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Why Bastiat Deserves to Be in the Pantheon of Great Economic Theorists

By Guest Post March 8, 2019

By Donald J. Boudreaux

Frédéric Bastiat (1801-50) is known today among economists—if he is known at all—as at best a brilliant polemicist. An economic theorist he most certainly was not—such is the common opinion.

I believe this common opinion to be mistaken. To explain why first requires a discussion of the nature of a theory.

A Theory Is a Story

As I tell students in my Principles of Microeconomics courses, a theory is a story that assists us in making better sense of reality. And a theorist is a storyteller who offers this assistance.

A story that explains the price only of bread is not a proper theory of prices, even if it is highly believable.

Stories, of course, differ in their believability. A story that explains, say, the Industrial Revolution as being the result of new knowledge imparted to us by aliens from another galaxy is completely unbelievable. Some other, more believable story is called for—one, say, that features a change in people’s attitudes toward commerce and innovation.

But for a story to deserve to be called a theory requires that it also be generalizable.

In economics, supply-and-demand analysis is a general account of how prices are formed and change. It’s not a story about the formation of the price of only one item, such as bread. It’s an outline for telling believable stories about the formation of all prices—from the prices of toy planes to those of jumbo jetliners, from the wages earned by motel maids to those earned by Tom Hanks. A story that explains the price only of bread is not a proper theory of prices, even if it is highly believable.

To be generalizable, a story whose creator wishes it to be regarded as a serious theory must make that story abstract. Being abstract, however, makes the story—standing alone—barren. As such, it engenders no understanding of the physical or social world. But it proves itself to be a good theory if, when relevant details of reality are added to it, those of us who encounter this story go, “Aha! Now I understand reality better than I did before!”

The core purpose of all theories is the creation of improved understanding. A theory that does not cause those who hear or read it to go, “Aha!” is worthless.

Bastiat the Theorist

And so we return to Bastiat. He’s one of history’s most brilliant tellers of economic stories. This fact, I’m convinced, justifies calling Bastiat a great economic theorist.

Who can read Bastiat’s satirical portrayal of sunlight as an unfairly low-priced import and not go, “Aha!”

Consider Bastiat’s famous 1843 “Petition of the Manufacturers of Candles.” In this short essay, Bastiat radiantly conveyed economists’ understanding that artificially contrived scarcities make the general population worse off even if they increase the wealth of a small handful of individuals. Who other than the most benighted protectionist can read Bastiat’s satirical portrayal of sunlight as an unfairly low-priced import and not go, “Aha! Of course, inexpensive imports that ‘flood’ into a country no more impoverish that country than does the light sent to us free by the sun!”

Another example is Bastiat’s even-shorter essay “A Negative Railway.” Here Bastiat revealed the flaw in the argument of a gentleman who insisted that if a railroad connecting Paris to Bayonne were forced to have a stop at Bordeaux, the wealth of the French people would be enhanced. The hapless target of Bastiat’s brilliance based his conclusion on the correct observation that forcing trains to stop at Bordeaux would increase the incomes of porters, restaurateurs, and some other people in Bordeaux.

Yet Bastiat didn’t settle for drily noting that, after paying these higher incomes, railways and their passengers would have less money to spend on goods and services offered by suppliers in locations other than Bordeaux. Instead, Bastiat followed the proposal’s logic in a way uniquely revealing: If forcing trains to stop at Bordeaux will increase the total wealth of the people of France, so too will the total wealth of the people of France be increased if trains are obliged to stop also at Angoulême. And if also at Angoulême, then the French will be enriched even further if a third stop is required at Poitiers. And if at Poitiers, then at each and every location between Paris and Bayonne.

Bastiat revealed the proposal to be flawed by showing that, if its logic were sound, the railway that would do the most good for the French people is one that is nothing but a series of stops—a negative railway!

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Accounting

Why Does Amazon Pay $0 in Federal Income Taxes?

By Guest Post February 22, 2019

by Tyler Cowen

Amazon is valued at nearly $800 billion, yet the company reportedly paid $0 in federal income taxes last year. Why?

The main reason Amazon as a corporate entity does not pay much in taxes is because the company so vigorously reinvests its profit. The resulting expensing provisions lower their tax liabilities, in some cases down to zero or near-zero.

That is, in fact, the kind of incentive our tax system is supposed to create, and does so only imperfectly, noting that many economists have suggested moving to full expensing.

(NB: You can’t hate both share buybacks and profit reinvestment!)

Amazon pays plenty in terms of payroll taxes and also state and local taxes. Nor should you forget the taxes paid by Amazon’s employees on their wages. Not only is that direct revenue to various levels of government, but the incidence of those taxes falls somewhat on Amazon, which now must pay higher wages to offset the tax burden faced by their employees.

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Economics

A Quiz to See How “Woke” You Are on World Poverty

By Guest Post February 19, 2019

by Barry Brownstein for FEE.org

By now you have probably heard the exhortation “stay woke.” To be woke means a person is “an informed, questioning, self-educating individual” who “look[s] past the provided narrative.” Yet, most among the self-proclaimed woke are still fast asleep. They may have a facile way of imparting narratives about issues, but those narratives are often based on neither sound facts nor theories.

In his book Factfulness, Hans Rosling, the late great professor of international health, offers 13 fact questions to test “our knowledge about the world.” One of those questions is foundational to our beliefs about the state of the world:

In the last 20 years, the proportion of the world population living in extreme poverty has …

A: almost doubled

B: remained more or less the same

C: almost halved.

The answer is C:

“Over the past twenty years, the proportion of the global population living in extreme poverty has halved.” Rosling considers this a “revolutionary” change—“the most important change that has happened in the world in [his] lifetime.” He adds, “It is also a pretty basic fact to know about life on Earth. But people do not know it. On average only 7 percent—less than one in ten!—get it right.”

About this dramatic change in the reduction in the world’s poor, most are not woke. Many of the self-proclaimed woke cling to a variation of the narrative that capitalism is impoverishing the world. Their illusions may be shared by many, but that doesn’t make them right.

Rosling adds these pointed observations:

The Democrats and Republicans in the United States often claim that their opponents don’t know the facts. If they measured their own knowledge instead of pointing at each other, maybe everyone could become more humble. When we polled in the United States, only 5 percent picked the right answer. The other 95 percent, regardless of their voting preference, believed either that the extreme poverty rate had not changed over the last 20 years, or, worse, that it had actually doubled—which is literally the opposite of what has actually happened.

If you think the “better-educated” would do better, you would be wrong. Rosling writes:

I have tested audiences from all around the world and from all walks of life: medical students, teachers, university lecturers, eminent scientists, investment bankers, executives in multinational companies, journalists, activists, and even senior political decision makers. These are highly educated people who take an interest in the world. But most of them—a stunning majority of them—get most of the answers wrong. Some of these groups even score worse than the general public; some of the most appalling results came from a group of Nobel laureates and medical researchers.

Those sharing their opinions on social media, professional pundits, and professors are mostly profoundly ignorant about basic facts. Worse, Rosling writes:

Not only devastatingly wrong, but systematically wrong. By which I mean that these test results are not random. They are worse than random: they are worse than the results I would get if the people answering my questions had no knowledge at all.

The systemic bias is in one direction: “Every group of people,” Rosling surveyed, “thinks the world is more frightening, more violent, and more hopeless—in short, more dramatic—than it really is.”

If You Can Observe a Thing

Why, Rosling asks, “is the misconception of a gap between the rich and the poor so hard to change?” Rosling writes, “Dividing the world into two distinct sides is simple and intuitive, and also dramatic because it implies conflict, and we do it without thinking, all the time.” Thus, Rosling observes, journalists “prefer stories of extreme poverty and billionaires to stories about the vast majority of people slowly dragging themselves toward better lives.”

Rosling offers many other cognitive biases, such as a “negativity instinct,” that prevent us from seeing the tremendous progress occurring in the world. These biases are significant, and behind these cognitive biases are theoretical biases.

Albert Einstein observed to his colleague Werner Heisenberg, “Whether you can observe a thing or not depends on the theory which you use. It is theory which decides what can be observed.”

If you understand why free markets have lifted billions out of poverty, you will see the evidence.

If you understand why free markets have lifted billions out of poverty, you will see the evidence. If you are waiting for a socialist revolution to help people rise above poverty, you will be blind to the billions who already have.

According to Rosling, “The picture that most Westerners see in the media and carry around in their heads” is this: “The rich are getting richer and the poor are getting poorer; and the number of poor just keeps increasing; and we will soon run out of resources unless we do something drastic.”

How Woke Are You?

To complement Rosling’s fact-based quiz, I offer this 15-question economics self-assessment taken from a 45-question assessment developed by me and my wife Deborah, a marketing professor, for an MBA economics and business environment course.

This self-assessment will measure your understanding of the conditions under which society can continue to progress and lift billions more out of poverty. Theoretical grounding will help you look past the “provided narrative” blaring at us daily that bigger government is needed to alleviate suffering and save the world.

How woke are you? The real woke understand economics.

On a scale of “1 to 7,” where “1” means “strongly disagree” and “7” means “strongly agree,” select the number that best represents the extent to which you agree or disagree with each of the following statements:

I have trouble conceiving of an economic order that is not deliberately made for a specific purpose.
It is likely that a group of well-intentioned government energy experts can direct energy research toward the next breakthrough in sources of efficient energy.
Because resource scarcity constrains the economy, the government must have the power to allocate resources.
As markets become more complex, the need for government regulation becomes greater.
There is a conflict of interest between consumers and corporations earning profits on a free market.
Government planning is needed to bring order and coordination to what would otherwise be chaotic social and economic conditions.
If other countries refuse to lower tariffs, it is in the interest of the United States to raise tariffs.
There must be a level playing field for international trade to be fair.
Individuals or small groups of people can know only a fraction of the knowledge that society uses.
Humanity can achieve more than “individual human reason could design or foresee.”
The basic economic problem is to use bits of knowledge that are dispersed and not held by anyone in totality.
Freedom to succeed or fail is a necessary condition for discovering the terms of mutually beneficial exchange.
It is not large corporations but government-created barriers to competition which are the most harmful to consumers.
Only the conduct of the players, but not the outcome of the game, can be said to be “just” in economic matters.
Spontaneous order can coordinate the conflicting actions and plans of different individuals and corporations.

Your Woke Score:

For questions 1-8, add your points. A real woke person will score 8; that is, they will strongly disagree with all of these statements.

For questions 9-15, add your points. A real woke person will score 49; that is, they will strongly agree with all of these statements.

Becoming More Woke

If you want to improve your theoretical understanding, I offer this short reading list of essential essays. The self-proclaimed woke are fast asleep, but you don’t have to be.

F.A. Hayek: “Cosmos and Taxis” in Law, Legislation and Liberty, Volume 1: Rules and Order

F.A. Hayek: “Individualism: True and False”

F.A. Hayek: “The Use of Knowledge in Society”

F.A. Hayek: “‘Social’ or Distributive Justice” in Law, Legislation and Liberty, Volume 2: The Mirage of Social Justice

F.A. Hayek: “Planning and Democracy” and “Planning and The Rule of Law” in The Road to Serfdom

Israel Kirzner: “Competition, Regulation, and the Market Process: An ‘Austrian’ Perspective

Murray Rothbard: “Justice and Property Rights”

Ludwig Von Mises: “Profit and Loss”

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Accounting

Why Marx Loved Central Banks

By Guest Post February 12, 2019

by Thorsten Polleit for Mises.org

In his “Manifesto of the Communist Party” (1848), published together with Frederick Engels, Karl Marx calls for “measures” — by which he means “despotic inroads on the rights of property” –, which would be “unavoidable as a means of entirely revolutionising the mode of production,” that is, bringing about socialism-communism. Marx’s measure number five reads: “Centralisation of credit in the hands of the state, by means of a national bank with State capital and an exclusive monopoly.” This is a rather perspicacious postulation, especially as at the time when Marx formulated it, precious metals — gold and silver in particular — served as money.

As is well known, the quantity of gold and silver cannot be increased at will. As a result, the quantity of credit (in terms of lending and borrowing money balances) cannot easily be expanded according to political expediency. However, Marx might have fantasized already, what would be possible once the state is put in a position where it can create money through credit expansion; where it has usurped and monopolized the production of money. Long before Marx, the English churchman and historian Thomas Fuller had elaborately expressed the power of money: “Money is the sinew of love as well as war.”

The Origins of Modern Central Banking

The idea of central banking has a long history. For instance, the Swedish central bank, the Sveriges Riksbank, was founded in 1668, and the English central bank, the Bank of England, was formed in 1694. The fraudulent operations of such institutions came to light soon, at the latest with the writing of the British economist David Ricardo. In his 1809 essay “The High Price of Bullion” he pointed out that it was the increase in the quantity of money — in the form of banknotes not backed by gold — that caused a general rise in prices, an effect we know as (price) inflation.

Unfortunately, however, the political-economic insight that central banks holding the money production monopoly would misuse their power time and again, engage in cronyism, and cause an anti-social debasement of the currency has not — to this very day — sufficed to discredit the monstrous idea of central banking. It seems that as far as monetary affairs are concerned, Marx’s concept of Dialectical Materialism has made quite an impression: What is appears to form peoples’ consciousness (not vice versa). This has certainly helped in creating central bank Marxism on a world-wide scale.

Cutting the Last Ties with Commodity Money

On 15 August 1971 Marx’s vision became true: The US administration single-handedly terminated the redeemability of the US dollar into physical gold – and so gold, the currency of the civilized world, was officially demonetized. Through this coup de main, in the United States of America, as well as all other countries in this world, an unbacked paper money — or fiat money system was established. Since then, all currencies around the globe represent fiat currencies: representing money creation by circulation credit expansion, not backed by real savings or deposits, monopolized by central banks.

The fiat money system, the creation of money through circulation credit expansion, has brought about a new kind of debt slavery on a grand scale. Consumers, corporations and, of course, governments, too, have become highly dependent on central banks continuously churning out ever greater amounts of credit and money, provided at ever lower interest rates. In numerous countries, central banks have de facto become the real centers of power: Their monetary policy decisions effectively determine the weal and woe of economies and whole societies.

By issuing fiat currencies, created out of thin air, a rather small clique of central bankers, together with their staffers, causes — to borrow from Friedrich Nietzsche — a “revaluation of values.” Chronic monetary inflation, for instance, discourages savings; running into ever greater amounts of debt gets cultivated; by central banks’ downward manipulation of the interest rate, the future needs get debased compared to present needs; the favoring of a sort of monetary “Deep State” comes at the expense of demolishing civil and entrepreneurial liberties.

A Supranational Central Bank

In Europe, central bank Marxism has accomplished a rather astounding feat: 19 nation states with a total of around 337 million people have given up their right to self-determination in monetary affairs, submitting to the monetary policy dictate of a supra-national central bank entirely beyond effective Parliamentary control that issues a single fiat currency, the euro. While central bank Marxism has been reasonably successful in Europe, however, its true spearhead has always been the US central bank: The Federal Reserve (Fed).

Today’s world depends on the fiat US dollar issued by the Fed more than ever. Effectively all other major currencies are built upon the Greenback, and it is the Fed that determines the credit and liquidity conditions in international financial markets. It effectively presides over a world central bank cartel which, if it is allowed to continue unimpededly, will eventually steer and control the world economy through its unassailable money production monopoly, effectively removing one of the most critical roadblocks against unrestricted state tyranny.

Ideas Have Consequences

So those favoring a free society can only hope that something will get in the way of central bank Marxism. This is by no means impossible. Socialism-communism is not the inevitable destiny of social life and historical evolution, as Marxists would like to make us believe. What truly matters are ideas or theories, if you will, as ideas — whatever their specific content, wherever they come from, whether they are right or wrong — underlie and drive human action.1Ludwig von Mises was acutely aware of this indisputable insight:

Human society is an issue of the mind. Social co-operation must first be conceived, then willed, then realized in action. It is ideas that make history, not the “material productive forces”, those nebulous and mystical schemata of the materialist conception of history. If we could overcome the idea of Socialism, if humanity could be brought to recognize the social necessity of private ownership of the means of production, then Socialism would have to leave the stage. That is the only thing that counts.2

Against the backdrop of Mises’s words one may add: Once people understand that Marxism (and all its particular forms of socialism) does not guarantee a higher living standard and that it does make a better or more just and reasonable world, it would usher in the end of central banking and fiat money. In other words: whether or not central bank Marxism and fiat money will prevail or be thrown out of the window (or flushed down the drain) will be determined by the outcome of the “battle of ideas.” So there remains reason for hope!

1. For a detailed explanation see Mises, L. v. (1957), Theory and History, Ludwig von Mises Institute, Auburn, US Alabama, Part Two, esp. Chapter 7, pp. 102 – 158.
2. Mises, L. v. (1981), Socialism. An Economic and Sociological Analysis, Liberty Fund, Indianapolis, p. 461.

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Accounting

Hamilton on Steroids

By Guest Post February 9, 2019

By John Devanny

“The revenue of the state is the state.” Edmund Burke, Reflections on the French Revolution

Washington D. C. finds itself in the midst of an entertaining, nay consuming, Kabuki theatre. The federal government has “shut down” its non-essential functions, re-opened the same, and promised to do it all over again in a few weeks, raising the question as to why it has non-essential functions at all. Mr. Mueller’s fishing expedition continues sailing along through Mr. Trump’s tweetstorms, as Democrats await the landing of the big tuna complete with waterside fish fry and impeachment. Meanwhile, the Trumpites patiently fantasize about their man turning the tables on the evil deep state by purging the temples and draining good ol’ foggy bottom. T’is all sound and fury underscoring Henry Kissinger’s view that the smaller the stakes, the more vicious the politics.

What is currently at stake is the survival of the last vestiges, really the tatters and shreds, of the old republic, and no one, neither leftists identity politics ideologues or MAGA hat wearing Trumpites are lifting even a whimper of protest, minus a few notable exceptions such as journalist Greg Hunter. What matters is 21 trillion dollars of unaccounted for spending. The story takes us back to the eve of the 9/11 attacks. Donald Rumsfeld, the Secretary of Defense, disclosed a particularly embarrassing piece of news that the Defense Department spent 2.3 trillion dollars and could not account for it. Conveniently for Rumsfeld and the DoD, some folks decided to pilot passenger jetliners into the World Trade Center’s twin towers, so the issue of the “missing money” fell to the wayside. Until, Catherine Austin Fitts, a former Assistant Secretary of Housing during Daddy Bush’s reign, claimed that around 6 trillion dollars of spending could not be accounted for in the Department of Housing and Urban Development budget. One Dr. Mark Skidmore, a professor of economics and the holder of the Morris Chair of State and Local Government Finance and Policy at Michigan State University, was sure Fitts and her researchers were incorrect. So he and a team of graduate students combed through the publicly available financial records and found that Fitts was correct. So, just for kicks, they took a look at the spending records of the DoD and found another 15 trillion of unaccounted spending. As Skidmore and his intrepid team dug deeper into the bowels of federal agencies with information requests, the Office of the Inspector General pulled the plug on all the internet links to the key documents that showed the unaccounted for spending. Eventually, the links came back up, and with a promise of an audit of spending by the DoD. Clearly, Dr. Skidmore had hit a nerve.

Various and sundry debunkers have gone into overdrive to assure us that all is well. The leading court newspaper, the Washington Post, is quite certain that this is a case of double counting or perhaps lost receipts. Other sober-minded folks have compared this to someone forgetting about the twenty-five bucks you paid an enterprising teenager to mow your lawn, or perhaps it’s like when you forget to report a meal on your expense account, or you double booked the latte at Starbucks. A few lawns, some lattes, some double booked F-35s, some uncounted $300.00 toilet seats and pretty soon we have 21 trillion dollars of unaccounted spending. The Post never produced any evidence of plugging or double booking of accounts, bless their hearts, they just took the federal government at its word.

But we really can’t take the federal government at its word. Consider Federal Accounting Standards Advisory Board (FASAB) Statement 56. According to Michele Ferri and Jonathan Luire, Statement 56 is fraught with perils for the republic.

In the absolute most simple terms, Standard 56 allows federal entities to shift amounts from line item to line item and sometimes even omit spending altogether when reporting their financials in order to avoid the potential of revealing classified information.1 However, as with all laws, nearly every word in that sentence is a complicated concept to unpack. Who counts as a federal reporting entity? When and how can these entities conceal or remove financial information from their reports? What information can be removed? When does something count as confidential, and who makes that determination? . . .

The simplest place to start with understanding Standard 56 is its scope. It applies to federal entities that issue unclassified general purpose federal financial reports (GPFFR), including where one entity is consolidated with another. This means it only applies to otherwise unclassified financial reports where there is a risk of revealing classified information; classified financial reports are their own can of worms. (see generally FASAB Statement of Federal Financial Accounting Standards 56, available at http://files.fasab.gov/pdffiles/handbook_sffas_56.pdf) Standard 56 also doesn’t remove the actual requirement to report, it just allows these entities to change their reports in ways that don’t reflect their actual spending.

Simply put, a broad interpretation of Statement 56 (When has the federal government not chosen the broad interpretation?), books can be cooked if an entity, public or private, is spending money or fiscally involved in operations that are related to national security. This renders the balance sheets and accounts of both the federal government and the corporations that do business with the government, deeply suspect at best, completely untrustworthy at worst. Most ominous, it effectively removes public spending from any meaningful oversight by the people or the representatives of the people and the states in the Congress. What is in place now is the legal architecture to support legitimize financial fraud.

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Entrepreneurship

Reasons Working Too Hard at Your Business is a Waste of Time

By Guest Post February 8, 2019

by Victor G. Snyder

As the leader of a small business, you’re bent on driving growth. You are willing to put in the work that’s needed to achieve that, but paradoxically, working too hard could create unexpected obstacles to your business growth.

If you’re working hard and putting in long hours but your business has hit a plateau, it’s possible that your hard work is the problem.

Here are some of the ways that working too hard could be holding your business back from realizing its growth potential.

Working Too Hard Stops You from Delegating Effectively

When you work too hard, you end up micromanaging your own employees. This undermines their dedication to the business and sends a silent message that you don’t trust them to meet your expectations. That can become a self-fulfilling prophecy, generating resentment and an unhealthy work atmosphere.

“As a CEO and Entrepreneur, your success will directly correlate to how well you can assemble the best team and then bring out the best in those people,” notes Mark Moses, the CEO of CEO Coaching International. “Micromanagers should never be CEOs of large or growing companies. This is because they are simply too complex to micromanage. Being involved at every level and not delegating to your team creates a bottleneck that essentially strangles an organization.”

Indeed, in order for your business to really scale, you need talented employees who are experts in their areas of specialty. If you’re working too hard, you are probably carrying out tasks which don’t draw on your real strengths. When you hire experts, they can carry out the work in less time, thanks to their training and experience, and you can free yourself up to focus on those strategic tasks which no one else can do.

Working Too Hard Stops You From Building Scalable Business Systems

No matter how hard you work, there is a limit to what a single person can achieve. For a business to scale successfully, it needs to be based on smart systems that can expand beyond your own capabilities. When you focus on completing task after task at all costs, instead of building a scalable business process that will do it for you, you’re stunting your business growth.

“Yes, your talents and skills were the reason that it was able to get up and running, but they will not be the tools that allow it to reach future success,” says Ken Marshall, founder of Doorbell Digital Marketing. “Now don’t get me wrong, working hard and getting things done is not an inherently bad thing. In fact, when your company is in its infancy, you’re going to be doing most of the work. But at some point, you’re going to have to figure out ways to remove yourself from all of the repetitive or non-essential tasks, take a step back, and look at where the ship is headed.”

Working too hard can create an overdependence on you. If your employees are constantly interrupting you to ask for decisions that they should be capable of reaching on their own, it prevents you from focusing on your more important core responsibilities and holds them back from potential growth in their own roles.

Working Too Hard Prevents You from Thinking Creatively

For your business to scale, you need to feel passionate about it. But when you work too hard, your drive and passion get drowned out by petty tasks that should be delegated to someone else.

You could end up focusing too narrowly on the minutiae of the business, making it difficult to see the big picture and create an effective business strategy. At the same time, rushing so fast from one task to the next prevents you from focusing fully on any one aspect of the business, which will also prevent you from maintaining perspective with a holistic growth plan.

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Capitalism

Freedom of Choice is What Sets Capitalism Apart — Not Competition

By Guest Post February 1, 2019

by Antony Sammeroff for the Mises Institute

Capitalism has often been described by as “a system of competition” by its adversaries, or a system “based on competition.” Naturally, this assertion is usually coupled with a spirited oration on how this “tooth n’ nail” competition psychologically corrupts us – pitting man against man in a “race to the bottom.”

Many of capitalism’s most vocal advocates have, themselves, imbibed this premise uncritically. They leap to fervent defenses of competition, extolling its virtues — real or perceived. In my view, this is a mistake. To accept without evaluation the presupposition that capitalism is a system of competition — in contrast to other hypothetical systems of cooperation (namely socialism and communism) — is to frame the very debate itself in leftist terms and play the game on an unfairly tilted game-board.

Competition Is Fierce for Government-Controlled Resources

This is not to say that those who defend competition do not raise some worthy points. For example: If not competition, then what is the alternative? Is there to be one central provider of each good and service available who gets to decide on our behalf how it is best to be produced and then allocated? Add to that, that if competition is wrong in the market, then why not in the political sphere? Surely democracy is out of the question if competition is a corrupting factor, because what do political candidates do if not compete for office? Think of the competition this generates between political parties, not to mention the ensuing competition between firms and individuals for preferential treatment from politicians and legislators, competition between lobbyists, think-tanks, and voters, to receive benefits out of the public purse. If the free and voluntary section of society is a system of competition, how much more so is government? Surely democracy is a “system of competition.” Politicians are competing for the very machinations of control in our society. For the right to pass and enforce laws which apply to everyone (whether they agree with them or not) and to force them to pay for their enforcement. They are not simply competing for market share where the winner of the competition is the one that satisfies the most demand. We can sidestep the more mundane economic arguments in favor of competition for the moment, such as the case that it increases efficiency and cheapens goods while driving innovation, as we are all familiar with them already.

Capitalism Is About Voluntary Exchange

This is not to say that competition is necessarily an evil either. The problem lies in defining capitalism as “a system of competition” — in comparison to other systems which are supposedly “cooperative” — is a rhetorical ploy. Those who profess it may honestly believe it to be so, but it’s not true. Capitalism is not “a system of competition.” any more than any other system. Capitalism (at least in its free-market, laissez-faire ideal) is a system of the voluntary exchange of goods and services in the absence of physical coercion, theft, compulsion or fraud, predicated upon the fundamental right to own and accumulate property.

Or, for brevity: Capitalism is a system of voluntary exchange, predicated upon the right to own property.

One might even venture, therefore, that it is capitalism that is the system most characterized by cooperation.

Granted, upon seeing this definition, many would still debate us over the morality of accumulating property. Or perhaps whether the “negative” right to ownership when it comes to the rich should take precedence over the “positive” right to healthcare or education at their expense when it comes to the poor. We can even debate whether the relationship between capitalists and their employees are really free of coercion given the power disparity between the two groups. Indeed these are debates I delight in exploring further. However, none of this is a justification for defining capitalism as a system of that is more competition-based than others.

Because Scarcity Exists, Competition Will Always Exist Under Any System

After all, it is not the presence of private property or the free exchange of goods that creates the presence of competition in a capitalist system. Scarcity causes that. In any situation of scarcity of resources, there is bound to be some form of competition over those resources (as well as over how those resources are allocated).

If we have a system that allows voluntary exchange, some competition is bound to arise out of that, but that would happen under any system. Even if you had a completely communistic society, which was centrally planned and involved no exchange of money whatsoever, people’s time would still be limited. If you were a filmmaker in this society, you would probably want as many people to see your films as possible. As would every other film-maker. This would put you at least somewhat in competition with them. Does this mean that communism, too, is a system of competition? Certainly, you would be competing for the only customer — the sponsorship of the state. Corruption and cronyism would surely be the result. Who gets their film made and who doesn’t? Who allocates the highly desirable job of being a film-maker over the undesirable job of being a street-sweeper or refuse collector, and how can their favor be courted? The competition will commence, but instead of being decided by the free and voluntary exchange of film-goers, investors and film-makers it will be decided by someone else, I would argue, in a rather more authoritarian fashion. (For a particularly vivid and chilling illustration of how communism substitutes market competition over customers (which is at least tied to the provision of desirable services) for the completely unmeritocratic competition over gaining favor from the corrupt power structure of the state, I refer the reader to Ayn Rand’s first novel, We The Living.)

Competition is just a feature of living in a world of scarcity and would exist in any system. Socialism cannot do away with competition – nor can any other system.

Opportunity Cost Means Competition Is Everywhere

The implications of these facts reach into any circumstances of scarcity beyond the economy. For example, supposing two friends each invite me over to dinner of an evening, I might have to make a choice between their invitations which will result in one of them losing out on my company. Does this then mean that friendship is a system of competition?

We can’t see all of our friends all of the time, or even all of them at the same time. Even if we do, we are bound to have to split our attention between them. In addition to that, we can only maintain so many close friendships at once, and we definitely can’t be friends with everyone. All of this means that inevitably we have to make choices. We each make decisions on who to make and maintain friendships with based upon our value judgments, conscious or unconscious. Perhaps based on how happy we feel around them, how long we have known one another, how much we have in common, how much we trust someone or how loyal they have shown themselves to be, how much they educate, enrich or enlighten us, or perhaps based upon what roles they allow us to fulfill in their lives. There can be countless other reasons. The fact is we decide. People who feel that they will benefit from our company, for whatever reason, will make attempts to spend time with us. We will invariably begin to make choices on who to spend time with based upon our values, schedule, and what other activities we are willing sacrifice to see them. These are basic facts of life, but they hardly make friendship a system of competition.

Similarly, on the market, our time and resources are limited. We make value-based judgments about choices of products and services to consume based upon what utility we think they will bring to us, sacrificing some options to others. Maybe we will choose a coffee shop based on which has the best-tasting coffee, or maybe based on which provides the nicest atmosphere, or maybe based on which is closest, or where the customer service is best, or which is the cheapest, or which we have gone to the longest and therefore find familiar, or perhaps even based on which we think has the best ethos — for example, because they are a social enterprise that only sells fair trade produce and deliberately seeks to employ and train disadvantaged people. The fact is we decide. Each service provider believes they will benefit from our custom and will make attempts to attract us, placing an upward pressure on the quality of services and a downward pressure on price which we may correctly identify as a form of competition. Since human beings are not infallible, sometimes someone might buy a coffee that they don’t end up liking, but over the long term, the competition is likely to be won by the satisfaction of customers.

The Benefits of Free Choice

The miraculous wonder we miss when we focus our attention upon the competition which derives from choice is the ability to choose itself. For example, supposing two commercial events are being held on the same evening. Each prospective patron will want to choose whichever event appeals to them the most, and for whatever reasons they choose based upon what they value in an event. Now, to simply mention that these events are “in competition”

The Mises Institute, “Austrian Economics, Freedom, and Peace”

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Communication

Don’t bother inviting me to catch up over coffee — I’m done networking and I’m starting to think you should be, too

By Guest Post January 31, 2019

by Shana Lebowitz

Will networking help you build a successful career? I’ve never been sure.
Mostly, traditional networking seems to me like it takes a lot of time and effort.
Some experts say building connections is a practical strategy, in case you ever lose your job.
Other experts say you’re better off working and developing concrete skills than schmoozing.

A few weeks ago, one of my coworkers at Business Insider created a Slack channel called #lunch-buddy. Anyone who joined the channel would be randomly paired with another BI employee; the two would then meet for lunch, or coffee, or maybe just a walk, and get to know each other.

This initiative seemed to me a brilliant idea. Generally speaking, my coworkers are lovely people, but I know only a sliver personally. And when it comes to employees in other departments — say, product or finance — I’m curious to know what they do all day because, as it stands, I have no clue. (I imagine the feeling is mutual.)

I typed “#lunch-buddy” into the Slack search bar. And then I closed out of it. It was a Monday morning and, already, I was behind on work. I imagined that, by the time my buddy and I arranged to meet up, I’d be even farther behind. Inevitably, I’d wind up nibbling nervously on a sandwich while sneaking glances at my phone to make sure no one was Slacking me. This buddy business was not going to work out, at least not for me.

I should mention that, when the email about the lunch-buddy program went out, I was in the middle of reporting a story about networking. My specific goal was to figure out whether networking was good for your career, as so many influencers would have it, or bad. Good because you meet interesting new people who can introduce you to interesting new job opportunities, clients, and projects. Bad because you spend so much time schmoozing that you forget to, you know, work.

I wasn’t sure where I stood on the subject. As the lunch-buddy incident had made clear, I theoretically supported networking, but wasn’t very adept at practicing it. On LinkedIn, I posed the question to my connections. Unsurprisingly for a networking website, several people who commented said their relationships had always benefited them in their career.

And maybe they’d benefited mine, too. A few years ago, I was looking for a new job and mentioned as much to an old coworker (who’d become a friend) when we got together for drinks. Days later, she emailed me a Business Insider job posting that I’d missed in my search and, well, the rest is history.

Does that count as networking? I’m not sure. I like to think it’s better defined as being a human being with human friends who are willing to help you out.

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Economics

Privatizing Airport Security Would Make Americans Safer and Richer

By Guest Post January 27, 2019

by David Inserra

Overall, this reform has the potential to save taxpayers money, increase their travel safety, and decrease their headaches at the airport.

The flu season isn’t the only thing keeping some Transportation Security Administration agents out of work. As the partial government shutdown rolls on, TSA paychecks aren’t coming in, and more agents are calling in “sick” as a result.

On Monday, the TSA reported a nationwide absence rate of 6.8 percent. That’s far higher than the absence rate of 2.5 percent, which was reported on the same day one year ago.

Noticeably, some airports are doing fine and still paying airport screeners despite the government shutdown. San Francisco International Airport, for example, is able to operate as normal because it is one of 22 airports in the U.S. that use private airport security, not TSA agents.

The Perks of Privatization

There are multiple reasons why reforming the TSA model would prove beneficial. A private model would allow for strengthened accountability, a decrease in operation costs, enhanced management of labor, and better focus on security threats and problems.

Privatizing aviation screenings would be beneficial for security. Private screening services can provide security that is at least as good as federal services, and at a cheaper rate. This is accomplished through the creation of incentive, competition, and accountability.

The core issue with the TSA model is the present conflict of interest created by self-regulation. Currently, the TSA is operating as both the security regulator and security provider.

As Reason Foundation transportation expert Robert W. Poole Jr. testified to Congress:

[The] TSA regulates itself. Arm’s-length regulation is a basic good-government principle; self-regulation is inherently problematic. First, no matter how dedicated TSA leaders and managers are, the natural tendency of any large organization is to defend itself against outside criticism and to make its image as positive as possible. And that raises questions about whether TSA is as rigorous about dealing with performance problems with its own workforce as it is with those that it regulates at arm’s length, such as airlines and airports.

Better Models

The TSA model is quite uncommon worldwide. The more common models utilize the government as a security regulator while a contractor or the airport itself provides security. This automatically pushes accountability and competition higher than the current U.S. model.

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