderstood the problems and created the modern central banking system.

Rage Against the Machine

When was the last time you heard someone exclaim, “Machines are the basis for unemployment”?  Throughout the history of man, when unemployment looms over society, machinery takes the heat for being the root cause.  This fallacy is the reason for labor unions, but why does this continue to get traction in today’s society?  If we believe this to be true, as Hazlitt stated, “Primitive man must have started causing it with the first efforts he made to save himself from needless toil and sweat.”  Well, it is time to set the record straight that automation is a blessing and most surely not a curse; it never has been and it never will be.

            Machinery can turn one man into a production god, for lack of a better term.  One man working a pen making machine, can now perhaps churn out 10,000 pens a day.  Before, he could merely make 3 a day when he had to bend and melt the plastic with his own handy work.  This, according to the labor unions, has put hundreds of pen makers out of work.  However, a pen no longer costs four dollars per pen.  Now it costs four dollars for one hundred pens.  That’s quite the economic boon to the general pen consumer base.  Because this general populace can save such a considerable amount of money on their pens, they will begin buying and investing their money elsewhere, thereby maintaining overall economic strength on the aggregate.  When people save money in one area, they spend it in another.  One only needs to understand the simple parable of the broken window by Frederic Bastiat to understand the seen and unseen forces of economics.  Furthermore, every laborer desires to better their economic expenditures, be that the money spent to hire labor, or to ease or quicken the pace of work for the average laborer.  Through machinery mankind continues to diversify their economies and improve the capability of work by each economic being.

            Perhaps now we should look at the entrepreneur instead of the average layman or consumer.  People will be quick to quip that machinery only makes the rich richer or that the entrepreneur can now take advantage of their employees in a greater manner.  However, because of the automation, the manufacturer can invest more in his business, employ the machine maker more, diversify his manufacturing, or any other mean of consumption.  Firms do not desire to profit more, so they can merely sit on their funds.  Firms expand profit to spend that profit to further expand their business.  Money in the private sector is made, so that it can be spent in the pursuit of luxury or making more money.  Machinery helps drive mankind towards a stronger economy when employed at all levels from the consumer to the producer.

            If we devote our rational processes to deriving the benefits of machinery, we can easily understand why and how machines have improved the quality of life in modern societies.  As economic thinkers, we cannot let the rumors driven by confusion reign over rational thought.  Machinery is not a curse and only serves to bless humanity, for without it growth would have stagnated centuries ago.

Taxation in the Nordic Model

The Nordic Model has been lauded worldwide as a successful blend of capitalism and welfare.  Your typical progressive will rave how the Nordic countries have free healthcare, free education even in the higher levels, generous unemployment benefits, and high levels of state care for the disadvantaged.  That progressive will say, they do all this while still maintaining economic growth and having the highest living standards on the globe.  However, there are some major faults in the welfare system in the Nordic states, and they must be discussed, amidst the successes of their system.

            Taxation on personal income in the Nordic countries averages around 48 percent.  On top of that level of taxation, most goods in Scandinavia have 25 percent value added taxes, greatly increasing the price of goods and services.  While the welfare safety net is very generous in the Nordic countries, disposable income is surprisingly low for such modern societies.  The only Scandinavian country to fall within the top ten of highest disposable income per citizen is Norway.  Denmark, Sweden, Iceland, and Finland place in the teens and twenties on this ranking.  An Austrian economist would blame the disparity of income on the heavy taxation.  While unemployment rates are surprisingly low in the Nordic countries, so many people have dropped out of the workforce entirely to live off of welfare, that the reason is obvious growth is so stagnant in Scandinavia.

            Maersk, Statoil, Novo Nordisk, Volvo, and many other major companies operate out of the Nordics.  They do so, because something that the Nordic Model does right, is it keeps its hands relatively out of business.  The average business tax rate in the Nordic countries is 22 percent, which is surprisingly lower than the modern average.  This low percentage fosters a business community where hiring more and expanding production is very financially efficient.  Because welfare is based on taxation of personal income, the Nordic nations realized to have a higher aggregate personal income, they need to incentivize employment and growing business.  While many stay out of the workforce because they personally receive so little in return, businesses can hire at higher wages and more working incentives, thereby balancing the system in some regards.

            With average GDP growth of two and a half percent over the course of the last couple decades, there is economic growth in Scandinavia.  There is a welfare net that catches many people, but only at a major expense to those who have employment.  This is causing great slowdown in the growth of the economic engine.  However, the treatment of business in the Nordic Model is surprisingly free and pro-capitalist in comparison to the rest of the modern world.  They do not have a perfect economic engine, in fact, what they currently have is far from it.  Nevertheless, they have made steps in the right direction that other nations would be wise to follow.  It would be wise to adopt a few of the ideas from the Nordic Model, while pushing other, freedom based, ideas from throughout the globe.

Free Market Monetary System

Jake Miller

December 2, 2014

Austrian Economics

Life Among the Econ Blog

Free Market Monetary System by Hayek

                The idea that I wanted to talk about today for my blog post is the idea of free market monetary system that is discussed by Hayek in his piece titled Free Market Monetary System and the Pretense of Knowledge.  This book is separated by two chapters you could say, but the focus of my post is about the idea of completely free market monetary system that Hayek elegantly describes in this book where he is definitely taking some ideas from Mises.  This is one of Hayek’s most far-reaching ideas because he thinks that there is now way of us ever having decent money unless it is issued by private institutions.  He thinks that the central banks cannot be changed because the government is in charge and is messing things up.  Hayek comes to the conclusion that the market should be in charge of the monetary system solely by itself without government interventionism also known as (Free Market Monetary System).  These ideas help also identify the crisis of the problem of money being controlled by the government and gives an answer to the problem of the quality of money in our country.

                Hayek’s first point to achieving a free market monetary system is to get rid of the gold standard to judge our value of money because the government influences the gold standard.  Hayek proclaims that, “The gold standard requires a constant observation by government of certain rules which include an occasional restriction of the total circulation which will cause local or national recession, and no government can nowadays do it when both the public and, I am afraid, all those Keynesian economists who have been trained in the last thirty years, will argue that it is more important to increase the quantity of money than to maintain the gold standard.”  I absolutely agree with this point of view that Hayek is trying to get across because the gold standard is always being observed by the government, and then the government uses its force to either increase or decrease the money supply which causes more problems when in fact the government interventionism in money causes the problems in money.  The gold standard is the only thing that we have in our world to put a value on money but really the gold standard just puts the self-control of money on the government which would be alright if the government was forced to do the right thing like it forces us.

                Hayek then decides to throw out the idea of private institutions issuing out their own money to their individual clients.  Hayek declares that, “But if private institutions began to issue notes under some other names without any fixed rate of exchange with the official money or each other, so far as I know this is in no major country actually prohibited by law.”  Obviously there is a problem with this idea because once one private institution decides to issue its own money the government that runs the gold standard will make it so impossible to do so without having many barriers to do so.  Another problem that Hayek see with this is why you would create a money that you couldn’t make a contract in terms of between people.

I agree with this idea, but then he came up with an idea that I had never thought of so Hayek states that, “If I were responsible for the policy of any one of the great banks in this country, I would begin to offer to the public both loans and current accounts in a unit which I undertook to keep stable in value in terms of a defined index number…. The essential point which I cannot emphasize strongly enough is that we would get for the first time a money where the whole business of issuing money could be effected only by the issuer issuing good money.”  Hayek believes that this is the only possible way that we can have decent money because a company would know that there money would depreciate because another company can offer a better product or money.  Hayek’s idea of private institutions issuing money is a very clear explanation of how a free market monetary system could operate in our country and others.

A Grand Masquerade? Regulatory Capture?

By C.W.

Two months ago, much to the chagrin of her  coworkers, former FED Bank examiner Carmen Segarra released audio recordings implying officials from the Federal Reserve Bank of New York showed leniency in an exchange of assets between Goldman Sachs and Spanish bank Banco Santander. The deal explained as “legal but shady” by the recorded FED employee, offers a rare glimpse into FED meetings. The contract required a “no objection” clause on behalf of the FED, the FED notices the detail and in their meeting with Goldman Sachs they do not press Goldman Sachs, rather accept Goldman’s explanation of it “not meaning what it appeared to say.” After the meeting, the tape records Segarras’ fellow employee speaking, encouraging his collegues not to “discourage” and “criticize” Goldman Sachs “in order to better understand the market place (1).” The article by NPR intonates the FED of being too familiar with the said banking institution and not having the strength to properly regulate banks. She advocates that the FED promotes a “culture of fear and servility in dealing with banks (2).” Jake Bernstein, the reporter who leaked the tapes states:

"These are people who work inside the banks. They see these people every day, and they need to obtain the information from these banks, and it's easier to obtain the information if you're friendly and if you have a good relationship, but sometimes that can slide to deference.” (1)

A quote form a recent reading of ours, echoes a similar sentiment:

“…but they can be people who importantly enforce the rules of the sport as they are known at the outset of the match, that is who follow the rule law- or they can be people who arbitrarily enforce rules against one team but not the other.” (3)

In the wake of the public criticism, the FED has decided to launch an internal investigation into whether it is too close to certain banks. While an internal review will offer little transparency and impartiality, it does highlight a major concern: is the FED in a state of regulatory capture? Have they ceased acting for the public good and are they too influenced by other major banking institutions? Obviously, the problem is a lot more complicated then what will be discussed here, but the existence of a central bank is a core argument in Austrian vs. neoclassical economic thought. 

The Federal Reserve is an exceptionally powerful institution; a bank that can literally dictate markets. By some reports, the Federal Reserve allocated 16 TRILLION dollars to banks around the world during the 2008 crisis. Do Austrian economists have a point? Is the Federal Reserve handing out free lunches? Will “printing money from thin air” have long term repercussions? Why did we not let these banks fail, and allow more risk adverse banks replace them in the financial niche?

Carmen Segarra was fired from her job and subsequently sued the FED. She lost.

1.       1. http://www.npr.org/2014/09/26/351520037/former-fed-bank-examiner-says-secret-tapes-show-fed-leniency

2.       2. http://www.theguardian.com/commentisfree/2014/oct/05/carmen-segarra-whistleblower-wall-street-federal-reserve

3.     3.   LH. White ,The Rule of Law of the Rule of Central Bankers, Cato Journal 30, pg. 453

Government is Force

         Throughout the weekly readings and throughout the course of history I have been seeing a trend. Most people understand that Government is force. Although, not many people understand the reason behind why government is force. When people walk into a store and buy milk, seeing the price increased from $2.50 to $4.00 they are outraged. People make enough of a fuss and the Government intervenes. What then happens? The Government lowers the price of milk by initiating a price ceiling. Milk prices are now not allowed to increase higher than $2.50. Many people are so happy; however, they do not realize the force that Government has initiated. Milk farmers cannot afford to produce milk due to the low price ceiling set by the Government. Then people stop producing milk and move to produce something else; something they can afford to produce and make profit on. This shows that the Government is forcing the producers to produce a good and sell at a price that makes no profit. What this does is show that milk farmers have no choice but to steer clear of producing milk and do something else. The market works in ways that cannot be changed by man; by the Government.

            Lets look at property rights. People can be living in a home for years, decades even. The Government decides they want to expand a road that will go along your property. They can come to your door and try to buy your house from you. You can refuse and refuse again; however, eventually you have to give up your home because you do not own the property your house is sitting under; the Government does. What does this prove, that Government is force. You should own the land your house sits on because you have been there for decades. You could of grown up in that house, your children and maybe even your grandchildren. Then you are forced to give it up. How does this not prove that Government is force?

            Government also feel it is their right; they have the force necessary to take money from us and distribute it according to the way they feel it needs to be. Although, how does the Government have the right to decide where our hard earn money goes? I saw a video streaming on the internet about a couple weeks ago of a lady with four children living off of our hard earned money. She had tattoos from head to toe, nice clothing, her hair colored and even had her nails done with acrylics. She stated how she has been living off welfare, food stamps, housing assistance, etc. for fifteen years. She was kicked off housing assistance for a while because the Government found out she was living with her boyfriend. How can you tell me this is acceptable? She has the money to get tattoos; which are not cheap. She has the money to get her nail and hair done; however, she does not have the adequate amount of money to feed and shelter her children? Also, she has not worked for over fifteen years. Now tell me how the Government has a right, has the force necessary to take the money from our hard earning paychecks to sustain this lady and her families living? I am twenty one years old, a college student who has debt and trying to work a full time job, slaving away to pay bills; however, this lady has children and she has the right, because the Government says so to take our money that we work for.

            Now please tell me after hearing all of this, that the Government is not force and have information to back it up. The Government feels they have a right to control our markets, our housing situations, even our money. The Government is ultimately force and they continue to use it because they feel they have the right too.

What Government Should Do

    There are still quite a few people wondering why democrats lost the election. One person, Brad Bannon, believes that Democrats failed to speak to the Middle-Class issues; these issues were mostly about unemployment. His suggestion is that,"Americans deserve a lot more than [service jobs] from their government. Americans deserve a lot more than that from the Democratic Party. Americans need more than jobs. America needs a raise". However, we have already discussed minimum wage and why it will do more harm than good; however, when he states that Americans "deserve more from their government", one should feel suspicious about that statement because it sounds as though Mr. Bannon is pushing for interventionism.

     Now it is difficult to say exactly what one "deserves" from government because government does not give anything to people (or at least it should not); instead government is suppose to provide specific services to its citizens because its citizens give government power to do so. The only thing that government should really be providing to people is protection of private property, providing national defense and correcting market failure. 
     
     A recession is not a market failure; it is the market taking its medicine so that it can be healthy again. Admittedly, recessions are tough and the recovery afterward can take awhile too, but medicine tastes nasty and recovering from an illness takes longer than anybody would like it too. So if many Americans are moving to service jobs while the medicine is taking its effect, and we are recovering from our recession, then that is what the market will do to heal itself. 

     Believing that government should regulate the market to help the market is will help no one. What Mr. Bannon is doing is encouraging government to abuse its power and ultimately make mistakes about how to help people. Interventionism can help some people with one problem, however it has some terrible side effects on the rest of us that he may not have taken into consideration. Side effects of "Government Intervention" include but are not limited to:
-Higher Unemployment;
-Higher Taxes;
-Misuse of taxpayer money;
-Arbitrary Laws;
-Disgusting "healthy-food" in public school cafeterias;
-More aggressive police forces about minor traffic offenses;
-Distorting a market for one good by applying a price floor, which will incentivize consumers to use a substitute good;
-Distorting a market for one good by applying a price ceiling which can cause many business to lose profits, possibly leading to layoffs or less goods for consumers;
-Inflation;
-"Affordable" Health care; 
-Raising Barriers to entry making it more difficult for entrepreneurs to enter certain markets;
- and Bailouts.
Please see your Primary Austrian Economist before using Government Intervention.

     With all of this in mind, there are two things that either party could that would help the country, 1. they could begin to deregulate some of the laws in the country so that the market can take its proper medicine and 2. They should not use arbitrary intervention as a method to  "help" the economy otherwise we will stay sick.

http://www.usnews.com/opinion/blogs/brad-bannon/2014/11/13/democrats-failed-to-address-middle-class-economic-worries-in-2014

Deflation: Welcome Visitor or Unwanted Guest?

       In his 1958 lecture “Economic Policy:Thoughts for Today and Tomorrow” that we read earlier in the semester, Ludwig von Mises elaborates on why governments and central banks have a tendency to encourage inflation. Basically, because national governments hold the greatest amount of debt, they benefit the most from a devalued currency that makes paying debt easier.  Defenders of such policies usually point to an increase in exports as well as short term bursts of increased consumption and growth that occur before prices catch up to the greater supply of money in circulation. However, these kinds of explanations tend to ignore the long term recessionary effects that Austrian economists focus on and therefore only tell part of the story.

  
       Another part of the story that has been gaining more attention is inflation’s counterpart, deflation. The Economist recently published an article on their website titled “The Dangers of Deflation: The Pendulum Swings to the Pit.” In it, an alarmist tone is taken regarding the failure of several countries (our own included) to meet the 2% inflation targets set by their respective central banks. It is feared that their inability to hit such low targets is a sign that deflation, of the sort Japan recently spent nearly two decades dealing with, is just around the bend. Several reasons are listed as to why deflation should be avoided: investment levels will drop as people fear money made tomorrow will be worth less than money made today, consumption levels will drop as people continually expect lower prices in the future, as wages and tax revenues fall- consumers and governments will have a harder time paying back the already growing burden of their debt, and finally; with interest rates already so close to zero, and politicians wanting to appear tough on spending, there is little that governments or central banks can do to stop it once it begins.
  
       But is stopping deflation a good idea? From the perspective of Austrian economics, perhaps it is not. Though it is recognized that what most mainstream economists refer to as deflation can be harmful, this isn’t necessarily true in all cases. One reason for the difference in opinion is definitional. Austrian economists do not define inflation and deflation as changes in the overall price level. Instead, the terms’ definitions are rooted in changes in the money supply. According to Dr. Eubanks, this leaves room for decreases in the price level that should be welcomed, such as those brought on by widespread increases in productivity. Furthermore, when the money supply does decrease, and deflation in the Austrian sense sets in, interventionist attempts to stop it can easily make matters worse. The Great Depression provides a good example of this; instead of increasing liquidity, interventionists like Hoover and FDR thought it would be wiser to keep wages and prices up- which wound up increasing unemployment and decreasing output.
  
       Despite this current bout of low inflation (i.e., lowflation) being explained by significant drops in energy prices, the writer of The Economist article has nothing but gloomy predictions regarding current deflationary trends. Reasons such as Japan’s problems originating from a burst housing bubble, the highly leveraged national debts that followed in the wake of the 2008 crisis, and even the low energy prices themselves (viewed as a reflection of depressed demand) are all convincingly pointed to as reasons to believe that lower price levels justify strong government action. But is this a knee-jerk response? Given that the largest contributor to low inflation rates is low energy prices, and that lower prices tend to increase consumer demand, perhaps this is deflation of the more welcomed sort- driven more by an increase in supply than a decrease in demand (after all, we are producing a lot more of our own oil now which does affect global energy prices). Only time will tell if this recent emergence of lowflation is good or bad, but Austrian insights do provide a rosier alternative to neo-classical interpretations of what’s happening- as well as a defensible position against the potentially massive fiscal interventions suggested in The Economist article.

Austrian Attitudes Towards Inequality

It seems to be very commonplace these days for politicians and media pundits to discuss inequality and its negative consequences.  Their argument usually states that inequality is a problem for society, and so if we have greater equality (or reduce inequality to a minimum), society will be better off as a whole.  It seems to me that discussing inequality and the pursuit of greater equality is a political tactic aimed at justifying the use of force in the lives of others.  Since the Austrian school holds a much different attitude towards inequality, it is worth further discussing below.

One of the key points many politicians overlook today when discussing inequality (specifically income inequality and poverty) is just how relatively well off even those we consider poor (in this country) truly are.  There are people living under the poverty line who live in three bedroom houses, drive a car, and own a flat screen TV and a cell phone.  These individuals are enjoying comforts and amenities that even the ruling elite of the middle ages couldn't even have dreamed of.  And, somewhat surprisingly, these comforts may actually have come about thanks to some level of inequality.

To carry this idea further, it is important to discuss the role of the "wealthy" members of society and their use of new luxury products.  Before a good or service is available to all, it is generally first used by only the wealth members in a society (take the car or cell phone as an example).  This is usually because they can afford to test such new luxury items.  But this testing fulfills an important function in society: it makes goods and services that were once only afforded to a few (because of price, or because they hadn't refined the production process yet) available to all.  Thirty years ago, only wealthy businessmen could afford the new technology that was the cell phone.  But today it is not uncommon to walk down the 16th Street Mall in Denver and see homeless folks chatting on them.

Because everyone is born with different attributes, aptitudes, skills, technical abilities, physical features, drive, ability to gain and retain knowledge, attitudes towards problem solving, and so on and so on, it makes very little sense to me to talk about equality.  Since no two individuals are completely alike, it is farcical to imagine a world in which they are.  It would be a world of homogeneous people all with the same abilities.  It doesn't sound much like a world I would care to live in.

The ‘Reserve’ Dollar: An Austrian Approach

The dollar first became the “reserve currency” of the world at the end of WWII. We, the US, still held a gold standard, and the dollar was regarded as “good as gold” for trading purposes among trading nations via the Bretton Woods Agreement. But though a few decades later, in September 1971, we abandoned the gold standard, the dollar still retained its position internationally primarily because of the relative strength of the US economy (1). That is beginning to change today, in main, due to the inflation of the dollar and the closing gap between the US economy and other economies internationally, but the US is still in a position to take advantage of the position of the dollar to continue enormous government deficit spending, and has done so consistently since abandoning the gold standard (3). Is this situation a problem for the US economy?

Some are beginning to answer yes. Surprisingly, many of the critics of this state of affairs come from the Keynesian persuasion. They look to the weakness of job growth, the rather large government budget and deficit spending, trade deficits, and financial bubbles as consequences of our dedication to the status quo regarding the reserve dollar. Several of these critics call for a return to the gold standard, which one proponent calls “the least imperfect monetary system of history” (3). On the other side of the argument, lie those that think that a return to the gold standard and thus a fixed exchange rate, would lead to further imbalances between trading nations internationally and cite the troubles of smaller nations within the euro zone as a modern example of these troubles with the exchange rate and recovery from the boom and bust cycle (4). And a third perspective is that yes, the dollar is declining in prominence as the reserve currency of choice, particularly in China and Europe, but this cycle of reserve currencies is nothing new, as it is the currency of the dominant economic force that fills this role, a position that has continuously shifted throughout history, and only since the twentieth century rests with the US (5).

The discussion at the root of this debate is money, particularly as it relates to our current fiat money vs. the classical gold standard. Austrian thought would certainly hold that our current monetary situation is far from ideal. And the gold standard is certainly moving in the right direction, one of diminished government intervention in the money supply, and the allowance of the variability of this money supply due to changes in the supply and demand of it and purely independent of intervention. Mises, in his The Theory of Money and Credit, clearly expands on the inevitable problems that arise alongside intervention; namely the impossibility in determining both the need for, and the proper amount and application of this intervention where the exchange-value of money is concerned.  And the ability of a metallic, perhaps gold, system to remain more easily outside government force is one of its primary strengths from an Austrian perspective (2). 

This strength is perhaps one of the reasons that is was abandoned. The government has an agenda outside of monetary security, and the ability to influence so thoroughly the money supply is invaluable in pursuing these goals (2). So, until the concerns with our current situation are vocal enough and widespread enough to outweigh the comfort and naively implicit trust in our government, we should not expect to see any changes in it. Particularly ones that would challenge and diminish the control and power of our government institutions, and power that the 'reserve' dollar cannot help but perpetuate.  

1.  http://mises.org/library/how-much-longer-will-dollar-be-reserve-currency

2. http://mises.org/library/money-subjective-value-and-gold

3. Lehrman, Lewis E. & Mueller, John D. “How the ‘Reserve’ Dollar Harms America.” Opinion. The Wall Street Journal 21 November 2014: A13. Print.

4. Miles, William. “Gold Standard Wont Solve ‘Reserve’ Dollar Problem.” Opinion. The Wall Street Journal 25 November 2014: A12. Print.

5. http://pragcap.com/how-much-longer-will-the-dollar-remain-the-reserve-currency-of-the-world

Should Division I athletes be paid

Alex Zollweg
ECON 3160
1DEC2014

College sports in the United States have been a major source of entertainment for many years. We live in a country where athletes are revered, looked up to, and something a great number of people strive to emulate. Because of this, athletes can command a very large salary, teams leagues and schools make immense profits off having these sports and athletes. There has always been a separation between those who play sports professionally and those who do not in this case, students that play a sport while in college. The phrase "student athlete" is shoved down the throat of every individual who does play a sport while in school. In every level below the division 1  college level I would say that "student Athlete" is an accurate description of what is required from them, academics coming first and then athletics. However, at the highest levels of amateur sport I argue that this is far from a reality.
The time when the phrase "Student Athlete" would have been accurate to say was a time when the leagues and schools that possess these athletes didn't make the profit they currently do. These schools use the abilities to make profits and increase enrollment rates at their schools, yet the players themselves see no compensation with the exception of scholarship money in some situations. Last year the NCAA made over 10 billion dollars in revenue, the most profitable football programs made just under 100 million dollars and profit. Yet for example Andrew Luck who is now a successful NFL quarterback was given and estimated $85.000 a year in scholarship money. The very next year after completing school he signed a 4 year 22.1 million dollar contract with a guaranteed 14.5 million dollar signing bonus, My question is what changed so drastically in one year that he should be paid so much more merely months after being paid a scholarship to Stanford University? My answer is the force that the NCAA applies to its players.
So far in Austrian Economics class we have discussed government interventionism and how it interferes in the market process. The situation of college athletes is similar with the NCAA acting as the force. In no other situation that I can think of, are peoples skills so artificially undervalued than in top tier college athletics. In a perfect "free market"  these athletes would be getting paid much much more because there skills are highly sought after. Also I think that most economists would agree that some sort of government or force is necessary, that being said this situation calls for some sort of rules and structure from the NCAA. But to not pay these athletes anything outside of scholarship because the NCAA's classification as "student athletes" is simply wrong to me.
The NCAA can make this classification because they say that these students are students before athletes. However, the typical division 1 football player spends over 40  hours a week on his sport, also a basketball player whose team  makes the NCAA  tournament in march can be expected to miss as much as a month straight of school.  I hope if nothing else these statistics would show that for many athletes school is not their top priority. I think with the amount of money these athletes bring in to their respective schools a free market would mean these athletes would begin to earn the money there skills demand. Its important to point out that any intervention by an institution acting as a force will create policies and those policies will move that "market" further from a free market. I think this example shows the institution does not always have to be a formal government.    


http://www.forbes.com/sites/marcedelman/2014/01/30/21-reasons-why-student-athletes-are-employees-and-should-be-allowed-to-unionize/