Economic Growth and the State

Posted on August 27, 2010 by Jonathan Finegold Catalán

In a response to a comment to a previous post, I argued,

…with economic progress the necessity to take from others will decrease, and as such the role of the state as the redistributive body will become irrelevant.

I predict that economic growth will make basic necessities sufficiently abundant as make irrelevant the “role of the state” as a just re-distributor of wealth.  I believe that as standards of living increase, class conflict falls inversely.  This is so, not only because the market tends to naturally narrow the income gaps between the capitalist and the worker, but because at a certain lifestyle one usually finds he has too much to lose to pursue political ends which could jeopardize that standard of living—this, for example, is the reason why most people put up with the state; the state is simply not a sufficiently large enough threat to justify political action against it (political action which could cost that individual his standard of living).

One of the responses was to that above quoted comment reads,

As for your hypothesis regarding state-enforced redistribution, aren’t redistributive measures taken by the government inversely correlated with growing wealth in the United States?

I don’t have much time right now, but here are my thoughts.

It’s true that with economic growth, assuming a constant volume of redistributed capital, the share of wealth the government takes becomes smaller and smaller in terms of percentages.  Rather than maintain a constant flow of redistributed capital, governments of course find it opportune to simply increase taxation (or through whatever means government raises money), since the economy can now suffer a larger burden in terms of pure volume.  This gives the state room to grow.  It is also true that the state tends to grow despite economic growth, largely because as a bureaucracy made up of thousands of individuals, each of these individuals pursue their own self-interests by taking advantage of the state’s monopoly on force.

Governments, however, tend to collapse after an indeterminate amount of time.  This occurs due to a variety reasons, including state expansion outstripping economic growth (see Israel, for example).  New governments replace old governments.  I think that the world has seen a general trend of liberalization (obviously, not true all the time, which is why I call it a “general” trend), and for all of its flaws democracy at first did represent a much more liberal form of government than an absolute monarch (contra Hoppe, although this is a slight strawman of Hoppe’s political philosophy, whereas he simply cites that monarchs are more liable for bad decisions).  But, all governments tend to worse over time.  Their replacements, however, tend to become marginally liberal.

So, as this pattern repeats itself, congruently with economic growth, future governments will have much less justification to grow quickly or as greatly as they do today, to the point where perhaps government will no longer be deemed necessary for our security.

I don’t know what time frame I am talking about here.  Maybe decades, probably centuries.

Posted in Politics | Tagged , , , , , | 16 Comments

The Water-Cantillon Paradox

Posted on August 26, 2010 by Jonathan Finegold Catalán

I am planning to write an essay for an upcoming libertarian journal that will hopefully be distributed throughout California’s UC system.  While I am still debating on what exactly to write about, the publication of a new edition of Cantillon’s Essai has inspired me to write it on exactly this topic.  I feel that Cantillon remains relatively obscure in the history of economic thought, despite all the effort put forth by Jevons, Rothbard, Schumpeter, Hayek, and others.  This stems largely from the fact that Adam Smith is just more widely regarded as the founder of political economy, and there is simply not enough mainstream attention paid to the contributions of Cantillon (this is not out of any dislike of Cantillon, or because Cantillon runs contrary to Smith, but because Wealth of Nations is larger, seemingly more complete, and generally says the same thing Cantillon does).

Nonetheless, Cantillon contributes a lot to economic science that Smith didn’t, such as his beliefs on inflation, interest, and value.  Cantillon does not fall back on the primitive labor theory of value Smith concocts to explain his diamond-water paradox, for exampe.  Cantillon, all-in-all, offered a much more accurate foundation of political economy, and had Essai been translated into English or had had more of an impact on economics than did Wealth of Nations, I am sure that many of the fallacies which permeate the science today would not exist (amongst all schools of thought).

To this end, I’ve been doing a lot of reading of Cantillon.  While I do have a sufficient archive of journal articles, I am a little lacking in book sources.  My main two sources remain Hayek and Rothbard.  I’ve been looking to buy two additional sources:  Schumpeter’s History of Economic Analysis and Antoin Murphy’s biography.

Holy cow, Amazon.com sellers must be out of their mind!

Schumpeter’s book is a bit more reasonably priced, although I would have thought that at this point the publisher would have printed so many copies that the price of a paperback would be closer to $20 or $30.  Instead, History of Economic Analysis goes for $94.  The cheapest used copy is $55.

Antoin Murphy’s dedicated biography runs for $2,053 in paperback, and the hardcover runs for $164 (there must be some mistake).  The other biography available, Tony Brewer’s, goes for $143 at the cheapest, on Amazon.com.

It looks as if I’ll have to base my information on the journal articles.

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What Did Krugman Mean?

Posted on August 26, 2010 by Jonathan Finegold Catalán

This entire renewed debate on the merits of Austrian theory has brought into question just what exactly Krugman was criticizing.  Daniel Kuehn continues to believe that Krugman was “unambiguous” about what he was talking about, as if Krugman wasn’t referring to Austrian business cycle theory, but simply to Narayana Kocherlakota,

And Krugman was absolutely unambiguous about what he was talking about (he provided quotes of what he was disputing for God’s sake! How could you mistake him for trying to dispute anything else?!?).

This a product of naïtivity.  The Krugman piece in question is a recent blog post (“Hangover Theory at the Fed“), in which he writes,

But one more thing struck me: at least some members of the FOMC have bought into the hangover theory — the modern version of liquidationism in which mass unemployment is somehow necessary in the aftermath of a burst bubble…

Sure, he quotes Kocherlakota, but he lumps him into a group of “liquidationists” he calls “hangover theorists”.  To provide some background, Krugman links to his past Slate piece (“The Hangover Theory“) critisizing what he terms the “hangover theory”,

A few weeks ago, a journalist devoted a substantial part of a profile of yours truly to my failure to pay due attention to the “Austrian theory” of the business cycle—a theory that I regard as being about as worthy of serious study as the phlogiston theory of fire… Call it the overinvestment theory of recessions, or “liquidationism,” or just call it the “hangover theory.”

Talking about “crude Austrianism”, or suggesting that Krugman is simply referring to those who improperly present Austrian theory, is simply disingenuous and plain wrong.  In his Slate article, we know that Krugman takes his opinion that Austrian theory is unworthy of his time and effort, because his description throughout the article is severely lacking (and completely wrong).  Krugman, in effect, set up a straw man.

Furthermore, in his Slate article he wasn’t responding to any particular view of Austrian theory (as if there were widly differing views [that means there aren't]).  He was responding to the Austrian theory.

So yes, Krugman did offer specific quotes in his recent blog post, but immediately equated it to the “hangover theory” (i.e. Austrian theory), and in effect did set up a straw man.  I would be equally as wrong to quote an economist and ascribe his theory as Keynesian, when perhaps it has nothing to do with Keynesianism.  I would also be equally as wrong to defend myself by arguing that what I only meant was to criticize that particular economist’s “crude Keynesianism”.   Not only would I be wrong, but I would be intellectually dishonest.

Posted in Current Events | Tagged , , , | 41 Comments

Malinvestment versus Overinvestment

Posted on August 25, 2010 by Jonathan Finegold Catalán

There is a lot “overinvestment” nonsense circulating in response to my previous post on unemployment and capital theory.  For example, Daniel Kuehn calls my theory an “overinvestment” theory, distinguishing it from Austrian theory on the basis that the latter is a “malinvestment” theory.  This confusion is not new.  This confusion has existed for quite some time, and stems from a misunderstanding of Austrian business cycle theory.  For example, Rothbard notes that Harbeler portrays Mises’s credit cycle theory as one that argues in favor of the “overinvestment” theory of the business cycle.  Fortunately, Mises corrects this error in Human Action,

It is customary to describe the boom as overinvestment.  However, additional investment is only possible to the extent that there is an additional supply of capital goods available.  As, apart from forced saving, the boom itself does not result in a restriction but rather an increase in consumption, it does not procure more capital goods for new investment.  The essence of the credit-expansion boom is not overinvestment, but investment in the wrong lines, i.e.; malinvestment.  The entrepreneurs employ a supply of r + p1 + p2 as uf tget were in a position to employ a supply of r + p1 + p2 + p3 + p4.  They embark upon an expansion of investment on a scale for which the capital goods available do not suffice.  Their projects on unrealizable on account of the insufficient supply of capital goods.  They must fail sooner or later.  The unavoidable end of the credit expansion makes the faults committed visible.  There are plants which cannot be utilized because the plants needed for the production of the complementary factors of production are lacking; plants the products of which cannot be sold because the consumers are more intent upon purchasing other goods which, however, are not produced in sufficient quantities; plants the construction of which cannot be continued and finished because it has become obvious that they will not pay.

This is why I continually stress, not overinvestment, but investment made due to the distortion of the price structure.  Investment made because entrepreneurs were unaware of the true scarcity of capital-goods.   It is a confusion of causality.  Entrepreneurs didn’t invest too much, per sé; their is no abundance of goods.  Rather, there is a lack of goods, caused by malinvestment.

I clarify this in my Krugman contra Hayek Mises Daily,

Despite this notion of disequilibrium, Austrian theory does not argue in favor of blaming “overinvestment,” as the supply of capital goods does not necessarily increase. Instead, it examines price distortion where a price ceiling is effectively installed causing entrepreneurs to not recognize the actual scarcity of the capital goods in question — the adjustment of the price mechanism reveals this scarcity, and entrepreneurs must liquidate their “malinvestments.”

So, for those who continue to claim this overinvestment nonsense as an interpretation of what I write, it is only due to your lack of understanding of Austrian business cycle theory, or an inability to “connect the dots”, so to speak.

I realize I come off as hostile and conceited, but the debate is tiring when it goes in circles.  I don’t accuse non-Austrians of being able to argue in only circles.  My only objection is to move beyond what has already been discussed, or at least disprove that Austrian theory is one of “malinvestment”  not “overinvestment”.  But, don’t debate as if we haven’t addressed these concerns already.

Posted in Theory | Tagged , , , , | 2 Comments

Further Notes on Capital Theory and Unemployment

Posted on August 25, 2010 by Jonathan Finegold Catalán

The debate between Daniel Kuehn and I continues.  Finally, he pinpoints what he sees as the major weaknesses in Austrian capital theory in explaining the full severity of economic crises.  Kuehn gives two reasons (“Readjustment and Broad-Based Unemployment“) he sees my explanation as unfitting, although they both ultimately merge into one—unemployment in higher-order good sectors doesn’t explain unemployment in lower-order good sectors.  This objection is not new, and has been proposed since the very day Austrian theory was developed.  It is the unfortunate product of the inability to carry through capital theory to its logical implications and short-sightedness.

One reason why the bust in the capital-goods sector affects the consumer-good sector is the revelation of the scarcity of capital-goods by the equilibration of the price mechanism (distorted by prior accelerating money creation).  As explained in my previous post on this subject, higher output in one phase of production requires a horizontal expansion of that phase.  In other words, capital-goods are required as inputs to produce these consumer-good outputs, and these capital-goods require other capital-goods to be produced (up until the point where the factors of production are just labor, land, and time).  So, even consumer-goods require a certain number of lower-order capital-goods to be produced.  When the price mechanism is distorted it causes an increase in demand for capital-goods by lengthening and widening the structure of production.  When the price mechanism is restored scarcity doesn’t return to its state prior to the beginning of the boom, but rather capital-goods are now even more scarce because they have been consumed in malinvestment.  This scarcity can effect both higher-order industries and lower-order industries.  It just makes sense that since higher-order industries require a greater input of capital-goods (because the sector is necessarily larger), it will the be most affected by the bust.

A second reason is very similar to the Keynesian “aggregate demand” explanation, although where Austrians differ is in causation.  A drop in productivity in the higher-order capital-goods sector, due to rampant malinvestment and high real-wages, is bound to lead to unemployment (I think this has been agreed upon).  The Austrian case for why this unemployment exists has already been laid out (this was another one of Krugman’s criticisms), but it basically revolves around the idea that unlike during a boom a period of high uncertainty will not produce as much investment, so there is no growth in other sectors that may absorb these newly unemployed (in fact, there is a contraction in the size of all sectors of the economy).  This will limit their ability to purchase certain consumer-goods, which in turns limits the productivity of the consumer-goods sector (it decreases their sales).  This can also be true if wages decrease due to monetary deflation.  It requires a drop in prices in consumer-goods and capital-goods alike (a drop in the price of capital-goods allows the manufacturer of consumer-goods to produce without incurring a loss).  Nevertheless, there is no reason to believe that the capital-goods industry and consumer-goods industry are not interrelated.

Third, and similar to above, industries severely affected by the downturn may not necessarily be those who had originally been involved in the malinvestment.  Indeed, it could be industries that existed before the boom began, and were profitable then.  Previously profitable enterprises will be severely affected by a general drop in productivity.  This includes capital-goods industries directly involved in the production of consumer-goods (that horizontal expansion I was talking about earlier).

Daniel continues with more minor objections of my explanation in general,

This one isn’t quite as clearly sketched out, but I think the point is that if the marginal productivity of the capital good (the nails) falls, because industries are interrelated production in all sectors will fall. Capital goods are substitutable and switchable across industries. But Jonathan fails to even consider any magnitude for the elasticity of substitution between sectors, and implicitly assumes such an elasticity is extremely high. Otherwise productivity shocks couldn’t propagate across sectors. So that’s one implicit assumption of his that he chooses not to share with his readers.

Admittedly, I am not quite sure what Kuehn is talking about.  I didn’t assume any level of elasticity in my explanation.  Elasticity for different capital-goods, along different sectors of production, can be different.  I merely suggested that given the dynamic characteristics of capital-goods they can be used in several different lines of production, which makes different industries interrelated to some extent.  To what extent can vary, but that relationship exists.

Furthermore, he criticizes that “assumption” on account of the Austrians disbelief in the homogeneity of capital.  I am a firm believer in heterogeneity of capital, but it doesn’t mean that certain capital-goods cannot be used for multiple industries.  It is perfectly plausible that the nails used to put together my home are also the same type of nails used to put together a retail store down the block.  Or, the same type of nails used to put together a factory on the other side of the city.  Or, it’s possible that the factory that produced my nails also produces the type of nails for the factory across the city, and when it went under so did the production of nails for that factory.

Kuehn’s criticism seems misplaced and based on a misunderstanding, or exaggerated understanding, of the Austrian concept of heterogeneity of capital.  Just because all capital is not substitutable, doesn’t mean that some capital is in specific industries, or between specific forms of capital-goods.  The Austrian approach, rather than ruling out the interrelation of different industries through the use of similar or the same capital-goods, stresses a microeconomic approach to deciding this interrelation, rather than the macroeconomic blanket approach of homogeneity.

Finally, Kuehn tries to equate my reasoning with Real Business Cycle Theory,

If Jonathan assumes that all capital goods at all stages of production experience a fall in marginal productivity I can certainly accept that as an explanation for widespread unemployment. That’s Real Business Cycle Theory.

This is false.  Two theories can conclude similar consequences, but the causality may differ.  This is true in this case.  While I blame price distortion as the cause of this economy-wide recession, Real Business Cycle Theory (based loosely on rational expectations) blames “real” causes—i.e. supply shocks and similar events.  I agree with Kuehn that Real Business Cycle Theory explains business cycles as a result of a fall in aggregate supply.  But, it is a poor correlation to make that the two are similar, because both predict a fall in “aggregate supply”, and it is a very gross misinterpretation of Austrian theory in general.

Furthermore, Kuehn suggests that no ample explanation for this fall in “marginal productivity” (if those are the words he wants to use), ignoring the fact that the entire basis of this argument is a defense of Austrian business cycle theory (something he previously said he agreed with to some degree, and to that extent he must agree with the conclusions it offers).  The consequence is a very confused criticism put forth by Kuehn, and one that forgets that one of the direct consequences of the boom period is a necessary contraction of the supply of money (strictly speaking, the supply of fiduciary media).  All of this is explained in a prior article of mine: “Krugman contra Hayek“.

Ultimately, I blame the inability , or perhaps the lack of desire, to carry Austrian capital theory to its most logical conclusions, and failing to see the full scope of implications Austrian capital theory has on the structure of production during the necessary post-boom depression.

Posted in Theory | Tagged , , , , , , | 7 Comments

New Translation of Cantillon’s Essai

Posted on August 24, 2010 by Jonathan Finegold Catalán

The Ludwig von Mises Institute is offering a new, paperback edition of Richard Cantillon’s Essai for the low price of $14.  Furthermore, this edition features a new translation of the original French, marketed as more accurate than the existing translation (by Henry Higgs).  The advantage of this particular translation is the use of more modern language, that makes Cantillon’s writing a bit more understandable (for example, the new edition replaces “undertaker” with “entrepreneur”).  This new translation was done mostly by Chantal Saucer, with the guidance of Mark Thornton.  Thornton is one of the premier Cantillon scholars of the Austrian school.

For those that don’t know much about Cantillon, it is probably because of the legacy of Adam Smith.  One of many things Smith is blamed for is “blotting out of knowledge of the rich tradition of economic thought that had developed before” him (Rothbard 1995, pp. 441–71).  In other words, Cantillon’s impact to political economy was largely ignored after the Wealth of Nations became the icon of the classical liberal school of economics (a book which which influenced many future classical economists, including David Ricardo, Thomas Malthus, Jean-Baptiste Say, and others).

Cantillon’s contributions to economics were largely rediscovered by Jevons, one of the three founders of the marginalist revolution of the late 19th century.  Jevons wrote, “Cantillon’s essay is, more emphatically than any other single work, ‘the Cradle of Political Economy” (Jevons 1881, p. 342).  Since then, Cantillon has been touted as a root of the Austrian school, given that on many cases he did not commit many of the same mistakes Adam Smith did in his writing, while still providing an equally as powerful defense of laissez-faire (of course, it is also true and oftentimes ignored that Smith’s book was far more comprehensive, and tackled a much broader scope of economic theory; the assault on Smith probably started with Joseph Schumpeter, and it was adopted by Murray Rothbard).  Those that believe this about Cantillon include: Rothbard, Schumpeter, and Hayek.

In any case, I first read parts of this new translation when it was a work in progress (released as a “beta” by the Mises Institute).  It’s very good, and I would suggest Cantillon’s Essai to anybody interested in the history of economic thought.

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The State and Violence

Posted on August 24, 2010 by Jonathan Finegold Catalán

Christina Jeffrey, here, argues that the 2nd amendment is the constitutional provision which allows for the people’s right to guarantee a “limited government” (although, let’s face it, the 2nd amendment never provided that ability from the very beginning of the union—how many rebellions were put down through the use of brute force?).  I think George Reisman alludes to this as well, in Capitalism; he argues that those who fail to resist to the initiation of force (that which infringes on our rights; he argues that minimal government is necessary to guarantee basic liberties) are slaves and cowards.

Seems to me that this rather proves that the state will always in some way intoxicate society with some level of violence.  The argument here is that violence is necessary to combat the initiation of violence.  A peaceful and free society should never have this as a prerequisite for existence—it is, in fact, a contradiction.  A free society should be built on mutual cooperation.

That is why, theoretically speaking (perhaps, admittedly, not practically speaking), the most peaceful and free society is that which is free from the state.

Posted in Theory | Tagged , , , , , , | 6 Comments

Unemployment in the Hangover Theory

Posted on August 24, 2010 by Jonathan Finegold Catalán

Daniel Kuehn brings up (“Krugman on Hangover Theory“) what he believes to be a valid objection by Paul Krugman (“The Hangover Theory“).  Kuehn writes,

Krugman makes the point that whatever matching problems are out there, and to whatever extent matching problems and malinvestments may explain unemployment rate differentials (we had a housing bust… the fact that construction workers are out of work after a housing bust is common sense), they do not explain the staggering collapse of employment across all sectors.

Which gets me back to what I continue to ask of Austrians – don’t explain to me ABCT over and over again. I understand ABCT. I even believe ABCT. Give me a reason to believe that is the primary force behind the downturn right now, rather than the secondary or the tertiary force.

I think the final part of the argument is a bit unfair.  Give a good reason why Austrian business cycle theory is not the primary force behind the downturn.  As the person challenging the theory, the burden of proof is not on us (although, of course, it might shift to us out of interest in defending the theory).  “A fall in aggregate demand” is not a good explanation; a fall in aggregate demand can occur for many different reasons.  Austrian business cycle theory suggests that aggregate demand (in the broadest of sense, since Austrians dislike talking about aggregate demand) falls because of a loss in productivity (so, namely, a fall in demand for capital-goods).

In any case, I’d like to comment on the notion that Austrian business cycle theory does not explain why employment falls across sectors other than the housing market.  Fortunately for Daniel Kuehn, the answer is not in Austrian business cycle theory, per sé.  The answer is in Austrian capital theory, and understanding the time structure of production.

Fortunately, I gave a lecture that included an introduction to the structure of production, and so this is all pretty fresh on my mind.  The structure of production can expand in two directions: vertically and horizontally.  The typical depiction of the structure of production is the Hayekian triangle, which is a two-dimensional figure which represents the vertical expansion of the structure of production.  On a basic level, the horizontal expansion of the structure of production would be represented on the z-axis.

From basic Austrian capital theory, we know that as capital accumulation increases, the structure of production becomes more roundabout.  Investment is made in sectors farther away from the consumer.  For example, if the final consumer good is an automobile, then a higher-order phase of production would be the manufacturing of the carburetor, and an even higher-order phase would be designing the carburetor.  If we assume one line of production, this can be represented by the Hayekian triangle (of course, the Hayekian triangle doesn’t really account for what is called “dynamic capital theory”).

However, an increase in demand for a good in a particular stage of production will also tend to expand that stage horizontally.  What is meant, following the example of the carburetor, is that an increase in production of carburetors will necessitate an increase in production of other capital-goods, or factors of production, relevant to the carburetor.  This may not be directly relevant to the final consumer good, in this case the automobile (and there is a caveat here, as well—an automobile, like a house, may not even be a consumer-good in the strictest sense; this is where dynamic capital theory can be brought into play), but represents a lengthening of the structure of production.

The result is that the lengthening of the structure of production relative to one good can have the consequence of lengthening the structure of production relative to a myriad of other goods.  In this fashion, the structure of production tends to expand over multiple sectors of the economy—a basic way of saying this is, different sectors become interdependent.

Only someone with a very poor understanding of Austrian business cycle theory, sorry Daniel, could claim that it only explains unemployment in the housing sector.  This is a gross misunderstanding of the theory, and shows poor understanding of the underlying theories which lead to Austrian business cycle theory (that is, interest theory and capital theory).  For all intents and purposes, Austrian theory predicts unemployment across a wide variety of sectors, and this ultimately affects both lower-order and higher-order industries.

Here it might be useful to describe what I consider a part of dynamic capital theory.  The fact is that an economic-good’s classification in terms of what stage of production it is in can change based on the line of production it is ultimately invested into.  The next good produced can then shift to another line of production, and so whereas the capital-good may have been six stages way from the consumer good at first, is now seven stages away.  That is why in the real world it is not really useful to depict the structure of production using two-dimensional, or even three-dimensional, graphs or illustrations.  There is simply no way of accurately illustrating dynamic capital theory (that I know of).

How is this relevant to the topic at hand?  Well, I’ll offer a very basic illustration.  Let’s say that because the structure of production relevant to the housing industry lengthens, there is an increase in demand and supply for nails.  These nails might be X stages away from whatever stage the actual house represents (like I said with the automobile, I am wary of classifying a house as a strict consumer-good; durable consumer-goods are oftentimes considered capital-goods).  However, if a box of nails is suddenly pitted towards another industry altogether (let us say, the construction of a lumber factory), then the stage it is at suddenly changes, as well.

While the lumber industry, in this case, is relevant to the housing industry, these kinds of switches can occur in industries which may not be directly related (as suggested above).  This, as also mentioned above, causes the structure of production to intensify across multiple sectors.  As a consequence of this interdependence (for lack of a better word), it only makes sense that a fall in productivity would affect several different sectors of an economy, not just the housing sector.

Really, in order to fully grasp Austrian theory, one has to delve into capital theory, as well (which is why most Austrian explanations of Austrian business cycle theory include an elementary explanation of capital theory).  I admit, myself, that I have not spent enough time into capital theory (even though, I agree with Hayek that at a certain point it might not be worthwhile to pursue capital theory in terms of concretely laying down in literature the more complicated dynamics of capital theory).

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Stewart, Heston, and Anti-Mosqueteers

Posted on August 23, 2010 by Jonathan Finegold Catalán
The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
Extremist Makeover – Homeland Edition
www.thedailyshow.com
Daily Show Full Episodes Political Humor Tea Party
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Paper Money is Worthless

Posted on August 23, 2010 by Jonathan Finegold Catalán

Yes, and so is everything else.  What gives something value is subjective preference.  Gold is not preferable to paper because of inherent value, but because it has other qualities which over an indefinite period of time makes it more desired than paper money (namely, the disadvantage of paper money is that is comparably easier to reproduce).

So, tea partiers, please stop touting the inherent worthlessness of paper money.  The problem is not that our money is made out of paper, but the fact that our money is decided by government fiat.  True, a capitalist society may prefer a metallic commodity over paper (although, more likely than not it seems as if society prefers money substitutes, tied to some specie), but this distracts from the fact that it’s not the paper that’s the problem, it’s the government which disallows through various means the introduction of alternative, freely chosen types of money.

Posted in Current Events, Theory | Tagged , , , , , , , | 2 Comments