Saturday, June 29, 2013

Socialism

After I summarized Mises' lecture on interventionism, I was thinking of proceeding to inflation, which is the 4th lecture. But as I reread the 2nd lecture, I find it interesting. So I decided to go for it. 

The second lecture is about socialism. The first few pages contained a discussion about economic freedom. It was followed by an explanation of consumer sovereignty. Then the next few pages were devoted to the exposition of the use of state laws and the meaning of irreconcilable conflict of interest. The bulk of the last pages was spent in elaborating about central planning and the fundamental problem of the impossibility of calculation and planning under socialism.


Photo Source: How Socialism Works


Economic Freedom

Mises described economic freedom as a system and a process. As a system, "it is the market economy, it is the system in which the cooperation of individuals in the social division of labor is achieved by the market" (p. 17). As a process, "it is the way in which, by selling and buying, by producing and consuming, the individuals contribute to the total workings of society" (ibid.). 

Mises made some necessary qualifications in his understanding of economic freedom. I find three:

First, in relation to nature, he acknowledged that man is not free but has to follow the regularity of its laws. 

Second, he also denied perfect freedom from a metaphysical standard. 

Third, he confined his discussion of economic freedom in the context of society. Within this context, the various types of freedom are interconnected. Economic freedom therefore is vital and cannot be separated from other forms of freedom. He considered it illusory to think that people are really free without economic freedom.

He cited two examples: freedom of the press and personal freedom. 

For Mises, there is no sense in talking about freedom of the press if the government owns all printing presses and ultimately decides the ideas to be printed. In such situation, ideas that do not serve the interest of the state have no place. And this is the reality of the slavery of the press. 

Personal freedom also does not exist in socialist countries. Freedom to choose one's profession and residence is not allowed. It is the government who decides the suitable career for every individual and the specific places where people should live. 

Consumer Sovereignty

Mutual dependence or service is central in this concept of economic freedom. The belief that in the free market someone lords over without the support of the people is mistaken. If there is any sovereign in the free market, it is none other but the consumer. 

However, without thinking economically, consumer sovereignty is difficult to see. To confine one's perspective of sovereignty among the leaders of the business world is considered short-sighted. We need to pay attention not only on the things that we can immediately see, but also on things which cannot be perceived obviously. This is the timeless message of the great French economist Frederic Bastiat. 

"The fact is", said Mises, "under the capitalistic system, the ultimate bosses are the consumers. The sovereign is not the state, it is the people" (p. 21). And the proof of such sovereignty is the right to commit mistakes. Slaves do not have such right. 

The Use of State Laws

It is exactly the right to commit mistakes that the government wants to prevent for mistakes can harm people. The government wants to protect people from such harm by the use of legislation. The laws are the tools used by the government "to guard" its people from harming themselves.

People harm themselves by their mistaken consumption such as the use of liquors and cigarettes. So it is but proper for the government to restrict this activity. But once such idea is accepted, the question of limitation is difficult to decide. Man can also hurt himself by reading "revolutionary" books, watching unwholesome movies, and listening to bad music. Is the government action therefore justified in restricting these harmful activities?

There are other ways besides legislation to convince people to change their harmful activities. Mises identified ways like writing books and articles, delivering speeches, and preaching the Bible's message. Once legislation is used to coerce other people, that's equivalent to opening of the path to slavery. 

Irreconcilable Conflict of Interest

Karl Marx popularized the idea of irreconcilable conflict of interest between classes. Mises criticized Marx for the latter used the idea and applied it on capitalism, but all his examples were taken from the pre-capitalistic era. 

Mises described the society of such era as a "status society". In that society, the important emphasis in the birth of a person is not his nationality, but his membership in a particular social class. It is in such social context that Marx took his idea of irreconcilable conflict between classes and misapplied to capitalism. To appreciate the detailed picture of such society, let us read two paragraphs from Mises:

"In a status society a man was not, for example, born a Frenchman; he was born as a member of the French aristocracy or of the French bourgeoisie or of the French peasantry. In the greater part of the Middle Ages, he was simply a serf. And serfdom, in France, did not disappear completely until after the American Revolution. In other parts of Europe it disappeared even later" (p.24).
"But the worst form in which serfdom existed—and continued to exist even after the abolition of slavery—was in the British colonies abroad. The individual inherited his status from his parents, and he retained it throughout his life. He transferred it to his children. Every group had privileges and disadvantages. The highest groups had only privileges, the lowest groups only disadvantages. And there was no way a man could rid himself of the legal disadvantages placed upon him by his status other than by fighting a political struggle against the other classes. Under such conditions, you could say that there was an 'irreconcilable conflict of interests between the slave owners and the slaves,' because what the slaves wanted was to be rid of their slavery, of their quality of being slaves. This meant a loss, however, for the owners. Therefore, there is no question that there had to be this irreconcilable conflict of interests between the members of the various classes" (ibid.).

In the kind of society described above, aristocrats did not consider peasants as their fellow citizens. They regarded them as "rabble" (p. 25). They only recognized aristocrats of other countries as their equals. And the proof of such sharp division among social classes is that each social class had their own unique language and clothing. All European aristocrats used French, the bourgeoisie used another language, and the peasants used local dialects.

Marx failed to see the distinctions between the status society and the capitalist society. In the status society, the aristocrats could retain their status for hundreds of years regardless of their moral quality. In the capitalist society, social mobility is constant. Mises explained the meaning of this social mobility:

"This means that there are always people who are at the top of the social ladder, who are wealthy, who are politically important, but these people - these elites - are continually changing" (p.26).
"But in a capitalist society, there is continuous mobility - poor people becoming rich and the descendants of those rich people losing their wealth and becoming poor" (ibid.).
"Everyone is free to change his status. That is the difference between the status system and the capitalist system of economic freedom, in which everyone has only himself to blame if he does not reach the position he wants to reach" (p. 27).

Central Planning

In socialism, social mobility is once again closed. Reading this, makes me wonder whether socialism is simply a revival of status society or feudalism. Though the name may vary, but the similarity of economic reality between the pre-capitalistic era and socialism is indeed alarming. 

Today, a popular and acceptable name is used in behalf of socialism. Its name is central planning. 

In discussing this subject about central planning, Mises mentioned a popular book in his time written by a certain British lady who happened to be a member of the Upper House. The title of her book is "Plan or No Plan". In that book, Mises discerned that the author was advocating the kind of plan originally proposed by Lenin and Stalin. This type of plan covers the entire life of a nation and excludes the personal plans of the people. For Mises, the title of the book was misleading for the contrast actually was not between the existence and absence of national plan, but between two kinds of plan - central plan or personal plans. 

Impossibility of Calculation and Planning

One, if not the central weakness inherent in socialism is its inability for economic calculation and planning due to the absence of price system. Only the market can provide such system. And since socialism is basically an economic system that abolished the free market, it is actually running blind without the price system. Socialism is confronted with an economic dilemma. It hates the price system, but it cannot survive without it. So how do socialists respond to this dilemma?

Socialists hate the price system and at the same allow an appearance of the free market to exist. Notice how Mises described socialism's difficulty:

" 'All the evils in the world come from the fact that there are markets and market prices. We want to abolish the market and with it, of course, the market economy, and substitute for it a system without prices and without markets' " (p. 33). 
" ' We will not abolish the market altogether; we will pretend that a market exists; we will play market, like children who play school ' " (pp. 33-34).

After citing the unprincipled response of socialism to price system and free market, Mises confessed that the issue he was dealing with required exhaustive treatment that he could not do in just six lectures. He advised his readers to consult his other books particularly "Human Action" and also to read the book of a socialist Polish economist Oskar Lange to see the other side of the story. 

And then Mises anticipated an objection about the Russian experiment. The objection was still relevant during the writing of the present book under study for the Russian experiment was still active that time. But since the collapse of Russian experiment in 1989, Mises argument was vindicated. Nevertheless, according to Mises, the reason why the Russian experiment had survived for seven decades was because Russia used the price system in capitalist countries. 

Mises concluded his lecture on socialism by returning again to that idea of sovereignty that we mentioned earlier in this article. In free market, the people or the consumers are sovereign, whereas under socialism, that sovereignty is transfered to the state. Two quotations illustrate this difference. Under free market, you will read outside of a business establishment this expression of gratitude: " ' Thank you for your patronage. Please come again ' " (p. 36). Under socialism, the shopkeeper will tell you, " ' You have to be thankful to the great leader for giving you this ' " (ibid.). 

Concluding Remarks

President Noynoy Aguino popularized the expression, "Kayo ang boss ko!" Compared to the message of the three Mises' lectures I covered so far, it appears that the message of our President exalts the free market economy, where the people, the consumers are sovereign.

I mentioned under "Central Planning" my astonishment about the similarity between socialism and feudalism in closing the opportunity for social mobility. I do not know the extent of central planning in the country. I am not an economist. I am simply an informal student of economics wanting to understand how the world works and why we are in a situation that we have right now, both nationally and globally. I observe so far that in reading Mises, he remains relevant for our time. 

I tried to read other articles related to feudalism and socialism to interact with this lecture and I find two. I carefully read them and thinking of including their ideas into this article, but I find them confusing. I am referring to "The Return of Feudalism" and "We Already Tried Libertarianism - It Was Called Feudalism" 

I was directed by mises.org to the first article and by Tom Woods to the second article. I have difficulty assessing the economic position of the writer of the first article especially in relation to socialism. Even though he identified some similarities and distinctions between socialism and feudalism, he wrote in the latter part of his article that he preferred socialism than the present condition in the US. I am confused because he described the existing US condition as already socialist and getting worst and at the same time, has returned to feudalism of a bad type. 

The second article is more confusing. The writer, Mike Konczal relied on Samuel Freeman's paper, "Illiberal Libertarians: Why Libertarianism is Not a Liberal View". He took four points from Freeman and made use of them to critique libertarianism and argued that libertarianism is actually a revival of feudalism. 

As a whole, I find two conflicting claims. One claims that libertarianism is the other name for feudalism. The other argues that it is socialism, which carries the economic reality of feudalism. To choose between the two is not an easy task. It requires careful analysis of the basic principles and characteristics of feudalism, socialism, and libertarianism. 

If there is anything we have to be cautious of, I think we should be careful in accepting any association between two theoretical constructs on the basis of similarity of words. We should examine the meaning attached in those words and especially their impacts on both personal and economic freedom. 



References:

Mises, Ludwig von. (1979). Economic Policy: Thoughts for Today and Tomorrow. Chicago: Regnery/Gateway, Inc.

http://mises.org/community/blogs/not-a-lemming/archive/2009/02/06/the-return-of-feudalism.aspx

http://www.nextnewdeal.net/rortybomb/we-already-tried-libertarianism-it-was-called-feudalism

Thursday, June 27, 2013

Interventionism

Mises' first lecture in Argentina in 1959 is about capitalism. In it, he exposed not a few erroneous ideas people had about capitalism. I skipped the second lecture, which is about socialism and went straight to the third lecture where Mises explained what interventionism is all about. 

Mises understands interventionism as the inclination of government to go beyond its appropriate function into the affairs of the free market. In short, interventionism is all "about government interference with the market" (p.40). Specifically, this means government interference "with prices, with wage rates, interest rates, and profits" (ibid.). Both the immediate and the long-term results of such interference will be the transfer of economic power from the consumers to the state and the bureaucrats.

Consumer sovereignty is the distinguishing mark in capitalism. So interventionism despite of its claim to preserve the fruits of capitalism, is actually working to destroy it. This is because interventionism is the other face of socialism (That's why when I was asked to define socialism, I simply replied that it is an economic system that gradually and persistently eroding the purchasing power of the consumers. I am simply following Mises in this conception. By socialism, I am not referring to the Marxian-Russian type, but to German type, which is prevalent these days.).

In this third lecture, we will see the real nature of this other form of socialism. And in order to do that, I would like to divide this article into five sections:

  • Proper role of the government

  • Mixed Economy

  • Price Control

  • Rent Control

  • Cartels

Proper Role of the Government

Interventionism is connected to the discussion about the proper role of the government. There are at least three views about the role of the government in relation to the free market. One is the idea that it is justified for the government to go beyond its proper function to protect its people. Another idea known as anarchism advocates the total abolition of government. And the third is the idea that the government has limited function.

In Mises' lecture, there's no hint related to the present debate within the libertarian camp between anarchism and minarchism. As I know Murray Rothbard is an advocate of anarchism or total absence of state government while Ludwig von Mises supports minarchism or limited government. 

In "How and How Not to Desocialize" posted last June 24 in mises.org, Rothbard speaks about an "act of self-immolation" on the part of the state for it to completely vanished from the scene. In Mises case, his idea of limited government is contrary to the popular saying, "That government is best, which governs least." For him, limited government means that a government ought to perform the very purpose for its establishment. And this includes protection of citizens both from domestic and foreign threats. 

Mixed Economy

Even though Mises does not believe in the existence of third economic system, for him the problem of interventionism should not be confused with the existence of the so-called "mixed economy". He understands mixed economy as an economic system where both private and public ownerships of corporations are allowed. 

Price Control

In order to clarify the distinction between mixed economy and interventionism, Mises gave three examples - price control, rent control and cartels. Under this section, we will see two historical examples of the failure of price control, an analysis of reasons for such failure, its extension to other products, and its end result.

1. Historical Examples

Examples of price control in the past tell us about the response of the government once prices started to increase as a result of inflating the money supply. Mises gave two examples: the Roman Emperor Diocletian and French Revolution.

The Roman emperor debased the silver coins in the second hald of the 3rd century. The government mixed increasing amount of copper into the silver coins. This is currency debasement that resulted into price increase followed by price control. Those who violated this law were severely punished. The final outcome "was the disintegration of the Roman Empire and the system of the division of labor" (p.41).

Similar mistake was repeated during the French Revolution. Since printing press had already been invented, the French used a different mode of currency debasement. They increased the money supply by printing huge quanitity of paper currency. The immediate result was price increase and again followed by price control. Even the method in punishing the violators was also changed. This time, it was through guillotine. 

2. The Reasons for Failure

In analyzing the failure of price control, Mises takes milk as an example. It all starts with people's dissatisfaction with the increasing price of milk. As a response, the government decides to fix the maximum price for milk, which is lower than the market price. Two immediate results will follow: the demand for milk will increase and the producers of milk will suffer loss as a result of lower price.

In order to continue and protect the business from the impact of government imposed price, it is natural that producers will do the following action: restrict milk production, reduce the number of cows by selling them and focus instead on other products made out of milk. The long-term results then of price control will be less supply of milk, greater demand, price increase, smaller number of people can avail the product, and rationing. 

3. Extension to Other Products

Then the government will inquire the reason for less supply of milk. The producers will respond that the cost of production is higher than the government imposed price. And as the government traces other items necessary for production, these items will be subjected also to price control. The same result that happened in the milk supply will also occur to related items. And if the government does the same thing with other basic necessities, similar result will take place. 

4. End Result

The final result of government interference in the market is socialism. This happened both in Germany and Great Britain in World War 1. Both countries inflated their money supply, which resulted to price increase and imposition of price controls. The government of Germany controlled the entire national economy through the "Hindenburg Plan" that resulted to the collapse of bureaucratic apparatus and bloody end. England would also about to suffer the same fate, if not for the entrance of the US into war that provided the necessary supply. 

During the 2nd World War, the same process was repeated. Price control was already present before Hitler came to power. During Hitler's time, the free enterprise was still allowed to operate but no longer under the control of entrepreneurs. Instead, they were called shop keepers. The entire operation of the free market is but a show. Everything is regulated from the kind and quantity of products, source and price of raw materials, buyers and price of goods to the designated works for people and amount of salary. This is the free market under German socialism. 

Great Britain followed the same pattern. It became socialist during the time of Sir Winston Churchill. Nationalization was the game of the day. For Mises, the difference between the two countries is unimportant for in both cases, it was the government's order, which had to be obeyed in all areas. 

Rent Control

The same process in controlling the price of milk is applicable in housing. Housing shortage is an outcome of similar mechanism, but this time, it is rent control. 

Mises identifies a series of results from rent control: people will not choose to transfer to smaller apartments when their conditions changed, many cities in the US suffered financial difficulty, shortage in housing, and then the government spent billions for building of new houses. 

Cartels

Another economic consequence of interventionism in the form of "protectionism" is the formation of cartels. Mises describes the formation of cartels as a result of the government's attempt "to isolate the domestic market from the world market" (pp. 51-52). Then the government "introduces tariffs which raise the domestic price of a commodity above the world market price, making it possible for domestic producers to form cartels" (p.52). Once cartels are formed, the government will call for anti-cartel legislation. Observing the process, you will see the absurdity of the government's call for legislation while in fact, cartels are formed due to its intervention. So if the government really wants to stop cartels, it must stop intervening in the affairs of the market. 

Conclusion

Interventionism is not a new development. It is a revival of an old idea that a king was the "messenger of God" with supernatural powers. It came back to the modern times through the influence of a German professor, Werner Sombart. This professor believes that Hitler's orders directly came from God Himself, "the Fuhrer of the Universe". For Mises, the return of this belief is inexcusable in modern times and in a country recognized "as the nation of philosophers and poets" (p.54). The only remedy to interventionism is the power of the citizens.

A personal remark before I end. I agree that the key to limit the power of the government is through the citizen's power. However, students of liberty have a big role to fulfill in educating the people to know that power. 

Concerning Mises' statement related to the revival of an old idea, I find it contradictory. I have reservation when it comes to kings' possession of supernatural powers. And I do not understand what Mises exactly meant by that. But concerning his denial of a king as God's messenger, this is understandable for as far as I know, in his system of economic thought, metaphysical existence is denied. So the plain teaching in Romans 13 that "the one in authority" as God's servant has no place in his mind. 



Source: Mises, Ludwig von. (1979). Economic Policy: Thoughts for Today and Tomorrow. Chicago: Regnery/Gateway, Inc.




Wednesday, June 26, 2013

11 Unpopular Facts About Capitalism

"The rulers of America are despotic elites who are living in fear and trepidation of their own people and of people power around the world rising in rebellion against the misrule of capitalism." - Finian Cunningham of Veterans News Now

Cunningham's statement is true except the reference on capitalism.

With the increasing tension in global politics and economics, expect that capitalism will be continually associated with the despotic elites. It is natural, for misconceptions about capitalism is widespread. In this article, I glean eleven unpopular facts about capitalism from the book of the strongest defender of free market economy - Ludwig von Mises himself. 

In chapter 1 of "Economic Policy: Thoughts for Today and Tomorrow", Mises presents the true nature of capitalism. By reading the chapter, I encounter at least eleven misconceptions about capitalism. The distinction among these misconceptions is fluid and you can find an overlapping among them.

First, most people are unaware about the historical and social settings where capitalism emerged. In studying these settings, you will see how capitalism improved the life of the people by opening the opportunity to upward social mobility and accessibility to products and services, which formerly enjoyed only by the aristocracy. 

Feudalism was the dominant economic system prior to the entry of capitalism. Here we will see a big difference between the top minority who "rule" the society. Under capitalism, the "rulers" are those who serve the consumers. Unlike in feudalism, the rulers are secured of their social standing even though they would ignore the needs of the masses. The capitalist rulers cannot sustain their economic power if they will follow the feudal lords in that path. So in feudalism, we find that the door to social mobility was closed. As a rule, man's social status was fixed. Capitalism changed this social structure. Any individual from the bottom of society can climb up to the social ladder through innovative ideas and entrepreneurship. 

Two great social problems brought about the existence of capitalism. These are the increasing number of the outcasts and lack of raw materials. Outcasts were surplus people out of rural communities who did not own a land, did not have any work and society had no place for them. In dealing with this problem, the outcasts organized themselves and set up small shops to produce something. They produced affordable goods. This marked the beginning of mass production.

Second, most people fail to understand the basic difference between the economic condition in feudalism and capitalism. In feudalism, expensive products were manufactured exclusively for the wealthy. On the other hand, capitalism as mentioned above pioneered the production of affordable goods for mass consumption. In capitalism, the two important factors that products must possesss are quality and low price. Any entrepreneur who can provide products with either of these advantages to customers is destined to be prosperous. It is the basic principles of capitalism that any individual has a right to compete in market economy by serving the customer better and/or at an affordable price.

Third, most people do not realize the important contribution of capitalism in the increase of human population. The economic principle identified above had a corrolary result and that is, population growth. Mises wrote that the best way to answer those who hate capitalism is to give them this reply: 

"You know that the population of this planet is now ten times greater than it was in the ages preceding capitalism; you know that all men today enjoy a higher standard of living than your ancestors did before the age of capitalism. But how do you know that you are the one out of ten who would have lived in the absence of capitalism? The mere fact that you are living today is proof that capitalism has succeeded, whether or not you consider your own life very valuable." (pp.5-6). 

Fourth, most people do not know the origin of animosity against capitalism. Mises argued that hatred towards capitalism did not originate from the "proletariat" or the working class, but from the aristocracy. The aristocrats did not like the new system that replaced feudalism. As they observed the way capitalists paid their workers with higher wages, they were forced by necessity to pay equally higher wages to their peasants. Two quotes from Mises confirmed this:

"It is a fact that the hatred of capitalism originated not with the masses, not among the workers themselves, but among the landed aristocracy—the gentry, the nobility, of England and the European continent." (p.6).

"They blamed capitalism for something that was not very pleasant for them: at the beginning of the nineteenth century, the higher wages paid by industry to its workers forced the landed gentry to pay equally higher wages to their agricultural workers. The aristocracy attacked the industries by criticising the standard of living of the masses of the workers." (ibid.)


Fifth, most people are victims of historical distortion about capitalism. These people thought they are familiar with the so-called "unspeakable horror of capitalism." Mises describes such distortion, which he designates as "one of the greatest falsehoods of history": 

"...that the factories employed women and children and that these women and children, before they were working in factories, had lived under satisfactory conditions..." (ibid.).
Mises corrects such story: 

"The mothers who worked in the factories had nothing to cook with; they did not leave their homes and their kitchens to go into the factories, they went into factories because they had no kitchens, and if they had a kitchen they had no food to cook in those kitchens. And the children did not come from comfortable nurseries. They were starving and dying." (pp.6-7).


Sixth, most people fail to appreciate the higher standard of living in capitalist countries. Compared to previous century, capitalism blurred the distinction among different social classes. See how Mises understands such difference: 


"Today, in the capitalist countries, there is relatively little difference between the basic life of the so-called higher and lower classes; both have food, clothing, and shelter. But in the eighteenth century and earlier, the difference between the man of the middle class and the man of the lower class was that the man of the middle class had shoes and the man of the lower class did not have shoes." (p.9).


Seventh, most people think that employers determine wage rate. This misconception is about the source of wage rate. Anti-capitalists fail to see that ultimately, consumers determine the wage rate of employees. Mises explains this:


"Wage rates under capitalism are not set by a class of people different from the class of people who earn the wages; they are the same people. It is not the Hollywood film corporation that pays the wages of a movie star; it is the people who pay admission to the movies." (p.9).


Eighth, just like me, most people are not aware that capitalism was originally coined by its strongest enemy. Mises wrote: "The capitalist system was termed 'capitalism' not by a friend of the system, but by an individual who considered it to be the worst of all historical systems, the greatest evil that had ever befallen mankind. That man was Karl Marx." (p.10).


Ninth, most people do not know about the long-term benefits of savings. In order to produce business capital, savings is important. The use of savings as business capital benefits not only savers, but other players in the market such as the entrepreneurs, unemployed, producers of raw materials and existing wage-earners. Mises exlains the process:

"...savings mean benefits for all those who are anxious to produce or to earn wages...the money goes into the hands of an entrepreneur...What will the businessman do now with the additional capital?...to go out and hire workers and buy raw materials - in turn causing a further demand for workers and raw materials to develop, as well as a tendency toward higher wages and higher prices ofr raw materials." (p.11).


Tenth, most people think that the gap between the rich and the poor in capitalism will continually increase. This idea about capitalism thinks that the door for the economic improvement of the working class is closed. Anti-capitalist mentality teaches that as times pass, wealth will be concentrated in the hands of the privilege few. In the end, when "capitalism" reached its most corrupt stage, mass revolution is inevitable. For Mises, based on historical records, we could not see any capitalistic country that did not improve the condition of the masses. So this idea about capitalism is completely mistaken. Mises asserts, "The scornful depiction of capitalism by some people as a system designed to make the rich become richer and the poor become poorer is wrong from beginning to end." (p.12).


Eleventh, there are people who think that those who oppose capitalism such as the labor unions could improve the economic condition of the working class. Labor unions in their advocacy for higher wage rate, shorter work hours, and public ownership of means of production, some people believe are the means to improve the economic condition of the working class. Mises refutes these arguments in depth elsewhere. But here he mentioned Marx's theory of "iron law of wages" specifically as fallacious for its model was taken from biology. 


In closing, let us be reminded that higher standard of living depends on the supply of capital. As Mises emphasized: "A country becomes more prosperous in proportion to the rise in the invested capital per unit of its population" (p.14). 



Source: Mises, Ludwig von. (1979). Economic Policy: Thoughts for Today and Tomorrow. Chicago: Regnery/Gateway, Inc.

Monday, June 24, 2013

Suspicious Friends

Not sure if I can relate to Stephen Carson's experience when he wrote, "Some of my Christian friends are suspicious of my interest in economics." Maybe, my "friends" are not as sophisticated as Carson's friends who disliked the study of economics due to the influence of "Enlightenment rationalism, along with deism, atheism, the chaos of the French Revolution and other un-Christian aspects of the modern age." Maybe, they just consider it a diversion, something worldly, unspiritual and unworthy of the time of a Christian clergy. 

Carson then shared the relevant information he acquired from reading a book. After digesting that book, he confidently felt that he's ready to respond to his suspicious friends. 

Carson was referring to Alejandro A. Chafuen's "Faith and Liberty: The Economic Thought of the Late Scholastics." He said that the book was about the economic perspective of pre-Enlightenment Scholastics during "the late 13th century up to the mid 17th century." His description of these men is impressive:

  • "...in many cases their economic theory was far more advanced than many professional economists who came after them."

  • "Their brilliant economic analysis earns them a place as founders of economics."

  • "...their economic analysis was superior to the confused Adam Smith of 'The Wealth of Nations.' "

  • "One of the areas that marks the Scholastics as more sophisticated than the classical economists..."
"Far more advanced", 'brilliant", "founders of economics", "superior" and "more sophisticated" are the words used by Carson to describe the late scholastics. He mentioned several unfamiliar names and quotations. I just want to share three that caught my attention. 

The first one is by Juan de Mariana (1535-1624): "taxes are commonly a calamity for the people and a nightmare for the government. For the former they are always excessive; for the latter they are never enough, never too much."

Saavedra Fajardo wrote an interesting thought: "Coins are like young girls,...it is an offense to touch them' (p.68)." This quote is a warning about the ugly economic consequences once the value of money is debased as almost all governments in the world today have been doing. 

The quote from Martin Azpilcueta also speaks about alteration of monetary value: " '...money is worth more where and when it is scarce than where and when it is abundant' (p.62)." Carson thinks that Chafuen is right that Azpilcueta was the first to formulate the quantitative theory of money.

Carson's concluding sentence returned to his concern about his suspicious friends. Also, I'm not sure if I can share with his experience when he said, "In being ignorant of economics, they are not only ignoring a great secular science but our own Christian heritage."


Source: Christianity's Free-Market Tradition

Saturday, June 22, 2013

A Brief Outline of the History of Economics

This outline is taken from Faustino Ballve's Essentials of Economics, Chapter 1 - What is Economics About?

1. From ancient Greece to 16th century

"...Plato concerned himself with the DIVISION OF LABOR and of the various occupations; Xenophon dealt with the increase in rents in Attica and formulated a THEORY OF MONEY; Aristotle...expressed the hope that SLAVE LABOR might be replaced by MACHINERY,...Rome made the PROTECTION OF AGRICULTURE an economic policy—one that was supported in the Middle Ages by the Catholic Church’s CONDEMNATION OF TRADE, its prohibition on the charging of interest, which it characterized as USURY,...St. Thomas Aquinas advocated A KIND OF COMMUNISM that was later, from 1610 to 1766, to be practiced by the Jesuits of Paraguay. The French bishop Nicholas Oresmius published a TREATISE ON MONEY, and Gabriel Biel of W├╝rttemberg made investigations into the NATURE OF MONEY and the FORMATION OF PRICES. Humanism, with Erasmus, esteemed COMMERCE as honorable. Martin Luther, the founder of Protestantism, postulated that “man was born to work,” studied the DIVISION OF LABOR, and stressed the IMPORTANCE AND UTILITY OF TRADE, recommending the FREE MARKET even though he continued to condemn “usury.” On this last point Calvin disagreed with Luther and was, besides, the first to advocate the INTERVENTION OF THE STATE in economic life—an intervention that already existed in his age and, to a greater or lesser degree, has always existed and in the last thirty years has been considered as an economic panacea" (Faustino Ballve, "Essentials of Economics",1963, pp.2-3).

2. The rise of mercantilism from 16th to 18th centuries


Causes

  • Establishment of absolute monarchies in the 16th and 17th centuries

  • Emergence of modern nations and nationalism

  • Control of economic activity, and

  • Theoretical justification of such control


Results

  • Strangulating general economic life

  • Fragmentation of economic and political groups

  • Internal misery, and

  • External war

3. Transition from mercantilism to classical school of economics during the later part of 18th until the middle of 19th century


Major Proponents

  • Usually connected to Adam Smith's "The Wealth of Nations" (1776)

  • David Ricardo and John Stuart Mill in England

  • Jean-Baptiste Say and Frederic Bastiat in France

  • Thomas Malthus. However, His Malthusian Theory of Population ended with protectionist proposal

Height of Classical School
  • Introduction of machinery (Industrial Revolution)

  • Improvement of communication

  • Increase in production

  • International exchange

Causes of the Decline of Classical School

  • The discovery that the classical's idea of economic laws are not really infallible laws

  • The feeling of inferior competitive position of younger countries such as Germany and the US on world market

  • The idea embraced by both intellectuals and the middle class that the free market does not benefit the poor. 

  • Three Counter Movements - nationalist protectionism, socialism in diverse forms, and distrust of individual initiative and emphasis on national interest over and above the individual interest as a result of the influence of Historical school. Distinguishing marks of counter movements - economics not as man's universal struggle for well-being, but as national political economy, failure to grasp the unity and totality of economy, disconnection between distribution and consumption and existence of laws that control the economic process 

4. From classical school to neo-mercantilism. It was formed out of the three counter movements during the end of 19th century until the beginning of 20th century

Fundamental Principles

  • Direction of economic life by public bureaucrats

  • Idea that money is true wealth

  • Concern with a favorable balance of payments with the object of obtaining more money in international exchange

  • Protection of industry for the purpose of having articles of export in order to bring money into the country

  • Subsidies and privileges for exporters and for industries producing for export or avoiding imports

  • Increase in the population in order to augment the productive forces of the domestic economy

  • Competition with and isolation of foreigners by means of tariff barriers

  • Belief that the prosperity of one country is possible only at the expense of the others

Results

  • Destruction of international division of labor 

  • The two world wars 

  • Omnipotent state 

  • Planned economy justifying it as a defense of national interests against foreign competition and the poor against domestic oppression 

  • Retreat of democracy and liberty 

5. Two schools of economics also emerged during the later part of 19th century due to the theory of marginal utility developed by Carl Menger (1870), Stanley Jevons and Leon Walras.

Two Types of Mathematical School

  • The development of econometrics. Economics as an exact science and the chief bulwark of the ideology of central economic planning.

  • Use of mathematics in economics without claiming it as an exact science


The Austrian or the Critical School 

Carl Menger, Bohm-Bawerk, Wieser, Ludwig von Mises, Friedrich von Hayek, Henry Hazlitt and others.


PERSONAL COMMENTS


Coming from Reformed tradition, reading John Calvin as the first to advocate the intervention of the state surprised me. Theologically, Calvin is considered superior compared to both Erasmus and Luther, but from a free market perspective, his interventionist advocacy was a major threat both to personal and economic liberty. In this regard, I prefer the economic position of both Erasmus and Luther.

Moreover, the long quotation from Ballve of economic history from ancient Greece to 16th century made me realize that theologians cannot escape voicing out their economic point of view. In fact, if Gustavo R. Velasco was right that the center of conflict today is in economic problems (pp.xi-xii), can we consider it responsible for today's theologians not to study this very critical subject?

Furthermore, the reader will notice that our outline of history covers only until early 20th century and it ends with neo-mercantilism. I suspect that many people today just like me, do not have any idea about what neo-mercantilism is. So the question is, what is the dominant school of economics from the later part of the 20th century to the early 21st century. In short, what is the dominant economic idea in our time?

If Ballve's identification of neo-mercantilism as the dominant school of economics until the early part of 20th century was accurate, I suspect that perhaps neo-mercantilism has undergone a transformation and is now hiding under a different name. Would this name be interventionism, Keynesian inflationism, neo-Keynesian inflationism, crony-capitalism and corporatism? 

Among the identified schools of economics in our outline, I favor the recovery of classical school through the Austrian school. 

Thursday, June 20, 2013

Monetary Policy

Restating the meaning of monetary policy taken from Mises' Wiki, I understand it as the manipulation of money supply advocated by both the monetarist and Keynesian school of economics through central banking to maintain economic growth and limit unemployment. Only the Austrian school criticizes monetary policy for its destructive results on the economy such as redistribution of wealth, business cycle and other disastrous economic distortions. In this article, I want to explore further this idea of monetary policy as seen in US economy. To accomplish this goal, I glean relevant ideas  from four US Congressional Records in the past taken from Ron Paul's book, The Pillars of Prosperity. 

The Foolishness of Existing Monetary Policy

In December 1, 1982, then US Congressman Ron Paul described the American monetary policy as foolish. It was so because of the reliance to centralized monetary planning, which only strategy to boost the economy was to increase the money supply. This made the stock market that time soar. For Dr. Paul, that was just a temporary economic relief resulted from additional paper money together with the manipulation of interest rates. The American monetary policy was foolish for the decision makers ignored long-term results such as economic stagnation, higher rates of unemployment, soaring interest rates and runaway inflation. 

Above is the description of US monetary policy 31 years ago. The Fed is still committed to such folly. Since such folly is presented as wisdom by professional economists through mainstream media, no wonder almost all countries in the world are following the American example. 

After 15 Years

Fifteen years after that 1982 US Congressional Record, the US was still persistent in its foolish monetary policy. In March 5, 1997, the US House of Representatives recorded Ron Paul's exchange of ideas with Allan Greenspan about the conduct of monetary policy. Each shared their point of view about CPI and currency debasement. For Dr. Paul, CPI discussion was a diversion from the real issue. He identified that currency debasement was the real issue that would have the following results: higher price of goods, malinvestment, distorted interest rates, higher deficits, benefits for few and economic suffering for many. 

The content of the Congressional Record after three months and that's July 22 was just a repetition of the previous one. The only relevant material I found was the identification of those who benefit and those who suffer from currency debasement. So those who benefit are the early users of credit and they include people who borrow, the bankers, the big business and the government. Those who suffer are the middle class, the late users of credit and the little guy. 

IMF and the Asian Crisis

After two previous banking committee hearings, another hearing was made one year later. This happened in February 24, 1998. I find the discussion on the role of IMF and the impact of US monetary policy on Asian crisis very important. 

For Dr. Paul, the real mission of the IMF is not to help the poor of developing countries, but to assist multinational banks and corprorations. The record of the IMF proved this point particularly in relation to the impact of IMF's structural adjustment programs in Africa and Latin America. Instead of economic development, what Ron Paul saw was an increase in poverty, major cutbacks in health and education and increase in unemployment. 

After dealing with the failure of IMF, Dr. Paul raised the issue about the connection of Asian crisis to US domestic monetary policy. From this we can see that the consequence of the foolishness of American monetary policy is not only limited on their shores. Countries in Southeast Asia were also affected. Ron Paul explained this connection:
"...we certainly do export a lot of our currency. More than 60 percent ends up in foreign hands. And it serves a great benefit to us because it is like a free loan...so we get to export our inflation...So again, we get to export our inflation, and the detriment is the consequence of what we are seeing in Southeast Asia" (Pillars of Prosperity, 2008, p. 180).




Source: Paul, Ron. (2008). Pillars of Prosperity: Free Markets, Honest Money, Private Property. Auburn, Alabama: Ludwig von Mises Institute.

The Government is Doing a Lot

Reading "Poverty level in Phl unchanged since ’06" does not make sense to me. One could easily dismiss my difficulty to the fact that I am not an economist. But I ask, who is the audience by the way of such a report? Is it the economists or the Filipinos as a whole? If it is the economists, it makes sense why the report is technical. But if the intended audience is the Filipinos, why not make the report comprehensible?

There are parts in the article that I understand. At least, I got the idea that since 2006, poverty level in the Philippines remains the same. In terms of percentage, Ted Torres identifies that almost 28% of Filipinos remain poor. On the other hand, the parts that are incomprehensible to me are those related to the meaning of poverty line, the meaning of family income, the meaning of the different percentages of poverty incidence in different provinces and the meaning of government programs. So I have a problem in understanding the details of the report. 

I want to know how NSCB (National Statistical Coordination Board) determines the poverty line. Is it fixed or subject to change? What causes the change in poverty line? 

The difference in family income that determines a poor family also puzzles me. Does it mean that if a family of five is earning P7,821 per month, such family is no longer below the poverty line? How can a family of five with such an income pay their house rental, electricity and water bill? How about the allowance of children going to school and the transportation fee of the person who works? It is really unthinkable that with such an income the family can already buy other goods aside from food. To my mind, only a magician can expand such income to meet the enumerated needs. 

To my non-economic mind, to complete NSCB's income distribution, I find that the poorest 20% earns 6% of total national income; the middle 60% earns 44% of total national income, and; the upper 20% earns 50 % of total national income. What's the significance of this report? 

The reporter also wrote that "an annual tracking of poverty incidence will now be done to allow the government to make the necessary tactical or short-term changes in its Philippine Development Plan 2011-2016." I wonder when was the government war against poverty started? Is this annual tracking of poverty incidence only done this time?

I still have many questions in mind concerning government program against poverty. What is the meaning of the following phrases and statements: 

  • "...with the timely measures we are now implementing", 

  • "...the government’s massive investment in human development and poverty reduction", 

  • "...the problem of poverty requires a comprehensive, 'multi-pronged and multi-sectoral solution' involving many stakeholders", 

  • “We are making use of the current effort..."

  • “We need value-added activities for our farmers."

  • "We also need to spur their access to markets,” 

I just finished reading the introduction of Mises' economic policy. Reading this report, I think Mises is right that interventionism is very much alive in the country. Of course, the term is not used to describe the existing economic policy, but the reality is there. It is captured in this statement: "the government is doing a lot."

Wednesday, June 19, 2013

The Best Economic Policy

Margit von Mises compiled her husband's lectures in Argentina in 1959. The outcome is the book "Economic Policy: Thoughts for Today and Tomorrow". Regnery/Gateway, Inc., Chicago first published this book in 1979. 

The Six Lectures

After reading the book, I personally believe that Mises' lectures remain relevant for today's audience. Economic policy is sub-divided under six lectures. These are:

  • Capitalism

  • Socialism

  • Interventionism

  • Inflation

  • Foreign Investment, and

  • Policies and Ideas

Understanding the above topics, you will grasp what Mises meant by the best economic policy. In the Introduction, Bettina Bien Greaves gave the overview of such policy in contrast to interventionist policies. 

Interventionism

Interventionism is the most influential economic policy in our time. Bien Greaves describes the characteristics of an interventionist government as doing the following tasks:

  • Regulating production

  • Controlling prices of goods and services

  • Fixing salaries of workers

  • Interfering in business

  • Intervening in imports and exports, and

  • Providing welfare

The mentioned tasks above are indications that existing governments are going beyond their proper role. Bien Greaves claims that the proper role of the government should be confined in making it sure that the market environment is conducive to its free operation. The role of the government is limited in protecting the lives and properties of its citizens both from domestic and foreign aggression. If the government does exactly this, the people are genuinely empowered to take care of themselves. For Bien Greaves, this is the best economic policy. 

However, the limited role of the government is unpopular today. Statist, socialist, welfarist and interventionist dominate the political and economic landscape. They join their voices in unison making the idea of greater government power more popular. 

Personal Thoughts

Reading Bien Greaves' description of our era as interventionist, reminds me of not a few theologians who are passionate to keep their theological reflection atune with the times. Unfortunately, I suspect that just like me two years ago, most theologians I encounter both offline and online have zero idea about interventionism, which I consider the most important context in our age. Sooner or later we cannot afford to deny the existence of interventionism, for unless it is stopped, we will experience its force as it gradually erodes the freedom that we think we have. 

My intention in rewriting what I perceive to be the most relevant parts of the book is first of all to acquaint myself with Mises' basic thoughts (Other two books of Mises that I find helpful to achieve this goal are "Bureaucracy" and "Anti-Capitalist Mentality"). This will serve as my personal preparation in reading his larger books. 

Saturday, June 15, 2013

Anti-Capitalistic Theologians

While reading Ludwig von Mises' "Anti-Capitalistic Mentality", I stumbled with a surprising paragraph. It is like that I found a gem when I least expected it. And here is that particular quote: 

"Everywhere eminent theologians tried to discredit the free enterprise system and thus, by implication, to support either socialism or radical interventionism. Some of the outstanding leaders of present-day Protestantism-Barth and Brunner in Switzerland, Niebuhr and Tillich in the United States, and the late Archbishop of Canterbury, William Temple-openly condemn capitalism and even charge the alleged failures of capitalism with the responsibility for all the excesses of Russian Bolshevism." (Ludwig von Mises, "The Anti-Capitalistic Mentality", 2008, p.45).

I posted the above quote in a theological forum and at least four persons commented. I asked their permission to blog our discussion, but none responded. So I decided to blog it anyway and at the same time maintaining the anonymity of the commenters.

The following are the relevant exchanges. I hope you enjoy it!

_____________________________

JP:  Malay. Matagal nang turo ng bible ang capitalism. Kaya nga yun ang sinusunod ng USA na founded on biblical principles. Ang hindi magtrabaho, hindi kakain.

RC: how about yong argument na ang US daw sa ngayon ay mas sosyalista pa kaysa sa China?

JP: Ala namang masama dun. Mga kristiyano nga dati naging komunista.

JPP: Oo nga no. Mapag isipan nga

JPP: Kapag inatake mo ba ang laissez faire automatic na proponent ka ng ng socialism o interventionism?

RC: may naniniwala kasi na may 3rd economic system bukod sa socialism at capitalism, but as far as mises is concerned...dalawa lang

JPP: Ano yung third?

RC: mixture daw ng 2

RC: pero kay Mises yong socialism may 2 mukha, russian or marxian pattern at yong german pattern na sa ngayon ay parang synonymous sa interventionism

RC: yong marxian pattern nagcollapse na since 1989, ang popular ngayon at laganap sa US maging dito sa PH ay ang german pattern

JPP: Pano yun?

RC: mahirap makita e...very subtle...pero pinaka sintomas niyan ay expanding power ng government through interference in the free market by making numerous regulations for special interest groups...

RC: dagdag mo pa yong concern ng interventionism sa mga bagay na kung saan ay concern din ang mga mamamayan tulad ng people's welfare, social justice and fairer distribution of income. And above all, it claims to preserve capitalism and democracy...

RC: but in the end it leads to poverty, mahirap kasi isustain ang interventionist programs...kailangan ng higit na malaking buwis...so that means printing of paper money, inflation, budget deficit, etc...yong productive side ng market economy panipis ng panipis hanggang hindi na kayanin isustain ang demand ng public sector for consumption...

JPP: Oo nga mahirap controlin

RC: the key i think is in the hands of intellectuals...sila lang yong may kakayanan to educate the masses concerning personal liberty and responsibility, limited government, small taxes and sound money...

RLC: How about perhaps a 4th? Not yet tried but since all has failed, then why not?...Anarchism.

RC:  popular din yan anarcho capitalism...it's the tension inside libertarianism...it's the conflict between the followers of mises and rothbard...minarchism or anarchism...limited government or zero government...

RLC: And of course, the Austrian Proposal...Too bad the world has contented itself with the capitalist-socialism dualism...Call it now the lies of the Law of Non-Contradiction, or simply the fallacy of excluded middle.

RC: Yes, Austrian proposal, the sister of neo-classical liberalism or libertarian political economy ( also some conservatives and right libertarians call themselves neo-classical liberals)...for Austrian economists like Rothbard and North, the statist version of capitalism or so-called mixed economy as represented by Milton Friedman of Chicago School is the primary cause for the confusion...I think the message of Ron Paul is clear...ultimately mixed economy is none other than a subtle form of socialism...

RLC: Btw, I've read ur blog po and I really find it helpful. Summarizing the key and canonical figures in few sentences. I'm not an economist but I've been reading a lot lately on economic theory/ies. I have the sense that much of what happens in our evangelical community is more than just "politics", but really "economics."..Starting to believe Dubner and Levitt that the key to understanding human behavior is really -economics...Thank u sir and may God continue to season ur writings with grace.

JPP: So RC you are saying na maski ano pang alternative ang ilatag sa table, yang mga yan ay ultimately mga footnotes lang ng either capitalism o socialism

RC: Thank you for that prayer RLC! For now, my goal is to understand...later, God willing I will dig into Christian economics literature to provide a corrective to Austrian-libertarian reading...concerning the importance of economics in political discussion, I think the world owes such awareness to Ron Paul. His main goal actually in engaging in politics is to bring economic issues in the forefront of political discussion...to some extent though he failed in his presidential campaign, he succeeded in his educational goal...not familiar with Dubner and Levitt...though I find Mises' difficult, I want to understand what he meant by economics under the science of human action...concerning evangelicalism, I personally think that our theologizing will greatly improve if we seek first to understand from different lenses the primary cause of existing economic crisis...

RC: JPP, depende saan ka nanggagaling...there are several schools of economic theories...as far as Austrian perspective is concerned in Misesian tradition, ganon ang basa nila...take for instance yong issue nang origin ng Italian fascism at German Nazism,..both capitalism and socialism disown them as their daughters...if you are a libertarian leftist, sasabihin mo na ang fascism ay produkto ng kapitalismo...at para sa mga communist intellectuals, together with Nazism, Fascism was described as “the highest and last and most depraved stage of capitalism” (Mises, Planned Chaos, 1951, p. 29)...Pero kay Mises, ang origin ng fascism ay hindi capitalism kundi socialism...sa kasaysayan, ang claim ni Mussolini, iniligtas niya ang Italy from communism...kay Mises, that's not true...ang fascismo ay hindi ang dahilan kundi resulta ng kabiguan ng komyunismo...ang fascismo ay nabaon na sa kasaysayan subalit ang mga puwersa sa likod ng ideyolohiyang ito ay nananatili pa rin...nagbigay ng babala si Mises na ito ay maaaring mabuhay na muli gamit ang ibang pangalan...

RC: But of course, kung mga theologians naman tatanungin, hindi rin sila papayag na ireduce lang sa 2 kategorya ang mga economic systems...take for instance Brueggemann and Yoder...sa initial reading ko, for Brueggemann, the debate between “socialism” and “capitalism” is futile...at meron siyang binabanggit na 3rd alternative na ang tawag niya ay "covenantal"...ang challenge lang dito ano ang konkretong mukha nito?...kay Yoder naman, kasabay ng pagdating ni Jesus kasama ang isang bagong economic order...ang struggle din dito ay pagdating sa implementation...base sa kasaysayan, ang Kristiyanismo ay nagbigay ng 5 mga modelo...

JPP: Ano ung 5?

RC: Catholic, Reformation, Revolutionary, Dualist-Pietistic, and Anabaptist.

RC: Sa Catholic model, "Economic relationships are understood as divinely established.” The primary advantage of this arrangement is that “the church itself emerges as an economic power…”

Sa Reformation model particularly found in Zwingli and Puritanism, economic systems “are not simply accepted, but transformed.”

Revolutionary model has many variations. Its common characteristics shared with the second model are the mistaken identification of human programs with the plan of God and the use of force through the state. This paved the way for modern day state interventionism.

Sa dualistic-pietistic model, mali na i identify ang human program sa plano ng Diyos...so okey lang yong existing economic structures...baka kasi mapalitan ang ebanghelyo dahil sa koneksiyon nito sa politika...

Of course, Yoder advocates the Anabaptist model...It rejects both the radical character of Reformation and revolutionary models and the conservatism of the Catholic and the Dualist-Pietistic models. It believes that the Christian community offers an alternative economic order and serves as a constant critique to the mainstream society. It affirms that the Christian community is already in a new reality that it cannot force into the larger society. 

Again, the challenge here ay pag dating sa details...

JPP: Anong economic system pala ng pinas?

RC: hehehe...isip mo na...

RC: sa panlabas, kapitalista ang pakilala...pag tiningnan muli, maaaring sabihin na mixed economy in the sense na allowed pa rin naman ang free market...pero from Misesian perspective, increasing yong interference ng govt. regulation sa free market na ang naging produkto ay nabigyan lang ng pabor ang ilang mga special interest groups...so pwedeng sabihin na dahil sa pakikialam ng govt. sa free market, umabot doon sa sistema na iilan lamang ang may hawak ng politika at ekonomiya ng PH...resulta nito sisisihin ang kapitalismo at mananawagan ang mga intellectuals na kailangan makialam ang govt...ang govt. naman ay laan ding lumikha ng karagdagang mga regulasyon na kung magpapatuloy ang ganitong cycle sa bandang huli, masasakal na ang free market at magbubunga ng massive unemployment at deeper poverty for most Filipinos...and that's the essence of socialism in the form of interventionism... yan ay base lang sa personal na obserbasyon...

JPP: If you could explain socialism in tagalog ano yon?

RLC: Sosyalistang walang pera...Capitalism, in tagalog, capital na walang tao...Lol! 

GF:  Baka mas maganda stick to carrot na lang ako kay Milton Friedman.

RC: pinakasimple na siguro...isang sistema ng ekonomiya na inaalisan ng kapangyarihan ang mga mamimili...

GF:  Isa lang naman ang kapangyarihan ng mamimili...ano pa e di bumili!

RC: yon na nga...bumili...kaya lang hindi niya nababatid na dahil sa mga regulasyon, sa paglipas ng mga taon ang purchasing power ng kaniyang pera ay unti-unting nababawasan...sa tingin ng mga Austrian, using different economic theories, mahirap makita ang invisible tax...

GF: pinahihirap mo naman...simple lang naman anoman ang nasa market ang value nito ay depende sa demand. Kung ang mamimili ay ayaw bumili ang halaga ng anomang nasa market ay mawawalan ng halaga.

GF: Anomang economic theories ang ihagis mo sa harapan ng mamimili kung gusto nyang bumili bibili sya. Kung ayaw bumili hindi sya bibili. Kung may ibibili sya bibili sya. Kung wala naman syang ibibili hindi sya bibili.

RC: tama...generally, ang mga mamimili ay walang pakialam sa anumang economic theories...basta may pera, bibili ng gusto nila at kahit may gusto pa silang bilhin kung wala namang pera wala din silang magagawa...kung bakit mukhang mahirap ang simpleng bagay para sa mga austrians, hindi rin kasi ganon kasimple ang ginagawa ng interventionismo sa matiyaga at dahan-dahang pagkuha ng kapangyarihan ng mga mamimili...at ito ay hindi lantaran...ginagawa ito ng interventionismo sa paraan na tatanawin pa ng utang ng loob ng mga mamimili...

GF: Ang mamimili bumibili dahil may ibibili. Ang walang ibibili hindi makabibili. Anomang intervention ang mangyari at gawin nararamdaman lang ito kapag hindi marunong ang mamimili. Subalit karamihan ng mga maimimili na marunong bumili alam nila kung saan at alin ang kanilang bibilhin.

GF: Hindi ako naniniwala sa tinataguriang intervention.

RC:  Ka GF, I respect your opinion on interventionism...marahil marami sa govt. bureaucrats ay hindi rin aware sa long-term effect ng mga economic and monetary policies...for those who want to explore the relationship between economic freedom and interventionism, ... I am still reading it...

GF: Ka RC hindi lang Austrian model ang tignan mo. Sa karamihan ng capitalistic economy Keynesian ang model. Sa restoration ng Europe German model naman na hango din ang idea sa Austrian model. However, sa america may influencia din ang Friedman model.

GF: Consumers want and expect attributes from what they buy -- quality, safety, value - depending of course on the price they pay.

RC: Kaya nga sabi ko kay Ka JPP, depende saan ka nanggagaling o anong gamit mong economic theory...ikaw ba ay nanggagaling sa non-fiat monetary theory, Keynesian, Friedmanian, Schumpeterian and Austrian...so your chosen economic theory will determine the outcome of your analysis...so far kasi ngayon, sa pagkakaalam ko kahit mga mainstream economists are now recognizing the validity of the Austrian analysis particularly in relation to 2008 crisis...at isang halimbawa na diyan ay ang paper ni Jerry H. Tempelman na kaniyang sinulat nang 2010, “Austrian Business Cycle Theory and the Global Financial Crisis: Confessions of a Mainstream Economist”. For him, among several schools of economics, the Austrian school is now considered the most reliable source of interpretation of the 2008 global financial crisis with its business cycle theory. Dagdag pa niya, ang talaan ng mga pangalan ng mga mainstream economists na naimpluwensiyahan ng ABCT ay kasama sina William Dudley, Paul Krugman, The Economist, Taylor (2007), Jarocinski and Smets (2008), Smithers (2009), and Vogel (2010), Tobias Adrian and Hyun Song Shin (2009), and Brunnermeier (2009). The fact is, according to Tempelman, since 2008, many Federal Reserve officials have shown some “positive signs” acknowledging the mistake of their monetary policy. They are now considering some ideas for monetary reform. Ang malungkot nga lang, despite of the accuracy of the Austrian school, its proposal is still considered too radical and therefore rejected.

RC: thinking that you might enjoy this video...keynes vs. hayek (a former socialist converted to austrian way of thinking through mises)...Fight of the Century...