If there is an obvious trend in the history of economic thought it is that it has always been full of sophists and apologists.  Comparatively, practitioners of sound economics have been far and few between.  In fact, there have been too many historical episodes of sound economics being drowned out by more popular mercantilist gewgaw—the most recent episode starring John Maynard Keynes and the publication of The General Theory.  Heroically, there has always been a handful of intellectuals willing to stand up to the mainstream, and any current semblance of liberalism which may exist we owe to them.

These were the philosophers unafraid to challenge the Catholic Church and absolute State in the 16^th and 17^th centuries and the liberals willing to risk defamation and even incarceration during the early years of the industrial revolution.  Even these efforts were drowned out by the coming of Adam Smith and The Wealth of Nations, which backtracked economics and managed to overshadow and marginalize centuries of sound economics.  Uncovering these myths necessitated the erudite scholars which pioneered the subjectivist, or marginal, revolution who worked against the Smithian and Ricardian mainstream.  Without these champions of liberalism, we—their students—would not be where we are today.  Beware, however, that even today we struggle against an imposing mainstream.

This trend does not promise an endless battle between the forces of light and dark.  Historically, the liberal movement has grown larger and larger, as individuals rediscover the natural rights their governments have been denying them.  Given a positive rate of intellectual growth, it follows that over the long-run liberalism will outgrow statism.  The liberal movement will likely face setbacks, both minor and crippling, but human perseverance and spirit of liberty promise to overcome these obstacles and return with even greater strength and numbers.  Thus, the efforts and sacrifices of those scholars before us, who did not enjoy as much widespread support as those of similar attitude today, was not in vain.

Murray Rothbard, in his Economic Thought Before Adam Smith, tells of Hesiod, a Greek poet from a small agricultural community named Ascra, who recognized the problem of scarcity and the natural human gravitation towards the division of labor, entrepreneurship and investment.  In modern day, this may be obvious to the average person, but Hesiod lived in an era where liberalism was merely a seed—political liberalism, or whatever forces led to the development of democracy in Athens, did not necessarily translate to economic liberalism, or even individual freedom.  Although there were strands of libertarian thought in the works of Democritus and Aristotle, both champions of private property, this era must also be remembered as that of Pythagoras, an early founding father of ‘metromania’—an obsession with numbers—, and Plato, who envisioned a very communistic world.  Inexplicably, despite great insights, there was a tendency for all Greek philosophers to hold a confused partiality towards merchants, usury and currency exchange.  It was a partisanship made to persist through to the fall of Rome and throughout the Middle Ages.

After the death of Aristotle, economic thought fell into an abyss, as there was no major development until the commercial revolution which began in the 11^th century.  Roman law solidified, to a great extent, property rights, but as the Roman era slowly moved into the early medieval period, it was obvious that what ruled was the State and not natural law.  Economic thought, if any, revolved around the ideas of “just pricing”—and, until the insights of the early Catholic scholastics the “just price” was that decided by the State—and usury.  In the case of the latter, the fight against religious and statist opposition to the charging of interest lasted well until Protestant Reformation in central Europe.  In such a world where intellectually the basic tenants of economics were not well understood, we find the first sprouts of liberalism.

Building upon the proto-liberal discoveries of Saint Thomas Aquinas, Pierre de Jean Olivi, Jean Buridan de Bethune and Nicole Oresme, the Spanish scholastics—particularly, the School of Salamanca—became the first decisive and important liberal movement in Europe.  They expounded sound economic theory on the topics of entrepreneurship, the human drive to better oneself, money and usury—although, oftentimes they proved rather conservative on the last, ultimately working against their credence on later generations of proto-economists.  Like their predecessors, they consistently worked against a State opposed to an inherently anarchist set of beliefs.  Some scholastics, such as Juan de Mariana, openly opposed government policy, fervently writing in opposition until their deaths.  The scholastics of the early and mid renaissance formed an oasis in a sea of statist darkness, and their legacy was to be unfortunately forgotten for a great deal of centuries under the rising tide of resistance formed by those unhappy at their lax criticism of usury and those completely antagonistic against the very idea of liberalism and free markets.  The latter was embodied mostly by the Protestant Reformation, and the Calvinism coming with it.

With Calvinist extremism and Anabaptist communism, too came the rise of absolutism.  The Protestant Reformation gave justification for the European kings to finally break their ties with the Catholic Church.  Their rule no longer justified by the will of Papal creed, was more simply justified by a direct bondage with God.  So, within the context of liberalism, this post-scholastic period was indeed a new dark age.  In Italy, libraries of books were written on topics revolving around the responsibilities of the State, and it would be akin to an understatement to highlight the lack of liberalism.  This line of ideology, to be known as Machiavellianism, soon spread to France, and then throughout Europe.  Here, we see the first strands of modern mercantilism, largely propagated thanks to Michael Eyquem de Montaigne.  This man was none other than the founder of the “Montaigne fallacy”, or the idea that trade is a zero-sum exchange, or that one man must necessarily lose for the other to gain.  Here we find the lynchpin of mercantilist thought.

The coming centuries bore witness to the rise of mercantilism as the economic Zeitgeist of that era.  Mercantilism was not a true economic ideology, as it does not base itself on any axiomatic economic truths.  Its justification was not based on individualistic rationality, quite simply on only the idea that human purpose was to serve the State.  Over the centuries, mercantilism as an intellectual movement grew on the basis of inchoate writings and government policies.  Although for a long while there was no strong liberal intellectual opposition, the growth of the black market and the elusive entrepreneurship which managed to find ways to evade government tyranny remains a testament to humanity’s natural pursuit of liberty and freedom of will.

This gave rise to the liberal reaction in Western Europe.  Although John Locke would perhaps establish himself as a dramatis personae in the rebirth of liberalism, the strongest revival first occurred in France.  Indeed, while John Locke was highly influential, the British Isles only began the brunt of their liberal revival after the Scottish Enlightenment of the late 17^th and 18^th centuries.  French liberalism, it cannot be claimed, was always a positive force—indeed, the Physiocrats, although defenders of private property (to a degree), were also some of the greatest proponents of ‘metromania’ and empiricism in economics.  Nevertheless, the liberal reaction against mercantilism in France came with two very important individuals.  These were Richard Cantillon, originally born in Ireland, and Anne Turgot.  To the former goes the honor of being considered the father of modern political economy, and the latter goes credit to forming the apex of liberal economic thought during the Industrial Revolution—apex, because with Adam Smith would come darkness renewed.

Indeed, although the Scottish Enlightenment was generally not as sophisticated as the liberal revolution in France, it retained key insights.  The teachings of Francis Hutcheson, Gershom Carmichael and David Hume, although in some way steps back from what Cantillon and Turgot had already discovered, were generally complements to liberalism.  Adam Smith, long known as the founder of modern economic science and a proponent of laissez-faire, was neither of the two.  Out of his many fallacious economic theories would come the ridiculous Malthusian fallacies and the forever-injurious development of Marxist communism.  What Adam Smith did get right he blatantly plagiarized from the writings of Turgot and prior Scottish liberals.  The eventual widespread success of The Wealth of Nations, a tome in most ways inferior to his The Theory of Moral Sentiments, caused the blotting out of former superior economic works—whether the scholastic’s, Cantillon’s or Turgot’s.  Until the rediscovery of these important pieces of economic literature in the late 19^th century, Adam Smith formed the basis of all economic thought.

The marginal revolution of the late 19^th century can be seen as another resurgence of liberalism.  Although Adam Smith’s legacy would continue down through Alfred Marshall and the neoclassical school of thought, the subjectivist revolution continued strong.  Eventually, the core of the subjectivist strand became what we know today as the Austrian School of Thought.  For the first twenty to forty years of the 20^th century the Austrians were quite possibly at the forefront of economic theory.  But, like Adam Smith before him, soon came a new figure to blot out the son with a new book composed of almost pure fallacy.  This man was John Maynard Keynes.

Throughout history, the defenders of liberty have stood up to statism.  When liberalism seems to be drowned out by the legions of statism, liberalism has only shown a propensity to grow back in greater strength.  Perhaps it is just to compare liberalism to a hydra, if only to illustrate the idea that by cutting one head you only pave the way to the growth of many more.  There is an underlying drive within humanity to use reason to break away from the chains of government and statism, which bind human will within unreasonable boundaries.  Over the long-run, reason and liberty will inevitably become the mainstream.

In the meantime, we all must take example from the bravery and heroism of the early liberals.  We can even look at more recent examples, such as the war which the likes of Ludwig von Mises, Friedrich Hayek and Murray Rothbard fought to maintain the relevance of sound economic and philosophical theory.  These knights of liberalism are those we must look up to and learn from.  In one important aspect liberalism has won over tyranny, and that is in the fact that, despite statism conquering a large portion of the intelligentsia, liberalism was not effectively wiped clean.  For the first time in the history of economic and philosophical thought, liberalism stood strong against a rising tide of counterrevolutionaries.  With this in mind, the scholars of liberty continue to spread the word, develop their ideas and fight against an illogical world of illogical constraints, established by an illogical institution—in this era of illogic, there seems to be only one logical outcome, and that is the abolition of government.

In the opinion of many ecological activists the market must be regulated to force it to become sustainable.  They are of the opinion that market-driven economics is a practice of unsustainable consumption of resources.  Doctor Suzuki, in his infinite wisdom, proclaimed that Capitalism assumed the existence of limitless resources.  Implicitly admitting that Capitalism is the most powerful economic catalyst for economic growth, he proclaimed that this massive growth had to be sacrificed in order to guarantee the long-term availability of the necessary resources for human survival.  A cursory glance at current economic trends, without a doubt, offers much evidence in support of these arguments.  During the past three decades there has been an unprecedented era of prosperity.  The housing boom alone probably caused a spike in the demand for lumber.  This demand was met by an increase in supply, provided by loggers.  The problem is seemingly obvious.  Economic prosperity causes an increase in demand for certain resources, and these resources can only be provided by exploiting the Earth.  There is no evidence that this exploitation has been sustainable.  The existence of deforestation alone makes any arguments for any semblance of sustainability ludicrous.  In this case, the conclusions the intellectual-left make are sound.  But, they do not unveil the whole truth.

Fortunately for those who love their economic prosperity, deforestation is not the cause of an unregulated market.  It is exactly the opposite which is true.  Deforestation is the cause of regulated property rights and common ownership of prime logging territory.  Although the intellectual’s case has merit, what they fail to account for are the reasons why individual economic agents aggregately conduct unsustainable economic facts.  For what reasons do they not produce in sustainable fashion?  Is it out of refusal?  There are no economic reasons to do so?  Or is it because they have no incentive to do so?  The weak link in the pro-regulation movement’s chain of logic is this lapse between long-term profit and lack of sustainability.  If they were to fill this gap, they would find that their conclusions are no longer logically derivable.  Instead, they would be forced to opt for a pro-market approach, where the relevant individuals who partake in the lumber industry are given full access to their profits.  The fact of the matter is that farmers with full property rights have incentive to harvest their forests in sustainable fashion.  It is only when the owner of the property is ambiguous that the logger or the farmer lack incentive in long-term profit, given that their profit is uninsured.  There is ample empirical evidence which supports this argument, given that the lumber industry in Spain is largely entirely privatized (although, not free from a fair amount of government regulation).  Despite this privatized lumber industry, there is not widespread deforestation of forests which are privately owned.  This is because the incentive is in place for farmers to take into consideration a long-term profit, creating a sustainable industry.

Nature of privatized forests and profit

In several regions of Spain, it is not uncommon to see plots of land populated by tall pine trees.  This crop is actually quite profitable in the long-run.  It requires a large initial investment, and is a dangerous gamble given that there is no short-term profit.  The farmer must wait until the trees are fully grown in order to take advantage of them to sell them for lumber.  Usually, this process can last around ten years.  Nevertheless, it is a profitable venture, given that loggers pay very well per tree.  Foresting your land is not only valuable for lumber.  Profits can be made by selling hunting permits to those looking for small animal prey, like rabbits.  For many, it is more profitable to “sell rifles” than it is to plot any other type of crop and profit from the harvest.  This has given rise to a large amount of isolated forests in relevant regions of Spain.  These are not relatively short-term forests.  They are not grown and then logged.  Many of these forests have existed for several decades, or perhaps even a century.  Because the farmer has full property rights to the forest, it is within his interest to maintain the sustainability of his land and profit.  This profit-motivated relationship between privatized foresting and sustainability is not understood by the intellectual-left.  It is this fact which ultimately delays the movement from communal foresting (government-owned forests) to a completely privatized system.  And, if there is no general movement towards a Capitalistic solution then the intellectual-left’s greatest fears may ultimately come true.

Why does the farmer not sell his entire stock of trees to the logger?  Because the farmer is not interested in maximizing present profit, as opposed to maximizing profit over the length of his tenure as a farmer.  There are several reasons this holds true.  First, the price of lumber fluctuates in accordance with supply and demand.  The farmer must speculate, to some degree, what the price of lumber may be in the future.  Because the farmer is not always aware of the mechanisms of the lumber market it is far easier to sell trees in terms of fraction of a plot.  Usually, a farmer will sell a third or a fourth of his plot, in order to guarantee the existence of a more trees for future profit.  This is advantageous if the price of lumber increases in the future, increasing the farmer’s profit.  Second, for some psychological reason, it is more attractive to have a steady, long-term income, as opposed to a single, large paycheck.  Third, the farmer can have multiple sources of income for one crop—he can make a profit off selling a fraction of his plot of trees for lumber, while also receiving money from hunting licenses.  Logging in sustainable fashion also makes the profit sustainable, and maximizes profit over the long run.  As a result, if you were to live in Spain and take note, you would not witness the sporadic creation and then destruction of forests.  Ultimately, one would realize that free-market Capitalism is all about sustainability, not maximizing present profit at the expense of long-term wealth.

The next question may be: why don’t loggers currently act in a sustainable fashion?  The lack of property rights in major logging countries, such as Brazil or several countries in central Africa (specifically, along the Atlantic coastline, such as the Cameroon, the Democratic Republic of Congo, et cetera), leads to unsustainable logging.  There is no incentive for the logging industry to limit logging, because their long-term profit is not guaranteed.  If they were to only log a fourth of the trees and then re-plant them, so that when they harvested the final fourth of that plot they would have fully grown trees to continue their harvesting cycle, there is nothing that guarantees that they would reap the profits of their investment.  Their claims to those trees and the consequent profits are not respected, because legally they are not entitled to that land.  That catalyzes deforestation, because businesses no longer care about investing.  They will not see the fruits of their investment.  A clear indication of the reality of this industry is that deforestation takes place mostly on publicly owned land, not on privately owned land.

The only solution to the problem of deforestation is the free-market.  Specifically, forests must be transferred to the private sector, creating the incentive to maintain its existence.  The common notion is that profit-motivation leads to unsustainable economic action.  This couldn’t be farther from the truth.  When an investor is guaranteed the profit from his investment, he has the profit-motivation to harvest in a sustainable fashion.  One would come to this conclusion if they were to study the private logging industry in Spain and other European countries.  This provides perfect empirical evidence for a free-market solution.