Thomas Woods is one of the most brilliant scholars I know. Moreover, he's cool. He also manages to hand out good advice: "If you're going to pursue economics and economics history, find an area and master it. Forever, you will be the go-to-guy for this subject. For instance, labor history!" Uh-huh...
But really, studying labor history is a good idea, and so was his suggestion of the Progressive Era. Very little serious free market work has been done on those subjects; you could certainly make a name for yourself doing this type of stuff. In general, just consider what the Austrian school can teach you in your study of history. The Austrian school has a unique business cycle theory with great persuasive power - this theory alone converts many to the Austrian cause. If you understand what the business cycle theory is telling you, you know what to look for and do good history. We have to go into the study of history with a preexisting understanding of how the economy works.
There is a misconception about the Austrian school and history because the laws of economics not dependent on history. Yet Mises and Rothbard were amazing historians. For instance Rothbard wrote a four volume history of America called "Conceived in Liberty." That's pretty hefty - especially since it covered only the colonial period. Yep, and he did it in his spare time.
You should always have a skeptical eye on conventional wisdom about history. The rest of Woods lecture focused on President Hoover and why he was not as laissez-faire as many economists make him out to be.
Roger Garrison presents a whole lot of info on the macroeconomy in his book, "Time and Money." His lecture today focused on current tax policy and tax "reform." Just as a reminder, there are two methods of acquiring wealth. The first is production and exchange, which is the economic means, and the second is confiscation and threat of violence, the political means. Guess which one the state falls under?
Garrison presented the charts that displayed the government's expenses and revenues over the course of the last 50 years, the Federal surplus and deficit, the gross Federal debt (by the way, the United States debt has taken a huge spike to over 8 trillion dollars), and the international trade deficit. He asked us to consider some questions…
Does the tax take measure the burden of government? Milton Friedman has a point - government spending, rather than the total tax take, is closer to the mark in gauging the burden.
Government spending = Taxes + the budget deficit
Yet Friedman said that only spending matters, not budget deficits. However, chronically large budget deficits really do matter. Some economists (Austrians!) add the burden of regulation. In effect, regulation could be considered an added tax-and-spend equivalent that just doesn't show up on the books. The same could be said of other burdens of government such as tariffs.
Are all taxes, dollar for dollar, equally hurtful? The narrower the tax base, the greater - or, at least, the more concentrated - the distortion of economic activity. Consider George Bush's "yacht tax" in 1989. This didn't really affect the wealthy a whole lot. There are plenty of other things to spend your money on. However, boatyards were suffering from people not buying yachts. These people were not high income people, but they were the ones who suffered from the yacht tax. Just one more government backfire case… The broader the tax base, the less the distortion of economic activity.
Are taxes better or worse than budget deficits? Those with experience in economics should note the flip-flop in deficit apologetics here. It used to be that democrats would make excuses for borrowing lots of money. Now, it's the supply-siders (Republicans) making the excuses. In the 1960s, people said "we owe it to ourselves" as justification for large deficits. Yeah, great idea, maybe we just shouldn't punish robbery anymore, because "we owe it to ourselves"! Of course, in the 21st century we have a new excuse: "We have access to world capital markets, we're just a drop in the bucket!" Umm, when does a drop in the bucket become significant? If one drop is fine, what about two? What about six? The logic fails me…
Are current and projected budges large? There are many ways to consider this, but what about comparing the budget to saving? This is hardly ever talked about, but is extremely important. Americans have had a net negative savings in the last few years, in fact, which should seem to imply that there is a serious problem in investment coming. There is no reason to count on foreign governments continuing to lend to the US government year after year. It's like jumping off a skyscraper and half way down saying, "Hmm, so far so good!"
George Reisman once again gave a splendid lecture entitled "The Benevolence of Capitalism." The thesis: capitalism promotes human life and well-being and does so for everyone. Amen, preach on!
Freedom is the foundation of personal safety and economic security. Some people think there is a conflict of security and freedom, but really freedom is the foundation of security. Why? Freedom is the absence of initiation of physical force. When one is free, one is safe and secure from common crimes. To the extent we have freedom we are safe and physically secure. Free from government, which is potentially much worse than a common criminal gang. Furthermore, where there is freedom there is peace abroad, because once again there is absence of force. Economic security under freedom derives from the fact that you can do whatever you want to do without using physical force. With the use of force prohibited, he must use his reason to find ways to increase his own well being with others through trade and production. Hence, during the age of capitalism a continuing increase in the supply of economically useable, accessible natural resources has been made possible.
Production and economic activity, by their very nature, serve to improve man's environment. We hear a lot that man is destroying the environment, but it is really the exact opposite. We are constantly at work improving our environment and adapting it to ourselves. All we do is put chemical elements into forms and locations of greater utility to us.
The division of labor, which can exist in highly developed form only under capitalism, provides major benefits to the human race. Man continues to gain at ever increasing rates from the multiplication of the amount of knowledge that enters into the productive process. Just consider that each occupation has its own body of knowledge. The totality of this knowledge operates to benefit all consumers and hence all producers. We obtain the benefit of knowledge throughout the economic system, with new products to improve ourselves. Such products are not possible under anything but capitalism.
At least since the time of Adam Smith and David Ricardo, it has been known that there is a tendency in a capitalist economy toward and equalization of the rate of profit, or rate of return, on capital across all branches of the economic system. The operation of this principle provides balance among the different branches of production. In response to changes in prices, production is driven. Consumers drive where investment and production go. Any given business can earn an above average rate of return by innovating with new products or by cutting costs with more efficiency. These new earnings attract competitors, which encourages satisfaction of consumers by continuing innovation and by providing an incentive to lower prices.
As Mises has shown, in a market economy, private ownership of the means of production operates to the benefit of everyone, non-owners as well as owners. To receive the benefit of Exxon's production of oil, I don't even have to own stock in the company. I just have to use a car or something else that uses oil. A corollary of the general benefit from private ownership of the means of production is the general benefit from the institution of inheritance. Inheritance encourages people to save capital. More accumulated capital is, of course, a boom for the market, the benefits of those investments get passed on to consumers.
Under capitalism, not only is one man's gain not another man's loss, insofar as it comes out of an increase in overall, total production, but also - in the most important cases, namely , those of the building of great industrial fortunes - one man's gain is positively other men's gain - implications of earning a high rate of profit for a long period of time and saving and reinvesting the far greater part of the profits. As we have seen, the earning of profit for a long period of time results in new innovations, which also serves consumers.
Competition is an often misunderstood element of the capitalist system. For instance, it is often likened to biological competition as though we're all "fighting for our survival" hoping to be the fittest. Contrasted with biological competition, competition results in the positive creation of new and additional wealth. In fact, it's character is diametrically opposite to biological competition. Man, by virtue of his possession of reason, can increase the supply of everything. In contrast with animals, who compete for the limited supply of things, capitalists have the ability to create new things and earn new wealth. Instead of survival of the fittest, capitalism results in the potential of survival of all. The only "fittest" that survive are the fittest products and methods of production that increase wealth. Each individual out-competes all others for his special place in the capitalist system. For example, Bill Gates, who can obviously out-compete a janitor in the job for software mogul, could possibly be so talented as to also out-compete the janitor by being able to clean five times as fast as the janitor. Yet, the janitor can out-compete Bill Gates (and all others, for that matter) by being able to do the job at such a significantly lower price than Gates, who earns a grandiose salary. As a result, even janitors can enjoy the benefits of homes, tasty food, and cars. Farmers who were driven out of business by other farmers utilizing new innovations such as tractors didn't starve, but changed their profession and still enjoyed the benefits of industrialization. Competition allows normal people today to enjoy even a greater standard of living than Queen Victoria (save in the ability to purchase servants). The enemies of competition are the true advocates of the law of the jungle.
Far from being a "plan-less system", individuals plan their own existences and what they want to do with themselves to better their well-being. These plans are routine in the capitalist system. The means by which people are able to plan is through the consideration of prices in comparison to their own costs and incomes. Individuals planning to sell goods and services use prices to determine how to sell. Consumers plan by checking the prices of the goods available. Consumer plans and producer plans harmonize together in order to bring maximum feasible satisfaction to both. Planning and re-planning from all participants maximizes gains and minimizes losses. In destroying the means of production, socialism destroys the division of labor which makes possible the increase of the welfare of many.
People tend to have a very negative view of monopolies. In reality, though, socialism is the system of monopoly and capitalism is the system of freedom and free competition. Consider the requirement of being a sole supplier under capitalism: the price the business charges is just too low to enable others to enter the field. How is that bad for consumers? In order for the cost to enter be too high the capital must be used more effectively than anybody else trying to enter the market. A monopoly can only exist when the government protects an individual business by preventing through law any business from attempting to enter the market for that good.
How can someone say that capitalism isn't good for people?
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