A Powerful Argument Against Drug Prohibition...

...by John McWhorter at the Cato Institute (Dec 3rd, 2010)

The Case Against Alexander Hamilton

There has always been much to criticize when it comes to the decisions of the federal government. The extent to which that government, particularly the legislative and executive branches, contravenes the rights of American citizens is reflected by the innumerable individual struggles that Americans seeking a reprieve wage against Washington: the struggle against Obamacare, against the bailouts, against the Fed's monetary policy, against "cap and trade," against the expiration of the Bush tax cuts, etc. I could scarcely argue that these battles are not worthy ones, but as Henry David Thoreau, in a moment of profundity among many, once said, "There are a thousand hacking at the branches of evil to one who is striking at the root."

I'm convinced there is a "prime mover," a catalyst behind much of what the government is doing wrong today, and while there is a list of candidates who fit the description of such a catalyst which includes Theodore Roosevelt, Franklin Delano Roosevelt, Woodrow Wilson, and others, I think that title of ignobility belongs ultimately to Mr. Alexander Hamilton. He is a darling among some conservatives and is even thought by many to be the foremost advocate of capitalism among the Founders, surprisingly enough. Nonetheless, when he was alive, before he was offed by Aaron Burr, Hamilton advocated on behalf of quite a few dangerous political ideas, some of which I will mention here. He:

1.) supported the distribution of "pecuniary bounties" to certain manufacturers, 18th century parlance for corporate welfare, and defended this decision in his 1791 Report on Manufactures by appealing to the General Welfare Clause in which he wrote that "[T]he power to raise money is plenary and indefinite, and the objects to which it may be appropriated, are no less comprehensive thin the payment of the public debts, and the providing for the common defence and general welfare. The terms "general welfare" were doubtless intended to signify more than was expressed or imported in those which preceded..." ("Those" refers to the preceding terms in the General Welfare Clause.)

2.) argued in Federalist No. 23 that the power "to raise armies; to build and equip fleets; to prescribe rules for the government of both; to direct their operations; [and] to provide for their support...ought to exist without limitation..." (He defends his position further, but nevertheless, this was his belief.)

3.) supported the tax on whiskey which lead to the infamous Whiskey Rebellion. After the rebellion broke out, Washington, after Hamilton's urging, led a force a 13,000 militiamen accompanied by Hamilton, who eventually was put in charge, to put the rebellion down and facilitate collection of the taxes. Many officers of Washington's army where holders of government bonds. The rebellion increased the default risk of the bonds and therefore the prices of the bonds (no bueno for bondholders)

4.) supported an ever increasing supply of government bonds and therefore more government borrowing. Debt finance was more politically palatable than tax finance and Hamilton knew that the majority of the bondholders would be wealthy individuals, hence creating a powerful political faction that would be reliable agitators for tax increases to ensure the quality of their bonds.

5.) supported numerous tariffs and excise taxes, a carriage tax, and a national property tax which provoked a rebellion in Pennsylvania called the Fries Rebellion. He believed these taxes would actually encourage production (he hadn't met Arthur Laffer) and would maintain the quality of government bonds. Higher taxes would ensure a higher credit rating and therefore increase the demand for government bonds. The tariffs he endorsed were designed to protect Northern manufacturers against European competitors, to the detriment of Southern importers of Northern goods.

6.) succeeded in getting the federal government to nationalize the war debt of the states. Citizens of states such as Virginia that already fulfilled their state's war debt obligations were forced to help pay for the war debt obligations of states like Massachusetts whose citizens had not yet discharged their war debt.

7.) argued in favor of a central bank, the Bank of the United States, in his Opinion as to the Constitutionality of the Bank of the United States by claiming that the "implied powers" expressed by the Constitution enabled the federal government to charter a national government bank. The purpose of the bank was to issue bank notes representing gold and silver and to act as a depositary for government funds. It eventually began engaging in fractional reserve banking and lent money to Northern businesses and the government, the latter receiving $6.2 million in 1796 when the Bank's reserves were only worth $2 million, causing a 72% rise in prices from 1791 to 1796.

8.) was "the bastard son of a Scotch peddler." (John Adams)

Personally, it appears that Hamilton was the precursor to the nonsense of over-spending, over-borrowing, and monetary inflation that plagues the U.S. today. Given these details, I don't understand why an advocate of limited government and capitalism would champion Hamilton today.

(The points against Hamilton are all derived from Thomas DiLorenzo's excellent book Hamilton's Curse).

Raw Foods Raid - The Fight For the Right To Eat What You Want

Richard Epstein on Barack Obama, his former Chicago Law Colleague

Martin Wolf is Confused About Fractional Reserve Banking, Part 1

In a post at FT.com where he elaborated on what he believed were technological obstacles to the establishment of a gold standard, economist Martin Wolf made the following claims:

"Economists of the Austrian School wish to abolish fractional reserve banking. But we know that this is a natural consequence of market forces. It is wasteful to hold a 100 per cent reserve in a bank, if depositors do not need their money almost all of the time. Banks have a strong incentive to lend some of the money deposited with them, so expanding the aggregate supply of money and credit."

Clearly, one can conclude from this analysis that Dr. Wolf is uninformed of the Austrian critique of fractional reserve banking. Let us scrutinize Wolf's first claim, that fractional reserve banking "is a natural consequence of market forces" i.e., of the market operating.

We must begin with a description and analysis of markets. A market is a network of economic agents who voluntarily exchange ownership of goods between each other. A free market is a network where the economic agents engage in such exchange in the general absence of aggression, of initiatory violence. If markets exist within society, then private property rights are recognized to some extent in society, for the recognition of private property rights are a necessary condition for the existence of markets (in the proposition "If p, then q" q is a necessary condition for p). If all markets are networks of economic agents who voluntarily exchange ownership of goods between each other, then all markets are social phenomena that presuppose the recognition of private property rights precisely because all networks of economic agents who voluntarily exchange ownership of goods between each other are social phenomena that presuppose the recognition of private property rights.

All voluntary transfers of ownership of goods are exercises of private property rights. If a particular social order denies the exercising of private property rights, then such a social order cannot contain voluntary transfers of ownership of goods. When there are no exercises of private property rights, there are no voluntary transfers of ownership of goods. That settles that.

Thus, market operations ("market forces") are non-coercive operations, since coercion is the only means by which one may violate the private property rights of another. As a result, no market operations can possibly involve fractional reserve banking because such banking is not a non-coercive operation. How so?

Well, fractional reserve banking is a simple process. A bank first enters into monetary irregular deposit contracts with customers. A monetary irregular deposit contract is a voluntary agreement between two parties where one party, the depositor, agrees to transfer custody of a certain quantity of money to the other party, the depositary, for the purpose of safeguarding the quantity of money, in exchange for a safeguarding fee charged by the depositary. According to such a contract, the depositor only relinquishes custody of the quantity of money; he does not relinquish ownership, something which he still retains and which allows him to regain custody of his quantity of money on demand. In short, according to such a contract, the depositor's quantity must remain constantly available to him. In exchange for the deposit, the depositary gives the depositor a deposit receipt or deposit receipts (also known as bank notes) which act as money substitutes. They represent the quantity of money he deposits and he uses them to regain custody of his deposit by submitting them to the depositary. After a bank enters into many such deposit contracts, its total reserve of money increases.

Fractional reserve banking is the practice of lending money substitutes to borrowers who have not deposited money with the lender, where the lent substitutes give the non-depositing borrowers in question a claim to a portion of the total reserve, the reserve being the product exclusively of acts of depositing by depositors. A hypothetical scenario will help to expalin this practice. Lets say Smith Bank enters into a monetary irregular deposit contract with depositor Jim and as a result the depositor Jim deposits 1,000 ounces of gold into Smith Bank. In exchange for their deposits, Smith Bank gives deposit receipts (which act as money substitutes) to depositor Jim which are collectively worth 1,000 ounces of gold and allow the depositor Jim to withdraw his gold on demand. So far, Smith Bank's total reserve = 1,000 gold ounces and it has issued deposit receipts = to 1,000 gold ounces.

Fractional reserve banking occurs when Smith Bank decides to lend, say, deposit receipts to borrower Rick that give him a claim to 900 ounces of gold within its total reserve. When this occurs, Smith Bank produces a conflict of property rights where depositor Jim and borrower Rick each possess a claim to the same physical quantity of gold; the deposit receipts held by depositor Jim and borrower Rick each grant them exclusive control over the same deposit. Naturally, this contradicts the conditions of the monetary irregular deposit contract, according to which depositor Jim is to possess exclusive control over his deposit of money. He cannot control his entire deposit of gold if borrower Jim reserves the right to withdraw 900 ounces of it. Fractional reserve banking necessitates the violation of monetary irregular deposit contracts by granting other parties the ability to withdraw (i.e., steal) portions of deposits made by depositors. Such an ability prevents the depositors from exercising their private property rights, which includes the right to withdraw their deposits on demand. As economist Murray Rothbard once argued, such a banking practice amounts to embezzlement, a violation of private property rights.

That takes care of the nature of fractional reserve banking as a non-market institution.

I'll deal with Wolf's other two claims in later posts.

Lawrence O'Donnell on Gun Control

Lawrence O'Donnell proclaims to fellow collectivist Glenn Greenwald that the federal government should "ban all guns in America" (2:14). So much for the 2nd Amendment.

The Madness of Barack Obama

3 Reasons This Election Didn't Change A Thing

Timothy Sandefur on The Right to Earn a Living

Is Obama A Keynesian? Rally For Sanity, 10/30/10

The Young Turks Support the Protest in France?!

Why Can't Chuck Get His Business Off the Ground?

Defending Rich People

My first essay as the NY government waste examiner.

Don't Call Them Progressives

No one is without a pet peeve, a bete noire as some might say. No one. Suspicion is the only appropriate attitude concerning those who deny that there is something toward which they have only antagonism. I myself suffer from quite a few personal annoyances, namely occupational laziness, flamboyant hipsters (or hipsterism, if you prefer), political campaign ads, Che Guevara T-shirts and the obtuse people who where them, etc. I don't like these things; they provide me with an inexhaustible source of aggravation - in this respect they are quite reliable. However, I would like to discuss a particular irritation that I unfortunately (due to my cerebral interests) must encounter on a daily basis, that being the labeling of collectivists and of collectivist ends as "progressive."

It may surprise some (or not) upon realizing the fact that, from my experience, the more I learn, the more I scorn; this is particularly true when that which is being understood is free-market economics. After having become sufficiently acquainted with the workings of the capitalist economy (enough to call myself an amateur economist), its nature, its optimality with regard to human progress, and its now (personally) obvious supremacy over all other discrepant forms of social organization, nouns which previously meant little or nothing to me now provoke very poignant, very unambiguous emotional reactions. Franklin Delano Roosevelt and Woodrow Wilson now are contemptuous, fantastically intolerable half-wits of the state. Alexander Hamilton is a treasonous, scheming, non-revolutionary "bastard son of a Scotch peddler" (thank you John Adams). Martin Luther King Jr is a courageous albeit misinformed, overrated (now de facto canonized) opponent of genuine freedom. Mother Teresa is an abject, "gruesome, elderly virgin" and a "thieving fanatical Albanian dwarf" (thank you Christopher Hitchens). The list of slain sacred cows proceeds indefinitely.

Nevertheless, the grievance of which I am about to speak, yet another product of my free-market enlightenment, first emerged during my second year of college. One day, just for fun, I asked my political science professor to label himself politically. An unequivocal socialist and clumsy propagandist, Dr. Bauzon spent the majority of his tenured time casting aspersions at corporations, President Bush, and what he called the "neo-liberal agenda," all while advertising on behalf of the welfare state, rights to other people's property, and other such pearls of "social justice." Needless to say, his lectures were grotesquely unattendable and the literature he gave us, whether it was the essay questions he submitted for tests or the texts he had us waste our money on, was replete with a staggering bias. At least Marx was eloquent.

I recall my professor muttering some nonsense about anti-trust laws, the workers' struggle, and his appreciation for Theodore Roosevelt (another of my deceased non-heroes, the desecration of whom I'm equally prepared to partake in) in response to my inquiry about labels. At the end he said, "Therefore, I would call myself a progressive."

Now, the non-political definition of "progressive," according to Dictionary.com is "favoring or advocating progress." What's "progress?" It's "gradual improvement or growth." Let's assume that progress of this kind implies a continual improvement in the general standard of living among a group of people. Surely its not necessary to prove why abundance is preferable to destitution. If this is the case, then it would only be appropriate for collectivists to label themselves as "progressives" if their agenda proved to be genuinely progressive; if collectivists can legitimately label themselves as progressives, then they must endorse truly progressive policies. But is the consequent of this hypothetical proposition true? Let this be the first conditional test of collectivism.

While browsing through Craigslist's New York employment page I found an ad from something called the Working Families Party. After some research I discovered that, according to its website,

"The Working Families Party (WFP) is New York’s liveliest and most progressive political party."

The site provides enough information to test the credibility of the collectivist agenda and, therefore, the appropriateness of the "progressive" label. There's no mistaking the WFP's political stance.

Since joblessness is a pressing issue, let us use it as part of our assessment. No doubt, less unemployment is preferable to more unemployment, if progress is of value to us. Therefore, if the fulfillment of collectivist ends serves as a cause of rising chronic unemployment, then the fulfillment of said ends cannot be considered progressive. Let this be the second conditional test.

Unfortunately, the Party's "vision" bodes catastrophe for New York's jobless. Among the objectives of the Party include the imposition of a "living wage"(unspecified but undoubtedly higher than the minimum wage), paid family leave mandates, and compulsory employer-paid health coverage. Though it certainly has not dawned on any of the members of the WFP, these proposals, if legalized, would needlessly frustrate job creation.

A brief explanation of the capitalist mode of production will illustrate my point. A capitalist economy is one in which all property is privately owned. In order for economic agents to survive and flourish in a capitalist environment, they must produce goods for sale that other such agents are both willing to buy and capable of buying i.e., they must satisfy consumer demand. Entrepreneurs, along with capitalists, are the chief satisfiers of consumer demand. They go about satisfying demand by acquiring factors of production (things like land, labour, and capital goods) and using those factors cooperatively to produce those goods which are the object of consumer demand. Acquiring factors is a costly endeavour; land must be purchased or leased from landowners, capital goods must be purchased from higher-order entrepreneurs, labourers must be paid for their labour, and financial capital (a capital good itself), the money that allows entrepreneurs to acquire factors in the first place, must be sought from capitalists and investors patrolling the primary debt and equity markets.

If the difference between the amount of money an entrepreneur earns from sales and the amount of money he/she spends on factor acquisition is positive, then its referred to as a profit; if negative, then it called a loss. Low costs translate into higher profits, hence entrepreneurs continually seek to cut costs. Mandates for "living wages," paid family leave, and employer-provided health insurance all raise the cost of acquiring labour. According to the law of demand and the elasticity of the demand for labour, as the cost or price of labour increases, the quantity of labour demanded by employers decreases. To translate this bit of economic jargon, if the government forces employers to pay their employees more money in wages and benefits, then employers will tend to not only refrain from hiring further labour, they will begin firing some of their least productive employees and possible restrict the hours of others. If the new compulsory wage is, say, $10/hour, than those individuals whose productivity lies beneath $10/hr will face a serious risk of joblessness. Many will be "priced out of the market" and any newcomers to the labour market now will have to meet or exceed the $10/hr threshold if they are to possess job security. Poof! Rising unemployment and underemployment.

The chronically high unemployment found lingering in Europe is caused in part by similar economic stratagems. The equivalent "progressives" there have added stringent labour regulations to their political program, turning the process of firing an employee, particularly a government employee, into a legal ordeal. Hence, the cost of labour rises and the quantity of labour demanded drops.

We want this - now? This is progressive? What nonsense. This is the same pathetic, Orwellian irony that the Obama campaign draped itself in with its "hope" and "change" platitudes; the former is without justification and the latter, though we have been told to expect it, has yet to manifest (good change, that is).

So it seems our hypothetical argument is complete: The fulfillment of collectivist ends cannot be considered progressive because the antecedent of the second conditional test proposition is true. Furthermore the consequent of the first conditional test proposition is false, therefore its not true that collectivists can legitimately label themselves as progressives.

Picture courtesy of Charles Fettinger

On My Blogging Absence

I'm returning to blogging after having worked 6 to 7 days per week at a fantastically busy restaurant in Manhattan. Keeping up on bond data is too exhausting, so for now its economics and philosophy. It's good to be back.

Published with Blogger-droid v1.6.0

Dr. Thomas Woods on Nullification

Great video on a much needed political instrument.

Shilling Discusses Outlook for Euro, Treasury Market: Video

via Bloomberg

An Epistemological Problem with Anarchism

Libertarians have always been known as opponents of government intervention. However, the popularity of the idea that government is an aggressive institution per se and that it should be abolished and replaced with, among other alternatives, private courts and law enforcement agencies, has been growing among libertarians. The following will demonstrate that government is not an aggressive institution per se, that its existence is a necessary condition for the long-term maintenance of civil society, and that, by extension, its absence, also known as anarchism, is neither sustainable in the long-term nor desirable.

Lets begin by clarifying some terms. A government is an institution, equipped with factors of production, that monopolizes the use of force over a given geographic area. By "monopolize" it is meant to control something (in this case, the use of force) to the exclusion of all others. "Monopoly" will be further used to mean "exclusive control." The geographic area within which a government monopolizes the use of force is called its jurisdiction. Force (also known as coercion) refers to any act that, borrowing from Gennady Stolyarov, disrupts the physical integrity of a person's body, property, or obstructs a person's ownership of his or her property. A punch that leaves the recipient with a black eye is an example of a forceful act.

There are two kinds of forceful or coercive acts: initiatory and non-initiatory (or retaliatory) acts. An act of initiatory force is any act that involves starting the use of force against another; it means using force against one who has not himself started the use of force against another. If Smith is minding his business and has not initiated the use of force against another within society, and Jones approaches Smith and punches him in the face, then Jone's act of force is initiatory. An act of retaliatory force is any act that involves using force in response to and against an aggressor, someone who has committed an act of aggression, i.e., either an act of initiatory force or an act whereby the actor threatens to initiate the use of force. Within the category of retaliatory force we have emergency force, a type of retaliatory force which involves the use of force against another (i.e., an aggressor) who has either initiated the use of force or has threatened to initiate the use of force, where recourse to the government (in particular, the police) is impossible if the government exists (we will see what this means shortly).

A society is merely a group of people who live in close proximity. A civil society is a group of people, living in close proximity, who generally refrain from initiating the use of force or threatening to initiate the use of force against each other, i.e., aggression. A civil society is a society governed by the non-aggression principle, a normative proposition which asserts that "All acts that involve initiating the use of force or threatening to initiate the use of force are immoral and should be prohibited." The importance of an emphasis on force rests upon the fact that only by force may one violate the moral rights of another. A moral right is an legal sanction to commit a specific act in the absence of interruption that one should possess (as opposed to a legal right which is a legal sanction to commit a specific act in the absence of interruption that one does possess). Each and every non-aggressing human being possesses moral rights, the three most broad moral rights being those to life, liberty, and private property. According to Craig Biddle,

The right to life is the right to act as one’s life requires—which means, on the judgment of one’s mind. The right to liberty is the right to be free from coercive interference—so that one can act on the judgment of one’s mind. The right to property is the right to keep, use, and dispose of the product of one’s effort—which one does by acting on one’s judgment.

A Hypothetical Scenario

The epistemological problem of anarchism referred to in the title may be best understood through a hypothetical scenario. Let's say that Jones is resting on a bench in Central Park (assume Central Park is privately owned, so a special "anonymous" someone won't wet him/her/itself - you know who you are), adjacent to Smith with whom he shares the bench. Now lets say that Adam approaches the bench in a van, exits the van, apprehends Jones (coercively of course), announces to Jones that he is under arrest for having committed an act of theft against him, informs Jones of his legal rights, throws him in the van, and drives away. Let's assume that none of the three men has met another before, nor has any man heard news of another before. Consider the epistemic condition of Smith, an individual among others, after this event transpires. He, along with a few other people, has just witnessed an arrest of one man by another man. Can he determine if Adam's act of force against Jones is initiatory or retaliatory? Smith is confronted with a profound disjunctive proposition: Either Adam's act of force is initiatory or retaliatory. Is he capable, in this epistemic state, to determine which of the disjuncts is true?

Of course, the answer is undoubtedly no. Why? As stated earlier, an act of force is initiatory if its use is started by one agent against another. An act of force is retaliatory if its employed against another who has either initiated the use of force or threatened to initiate the use of force. Thus, in order to determine if Adam's act of force against Jones is either initiatory or retaliatory, Smith would have to know if Jones aggressed against someone or not. If Jones aggressed against someone, then Adam's act of force is retaliatory; if Jones did not aggress against someone, then Adam's act of force is initiatory.

We must ponder a further question before we answer the first. Does Smith know if Jones has aggressed against another previously or not? No, because it is assumed that each man has been unaware of the existence of the other until the coercive incident. Thus, Smith cannot possibly know if Adam's act of force is initiatory or retaliatory because he cannot meet the necessary conditions for the possession of such knowledge. This is the epistemological problem before Smith.

Smith neither knows if "Adam's act of force is initiatory" or "Adam's act of force is retaliatory" is true. Adam may be a righteous retaliator or a kidnapper. This fact demonstrates that if its not proven that an act of force is going to be retaliatory before its committed, then such an act, when it occurs, is indistinguishable from an act of initiatory force. In this case, Adam's status (either he is an aggressor or a retaliator) is not self-evident to Smith.

A logical conclusion from the above event is that Adam is a threat (a potential violator of moral rights) and as such is a hazard not only to Smith but to his local community. Consider the following argument. Adam is an individual who uses non-emergency force without first demonstrating to the local community that his act of force will be retaliatory. An individual who uses non-emergency force without first demonstrating to the local community that his act of force will be retaliatory is a potential violator of moral rights; therefore, Adam is a potential violator of moral rights. Furthermore, a potential violator of moral rights is a hazard to the local community; therefore, Adam is a hazard to the local community.

Limited Government as the Solution

Naturally, the question "how can a local community deal with Adam as a hazard?" arises. Since any individual who uses force as Adam does is a threat, the pressing question is "how can a local community deal with private threats, with the hazard of private, non-emergency force, i.e., force employed by individuals without governmental approval and without prior public knowledge of its nature and, therefore, indistinguishable to society's members from aggression?" Private force is force employed by any person or persons without expressed governmental approval (we'll see what a government is later). We see that it is not enough that Adam prove to himself that his act of force is going to be retaliatory. What makes him a threat is the fact that he fails to prove to those within his local community that his act of force is going to be retaliatory. If the members of civil society consider it to be a value, then ipso facto they will do what is necessary to protect it against both violators and potential violators of moral rights like Adam. If the consequent is false, then so is the antecedent.

The solution then to the hazard of private force is to ban it, with the exception of its emergency form; the members of civil society must organize to prohibit private, non-emergency force. As an important side note, if Rick is attacked by Chris, then Rick possesses the moral right to employ emergency force against him without proving to the pubic that his use of force is going to be retaliatory because Rick's attack puts Chris in a situation where such an obligation cannot possibly be fulfilled without harmful consequences, i.e., without having to focus on something other than self-defense (he would however, in a civil society, be forced to prove to others after the incident that his use of force was emergency-based, not initiatory). In such a situation, recourse to assistance may be impossible. But by organizing to ban the use of private, non-emergency force, the members of civil society retaliate against the hazard of private, non-emergency force. Acting against the hazard of private, non-emergency force, in this case, is a retaliatory act, not an initiatory one. The hazard of private, non-emergency force arises from the nature of society, and by organizing to ban its use the members of civil society act in response to it.

Yet while private, non-emergency force should be banned, it should also be noted that force is still an instrument that needs to be used, even in civil society. History lucidly demonstrates that the existence of civil society does not preclude the existence of aggressors; there always have been willing users of aggression and there will continue to be such people in the foreseeable future. The only efficacious method of protecting one's moral rights from aggression is through retaliation - force. Murderers, rapists, and thieves - users of aggression - can only be stopped with countervailing force. Thus, the next question that must be answered by advocates of civil society is "how can the individuals of a local community:

1.) effectively ban private, non-emergency force and simultaneously
2.) employ retaliatory force in a way that effectively protects the moral rights of individuals within that local community?"

The answer is by permitting some within civil society to use force, including the force that's required to effectively maintain a ban on the use of private, non-emergency force, within a well-defined geographical area on the condition that they will sufficiently demonstrate, publicly and before they use force, that their coercive acts will be retaliatory ones. Those individuals who are allowed to use force under such conditions are collectively referred to as government. All or most of a particularly small community could preside over the granting of a conditional permission to a capable individual or individuals to use force against an aggressor or to use force to maintain a ban on the use of private, non-emergency force. However, as a community increases in population size, in population density, and spreads out over a broader area, the presence of most, let alone all community members becomes impossible. In order to cope with this problem, the community must refer the presiding to representatives, again on the condition that they will ensure that anyone who wishes to use force must prove publicly that their act of force will be retaliatory. In this situation, government becomes not only those who are permitted to use force but those who preside over the granting of conditional permissions on behalf of the citizens who cannot preside over them. As populations grow, the referring as described above will be performed by more and more individuals, making government larger and therefore more capable of mitigating the problems of population growth. Eventually, population growth may even warrant a division of a jurisdiction.

But nevertheless, a rights-respecting government protects the moral rights of its citizens by retaliating against those who initiate the use of force or threaten to initiate the use of force. Those who use private, non-emergency force or threaten to use such force ipso facto are threatening to initiate the use of force, therefore, the government contributes to the protection of moral rights when it retaliates against those who employ or threaten to employ such force. In order to simultaneously ban private, non-emergency force and employ force on behalf of its local community, a government must monopolize the use of retaliatory force. And in all cases, a rights-respecting government is transparent and accountable to the people within its jurisdiction; cedant arma togae was once said.

Now, even with a government in place, Smith could not know with certainty that, say, if the police arrest Jones from the park bench that the police are employing retaliation rather than aggression. A government, or government employees, are quite obviously capable of employing aggression. However, with a proper, limited government in place, there is significant evidence to suggest that police activity is retaliatory activity, particularly when those who enlist within the police department demonstrate via training and oaths that they are committed to the proper use of force. If police departments continue to employ force in a proper, retaliatory style over time, then the reputation of said departments and the inductive inference that police activity is probably retaliatory activity are both reinforced.

The Libertarian Anarchist Argument from the Non-aggression Principle Against Government

Many libertarian anarchists, especially those who agree with the above description of moral rights, aggression, and retaliation argue that government is antithetical to civil society. Their arguments range from appeals to economics, to history, and to morality. The following is a formalized version of perhaps their most popular argument, the argument from the non-aggression principle, famously offered by former libertarian anarchist Roy A. Childs against Objectivist Ayn Rand. Again, the non-aggression principle is an ethical or "ought" proposition which asserts the following: All acts that involve initiating the use of force or threatening to initiate the use of force are immoral and should be prohibited. The libertarian anarchist argument from the non-aggression principle proceeds as follows:

-Legend:
P = premise, C = conclusion, number (ex. P1m) indicates the order in which the proposition appears, m = minor premise, M = major premise

P1m -All institutions that monopolize the use of force within a geographical area are institutions that prohibit other individuals and institutions from employing force within that same area (of course, with the exception of emergency force in this case)
P2M -All institutions that prohibit other individuals and institutions from employing force within the same area are institutions that initiate the use of force
C1 -All institutions that monopolize the use of force within a geographical area are institutions that initiate the use of force

P3m -A government is an institution that monopolizes the use of force within a geographical area
C1P4M -All institutions that monopolize the use of force within a geographical area are institutions that initiate the use of force
C2 -A government is an institution that initiates the use of force

C2P5m -A government is an institution that initiates the use of force
P6M -All institutions that initiate the use of force are things that are antithetical to a civil society
C3 -A government is something that is antithetical to a civil society

The following propositions are false:
-P2M, C1P4M, C2P5m, C3
The following propositions are true
-P1m, P3m, P6M

The forms of the sub-arguments within the broader libertarian anarchist argument are all valid. Unfortunately, for the libertarian anarchist, each sub-argument contains a false premise, which ultimately dooms the conclusion of each to falsity. A valid form (such that its impossible for the conclusion to be false while the premises are true) and true premises are necessary conditions for the existence of a sound argument. In order for the libertarian anarchist argument to properly represent reality, it must be sound, not merely valid.

A Critique of the Primary False Proposition within the Anarchist Argument

1.) P2M -All institutions that prohibit other individuals and institutions from employing force within the same area are institutions that initiate the use of force.

This is false. Its often objected by many libertarian anarchists that, within a geographic area in which the use of force is monopolized by the government, the government, as part of its monopoly of the use of force, prohibits individuals or institutions from competing with it with regard to the use of force to protect moral rights. This is true - if the government monopolizes the use of force within a geographical area, then it prohibits all others from competing with it with regard to the use of force to protect moral rights. However, these same libertarian anarchists go on to argue that if the government prohibits all others from competing with it with regard to the use of force to protect moral rights, then the government initiates the use of force, thereby making it inherently antithetical to the non-aggression principle and, therefore, anathema to civil society.

The reason why it is not true that if the government prohibits all others from competing with it with regard to the use of force to protect moral rights, then the government initiates the use of force - the reason why "All institutions that prohibit other individuals and institutions from employing force within that same area are institutions that initiate the use of force" is false is because by prohibiting competition with regard to use of force in the protection of moral rights, the government (a limited one with the purpose of protecting moral rights) retaliates against the hazard of private, non-emergency force.

How does society, how does a local community know if, under libertarian anarchism, a competing protection agency actually uses retaliatory force when it uses force? Under a rights-respecting social system where the government monopolizes the use of force, its monopoly is conditional - its granted to it by society's members on the condition that it use its monopoly only to use retaliatory force and only to protect moral rights. After the individuals of the government demonstrate to the local community that they are both capable of and willing to use force only retaliatorily and only in the protection of moral rights, then its reasonable to assume that future coercive acts committed by the government will be retaliatory, rights-protecting ones. Each member of government can display such a capability and willingness through a number actions such as (as members of the police and the military do today) taking oaths, agreeing to certain terms of employment via legal documents, undergoing appropriate training, etc. A vigilant citizenry of course will, without intermission, scrutinize their government in order to ensure that it continues to use force only in a retaliatory way and only to protect moral rights; there's nothing inconceivable about a corrupt and inefficient government being overhauled by disillusioned, liberty-loving citizens.

However, how can a local community obtain such an assurance under libertarian anarchism? Its conceivable that under libertarian anarchism, a private protection agency could voluntarily prove to society's members that it intended to use force only in a retaliatory way and only to protect moral rights. However, the problem is that under libertarian anarchism, the condition that one demonstrate, before using force, that one's use of force will be retaliatory and employed in the protection of moral rights, does not exist as a law, i.e., as an enforced rule of social conduct. Solving the dual social problem of simultaneously protecting moral rights against the hazard of private, non-emergency force and enabling the use of retaliatory force to protect moral rights in general requires a solution that is illegal under libertarian anarchism. In order to protect themselves from the hazard of private, non-emergency force, a local community must ban the use of private, non-emergency force. Meanwhile, citizens must use force to protect themselves against aggressors like murders and thieves. The only effective way to perform both is to, as argued above, vest some within a local community with the conditional monopoly of force as articulated above. Unfortunately, the granting of such conditional monopoly is criminal under libertarian anarchism, for under libertarian anarchism it is illegal to prohibit competition with regard to the use of force to protect moral rights. Consider the following argument:

-The granting of conditional monopoly of the use of force is something that involves banning the use of private, non-emergency force and, therefore, banning competition with regard to the use of force to protect rights
-Something that involves banning the use of private, non-emergency force and, therefore, banning competition with regard to the use of force to protect rights is something that is illegal under libertarian anarchism
-The granting of conditional monopoly of the use of force is something that is illegal under libertarian anarchism

Since proposition P2M is false and the entire libertarian anarchist argument is valid, the libertarian anarchist argument is unsound.

In summary, the epistemological problem with libertarian anarchism is that it allows private, non-emergency force, i.e., force employed without a prior demonstration that it will be retaliatory and employed in the protection of moral rights. Such force is, by definition, not proven to be retaliatory, ergo it must be inferred by society's members, whom such force thereby threatens, that such force is aggressive. Society overcomes this problem by creating an institution called government which allows the people to retaliate against the hazard of private, non-emergency force as well as employ force to protect moral rights in general.


-Biddle, Craig. "“Immigration and Individual Rights” by Craig Biddle." The Objective Standard: A Journal of Culture and Politics. 2008. Web. 14 July 2010. http://www.theobjectivestandard.com/issues/2008-spring/immigration-individual-rights.asp.
-Watkins, Don. "Epistemological Anarchy." Diana Hsieh: NoodleFood. 22 Dec. 2005. Web. 14 July 2010. http://blog.dianahsieh.com/2005/12/epistemological-anarchy.html.

Picture via Daniel Zanini H.

Why the Poor Should Pay Higher Interest Rates

Try as I may, I've found that its become increasingly difficult to convince "I have a right to healthcare" folks that they're wrong. I've produced a few adherents, but in terms of conversion rates its been an abysmal attempt. I enjoy the formal disproving process, but it would be nice to produce some influence.

Adding to the amalgam of illegitimate rights-claims is the alleged right to credit, the idea that such a thing as a moral entitlement to loanable funds exists. Of course, the belief in such a notion lies behind everything the federal government has done within the last 40+ years to promote homeownership, particularly among the poor.

At the same time, left-collectivists have been lamenting the fact that poorer borrowers often pay higher interest rates than wealthier borrowers on loans of similar maturities. Intuitively, this seems unjust: shouldn't wealthier borrowers pay higher rates given that they are more capable of paying them than poorer borrowers? Does this not prove that the market allows for the existence of exploitative, financial arrangements? Hardly.

A comparison of two credit transactions with similar maturities, one involving a wealthier party and one involving a poorer party, will help to legitimize the disparity. Let's assume that Simple Loan Inc., an institutional saver/creditor, unveils its willingness to offer $10,000 loans to potential borrowers. In other words, Simple Loan is willing to form loan contracts with potential borrowers. A loan contract is a voluntary agreement between two parties where one party, the creditor or lender, agrees to transfer ownership over an amount of money to the other party, the borrower, in exchange for a promise (usually expressed in written form) from the borrower to receive the exact same amount (the principal) back on a future date plus an additional amount (the interest) as a fee to compensate the lender for the time he/she spends without the principal.

Now, a lender in a loan contract cannot know with complete certainty that his respective borrower will repay him with the entire principal and interest fee. The future, as far as specific human conduct is concerned, is uncertain. We can only form probabilistic conclusions with statistics and inductive reasoning regarding repayment. Thus, if Jack borrows $10,000 from Simple Loan, Simple Loan cannot know with certainty that he will reimburse them. He can either repay or not repay; to use probability jargon, these are "mutually exclusive events."

Using the probability calculus, the situation involving Jack and Simple Loan would look as follows:

P(reimbursement v non-reimbursement) = P(reimbursement) + P(non-reimbursement) = 1,

meaning "the probability of reimbursement plus the probability of non-reimbursement equals 1." The sum of each is 1 because the probability that either will occur is 100%. Moreover,

P(non-reimbursement) = default risk (r),

the default risk being the probability that Jack will fail to reimburse Simple Loan.

The trouble for Simple Loan, and any lender for that matter, is quantifying the default risk associated with a potential borrower, including Jack. This is done by mathematically assessing Jack's ability to remunerate the loan. While Jack's ability to repay is expressed in quite a few ways, it's done so essentially through his productivity. The more productive Jack is, the more money he'll have, hence the greater probability he'll repay; the less productive Jack is, the less money he'll have, hence the lesser probability he'll repay.

Let's assume that Simple Loan's credit assessment of Jack unearths that he is fairly productive and, as a result, earns $100,000 annually. He pays his bills on time and has not failed to repay past loans. Let's further assume that given all of this information, Jack and Simple Loan agree to a $10,000, 7% simple loan contract.

Now assume that Adam is interested in borrowing money from Simple Loan as well. However, according to his credit assessment, he is approximately half as productive as Jack, earning only $50,000 annually. He's been shown to be delinquent at times when it comes to paying his bills and has delayed the repayment of his debt in the past. Given all this information, Simple Loan may agree to extend a simple loan of $10,000 to Adam, but only at a 10% interest rate. Is such discriminatory lending justified? Absolutely.

The reason why Simple Loan is justified in charging Adam with a higher rate than Jack for a loan of the same amount and maturity is because the default risk associated with Adam, who is less productive and therefore poorer than Jack, is higher than the default risk associated with Jack. This means that the probability that Adam will fail to reimburse Simple Loan is greater than the probability that Jack will fail to reimburse Simple Loan. Risk, any risk, is bad. If the risk associated with an investment increases, then the probability that the investment in question will yield a profitable return decreases.

The argument for such discriminatory lending is simple: Risk is a bad thing. Things that are bad ought to be mitigated. Therefore risk ought to be mitigated. The default risk associated with a risky borrower can be mitigated by increasing the interest rate charged to the borrower in question. In this case, the difference between Jack's rate and Adam's rate is an example of a default risk premium. A default risk premium is an increase in an interest rate charged by a lender to a borrower as compensation for incurring greater default risk on a debt instrument. Thus if Jack's rate is 7% and Adam's rate is 10%, then the default risk premium in this case is 3% (default risk premium = Jack's rate - Adam's rate). With a default risk premium attached to Adam's rate, Simple Loan can mitigate the default risk associated with Adam, i.e., the probability of a loss, by increasing the probability of a profitable return. The mathematics of Jack's loan and Adam's loan would look as follows:

The equation demonstrating the return on a simple loan is:

FV = PV(1 + i), where

FV = future value or the amount earned by the lender
PV = present value or the amount initially given by the lender to the borrower (also known as the principal)
i = interest rate or price of temporary ownership of the principal

If,

PV = $10,000
i = 7%
r = 3% (default risk premium attached to Adam's loan), then Simple Loan's return on Jack's loan (should he reimburse) would look like this:

FV = PV(1 + i), $10,700 = $10,000(1 + 0.07)

Simple Loan's return on Adam's loan (should he reimburse) would look like this:

FV = PV(1 + (i + r)), $11,000 = $10,000(1 + (0.07 +0.03))

The addition of a default risk premium may prima facie seem opportunistic, but after thoughtful analysis it should be understood that a default risk premium benefits both the lender and the borrower. The benefit to the lender is obvious; it allows the lender to mitigate against default risk and earn a higher return. However, a premium benefits the borrower as well by enabling the borrower to become creditworthy. Without default risk premiums, most lenders would refuse to lend to riskier borrowers. Default risk premiums effectively incentivize lending to such borrowers. Thus, default risk premiums increase the potential for positive-sum transactions.

Furthermore, default risk premiums increase the potential for third party benefits as well. By incentivizing lending to riskier borrowers such as small, fledgling businesses, such premiums increase the amount of financial capital and, therefore, the potential for profitable investments. Risky businesses that otherwise would not have financial capital now can acquire capital and use it to acquire more labour (i.e., create jobs), acquire more or better capital goods, or invest in R&D - business decisions that all serve to increase productive capacity and therefore the broader economy.

Risk is an omnipresent phenomenon. Default risk premiums allow lenders to cope with risk, risky borrowers to get their hands on financial capital, and other economic agents to benefit from investments in riskier firms. Abolishing such premiums reverses these trends, making lenders unnecessarily conservative, risky borrowers unnecessarily cash-starved, and third parties unnecessarily less well-off.

Picture via George Eastman House Collection

Ron Paul: Treasury Bills Are The U.S. Governments Last Bastion

via RonPaul2008dotcom

Crisis of Capitalism, The Critique

via HowTheWorldWorks

Finally Back from Camp Smith....

What Rising Rates Mean for Your Bonds

via MorningStar

Socialism and Fascism: A Political-Economic Spectrum Analysis

via Mises Media

Between Bullishness and Bearishness in Bond Markets

May has proven to be risk-awareness month for bond traders, as the 3-month, 5-year, and 10-year yields all experienced significant declines as traders withdrew from corporate debt markets and saturated Treasury markets.



via CNNMoney.com

A rise in the perceived riskiness of corporate debt encouraged traders to reduce demand for corporate bonds and increase demand for Treasury instruments, causing Treasury prices to rise and Treasury yields to drop as the supply of loanable funds increased. "As a result," according to Investor's Business Daily, "Treasury bond funds soared in May. They gained 3.48% on average, according to preliminary data from Lipper Inc. Funds owning agency-backed securities scored gains too."

No doubt, the recent activity within the bond markets can be attributed to the debt crisis in Europe. Treasury bills, bonds, and notes are considered to be safe-haven instruments, as reflected by their routinely stellar credit ratings. However, Treasury prices fell yesterday and it appears that Treasury yields are on the rise again. According to Reuters, "Benchmark 10-year notes US10YT=RR were down 15/32 in price at 101-18/32 after rising to a session high of 102-2/32. Their yield, which moves inversely to price, was 3.32 percent, up 5 basis points from late on Tuesday but still far below the high of 4.00 percent hit in early April." This indicates that perhaps a mild bullishness exists among traders.

Japanese Govenerment to Exempt Foreign Investors from the Corporate Bond Tax

Good news from Japan. According to Reuters, the Japanese Financial Services Agency is seeking to temporarily exempt foreign investors from paying the corporate bond tax on Japanese bonds. Why? According to the FSA, the corporate bond tax is a 15% fee withheld from the interest income earned from holding Japanese bonds. According to Reuters, "Out of some 68.1 trillion yen ($748 billion) in Japanese corporate bonds outstanding as of March 2009, foreigners held a mere 0.6 percent." FSA officials believe that the corporate bond tax is but one cause of this diminutive attention from foreign investors.

If the goal of the FSA is to increase the demand for Japanese bonds, then removing the corporate bond tax is an appropriate decision. Ceteris paribus, if taxes imposed upon the bond-interest earned by bondholders (lenders why purchase bonds) decrease, then the wealth of bondholders and the expected returns on bonds will increase. Furthermore, if the wealth of bondholders and the expected returns on bonds increase, then the demand for bonds will increase as well since these are determinants of bond demand.

Moreover, if the demand for bonds increases, then the supply of loanable funds will increase, since every bond transaction involves an exchange of loanable funds from bondholders to bond issuers. The exemption proves to be a step in the right direction for Japan, especially since it will enhance Japan's competitiveness with nations like Germany, Britain, France and the U.S. where such taxes on foreigners are non-existent.


-Kitano, Masayuki, and Naoyuki Katayama. "Japan to Exempt Foreigners from Corporate Bond Tax | Reuters." Business & Financial News, Breaking US & International News | Reuters.com. 01 June 2010. Web. 02 June 2010. http://www.reuters.com/article/idUSTOE65000X20100601

Against Democracy!?!

Without a doubt, it is the most overrated idea of them all. Few find anything wrong with it. Fewer people bother to critically examine it. Its almost universally accepted in the West.

However, ever since I starting reading Mencken lately I realized that there have been and continue to be a few willing dissenters.

Mencken was among a depressingly small minority of thinkers who understood the perils of an unregulated democracy. Of course, the classic definition of democracy is "rule by the majority." This however begs the following question: How does the majority rule under democracy? This underscores the fact that there can be degrees of democracy. Under pure democracy, all things, including individual rights such as rights to liberty and private property, are subordinate to majority will. The standard individualist argument against pure democracy is as follows:

-Pure democracy is a social system where the recognition of individual rights (including those to liberty and private property) is contingent upon majority will (Majority agreement regarding the recognition individual rights is a necessary condition for the actual recognition of individual rights within a pure democracy)

-Any social system where the recognition of individual rights is contingent upon majority will is an anti-individualist social system

-Pure democracy is an anti-individualist social system

The hypothetical problems of pure democracy are well-known among free-market advocates. For example, if a majority realizes the extent of its power under a pure democracy, then what's to them from stealing (either through overt violence or through voting) the money possessed by those of the minority? Such conduct would be morally reprehensible, yet it would nevertheless be lawful under a pure democracy. Mencken was frank when it came to his opinion of most people. According to Mencken,

"The great masses of men, though theoretically free, are seen to submit supinely to oppression and exploitation of a hundred abhorrent sorts. Have they no means to resistance? Obviously they have. The worst tyrant, even under democratic plutocracy, has but one throat to slit. The moment the majority decided to overthrow him he would be overthrown. But the majority lacks the resolution; it cannot imagine taking the risk. So it looks for leaders with the necessary courage, and when they appear it follows slavishly, even after their courage is discovered to be mere buncombe and their altruism only a cloak for more and worse oppressions. Thus it oscillates eternally between scoundrels, or, if you would take them at their own valuation, heroes. Politics becomes the trade of playing upon its natural poltroonery - of scaring it half to death, and then proposing to save it."

What explains this totalitarian propensity among the average man, the inferior man? Within Notes on Democracy, Mencken argues that the inferior man's preference for statism over liberty exists because "What he longs for is something wholly different, to wit, security. He needs protection. He is afraid of getting hurt. All else is affectation, delusion, empty words." Mencken also quotes Sir Francis Galton as saying, "The vast majority of persons of our race have a natural tendency to shrink from the responsibility of standing and acting alone." In one respect, freedom is frightening, for how should one use one's freedom? How does one support oneself financially under a state of freedom? What decisions should one make when one is free? Freedom does not guide people in making decisions, it merely enables the decision-making process. Such guidance is the province of ethics, not political philosophy.

People have two choices: Either they can value self-governance or they can value governance by others. If they value self-governance, then they'll tend to value freedom; if they value governance by others, then they'll tend to value statism. By extolling self-governance over governance by others, then we can mitigate the inclination towards despotism exhibited by the masses. Notes on Democracy is the first step in such an endeavor.

Picture via The Mises Institute

The Economics and Ethics of Discrimination

Walter Block demonstrates that the market imposes costs upon irrationally discriminatory behaviour.

Is Christianity Compatible with Capitalism?

Dr. Jennifer Morse debates Yaron Brook.

The Myth of the Rational Voter

Bryan Caplan and Will Wilkinson discuss Dr. Caplan's book The Myth of the Rational Voter.

Yaron Brook and Terry Jones on the Stock Market Dip and Unemployment

See here.

The Chaos of the Constitution

If you try to search for common ground on which conservatives are met with contemporary liberals, you'll notice that both groups have their fair share of people who appeal to the Constitution when arguing in favor of their opinions as symbolized as propositions. Numerous conservative and modern liberal groups appeal to the Constitution to reinforce their positions such as the ACLU which appeals, among others, to the 1st Amendment and to the 5th Amendment, and the NRA which appeals to the 2nd Amendment.

The argument from the Constitution involves the assertion of the claim that one's belief (as expressed in the form of a proposition) corresponds harmoniously with the Constitution, coupled with the further claim that propositions that correspond with the Constitution in such a way are true. Finally, these two claims are used as premises in a deductive syllogism to yield the conclusion that one's initial proposition is therefore true. A formal version of the argument is below:

-My proposition is a proposition that is congruent with the Constitution or with a section of the Constitution.

-All propositions that are congruent with the Constitution or with a section of the Constitution are true propositions.

-Therefore, my proposition is a true proposition.

The popularity behind the above argument from the Constitution comes, in part, from the general public veneration of the Constitution itself as the law of the land as well as the deference many people display towards the Founding Fathers who drafted the Constitution. Now if one tasks oneself with opposing the expansion of government on legal grounds, then sound constitutional arguments make for some of the best, most effective means towards that end (the futility of arguing from the non-aggression principle in front of the Supreme Court comes to mind). However, the Constitution, while admittedly perfectable, is far from perfect. History admirably demonstrates that the Constitution is, among other things, sufficiently vague and ambiguous to enable ambitious statists to form very broad interpretations of it - interpretations purporting to legally justify socio-economically detrimental conduct from the government.

For example, the Commerce Clause. Formally known as Article 1, Section 8, Clause 3 of the U.S. Constitution, the Commerce Clause recognizes the legal right (a legal sanction to the performance of a specific action) of the government to "to regulate commerce with foreign nations, and among the several states, and with the Indian tribes." The questions that the Commerce Clauses begs (literally) are obvious: What does "regulate" mean? What does "commerce" mean? What acts of government are included within the class of "acts of government that conform to the Commerce Clause?"

Was it not said of the majority of the New Deal programs that they were legally justified according to the Commerce Clause? Has it not also been demonstrated that those same undertakings turned what would have been a normal recession by 19th century standards into an unprecedented depression? The conflict here is clear: arguments from the Constitution can be used to legally justify deranged, socio-economic policies. No doubt, many pro-New Dealers implicitly offered the following argument for each of their beloved programs:

-"Program X of the New Deal is legally justified" is a proposition that is congruent with the Constitution or with a section of the Constitution.

-All propositions that are congruent with the Constitution or with a section of the Constitution are true propositions.

-Therefore, "Program X of the New Deal is legally justified" is a true proposition.

How can one counter this argument from the Constitution with another argument from the Constitution? The above argument depends for its soundness upon a generous (to the government) definition of the word "regulate." Who may argue that such a definition is legally mistaken? Why is the broad definition of "regulate" erroneous from a legal standpoint?

Some have adopted the Originalist approach towards the Constitution which holds that "the meaning of the Constitution should be settled by reference to the original understanding of those who ratified it." By contrast, Popular Will theory holds "that proper judicial decision-making must regard the will of the people as all-important." Minimalist theory endorses a policy "of saying no more than necessary to justify an outcome, and leaving as much as possible undecided." On the other hand, living Constitutionalists argue that interpretations of the Constitution should be sufficiently broad to adapt to socio-economic changes. Which legal method among these is the correct one?

It is not enough, for a believer in capitalism and reduced government, merely to employ the argument from the Constitution because the minor premise (the first one) asserts a relation of terms that can be simply denied by opponents of capitalism. If one knows that, in fact, a given proposition is congruent with the Constitution, then one must know what the Constitution says. Therefore, knowing what the Constitution says is a necessary condition of knowing that a given proposition is congruent with the Constitution. However, if one does not know what the Constitution says, then one does not know that a given proposition, including one's own, is congruent with it.

Well, what does the Constitution say? As should be apparent by now, theories on how to interpret the law are ultimately based upon political philosophies. Take the proposition that "Congress should regulate commerce with foreign nations, and among the several states, and with the Indian tribes." Should "regulate commerce" mean "ensure that commerce occurs in the absence of coercive interference" or should it mean "subject commerce to supervision and forcible governance?" Whether one believes the former or the latter depends upon what one believes the government should do in general? This is where economics and ethics must inform any argument for politico-economic freedom. Economic theory demonstrates that government intervention, by eliminating the necessary condition for continued growth, prosperity, and progress - the absence of coercion - that, by doing so, it causes a whole host of social problems from unemployment to price inflation to business cycles. Ethics demonstrates that if the absence of coercion is a necessary condition for human progress, then it should be an end pursued by those concerned with such progress.

So, when defending gun ownership and opposing gun control, its best to employ arguments from ethics and economics in conjunction with an argument from the Constitution that involves appealing to the 2nd Amendment. Its not enough to state merely that the right to own a gun is recognized by the Constitution. Social science demonstrates that gun control policies end up rendering law-abiding citizens defenseless by disarming them in an environment where criminals willfully disregard such policies. Ethics shows us that if we value safety, that therefore we show oppose gun control laws. With ethics and social science, we have arguments from practicality, whereas with the Constitution we have arguments from legality.


-Smith, Tara. "Why Originalism Won't Die - Common Mistakes in Competing Theories of Judicial Interpretation." Duke Journal of Constitutional Law and Public Policy 2 (2007): 159-215. Social Science Research Network. Web. 16 May 2010. http://www.law.duke.edu/journals/djclpp/index.php?action=downloadarticle&id=46.

Some Basic Economic Problems of Free Healthcare

If I could remove one thing from the discourse in this country, as well as the rest of the world, it would be the careless approval people lend to the idea that healthcare should be provided free of charge. The assertiveness with which people demand healthcare pro bono comes in part from their conviction that they are entitled, by right, to be furnished with it at another's expense. Belief in a "right to healthcare" is pervasive and I've elaborated briefly but conclusively on the moral implications of enforcing entitlements to free healthcare here. Now I will elaborate a bit upon the forthcoming effects of any such attempt to turn healthcare into a free commodity.

The aim of the free healthcare movement is a state of affairs where healthcare is offered for free upon request to all. Since such an end cannot possibly be fulfilled through persuasion, forcible government intervention is the instrument with which the movement wishes to bring about this state. Our analysis cannot begin unless we are explicitly aware of the ends and the means of the free healthcare campaign. Now that this task is fulfilled, we may proceed.

If the aim of the free healthcare movement is to ensure that healthcare is free upon request, then this means that the aim of the free healthcare movement is a state of affairs where the price of healthcare is $0.00. Now healthcare is a sale-good that holds a high position on the value scales of many people. Any sale-good that holds a high position on the value scales of many people will probably not have a non-zero price; ergo, healthcare, in a free market, will probably not have a non-zero price.

Thus, in a free market, in order to realize the aim of free healthcare upon request, the free healthcare movement, via government, would have to reduce the price of healthcare to $0.00. According to the law of demand, if the price of a good decreases, then the quantity of that good demanded will either remain the same or increase. This occurs for two reasons. First, if the price of a good decreases, then the probability that it will enter the price ranges of more buyers increases. Second, if the price of a good decreases, then the probability that it will enter the additional-purchase price ranges of each buyer increases. The price of healthcare, like all prices, conforms to the law of demand, and since the demand for healthcare isn't too inelastic, its the case that as the price of healthcare decreases, the quantity of healthcare demanded increases.

If the government steps in and forcibly reduces the price of healthcare and therefore increases the quantity of healthcare demanded, then the quantity of healthcare supplied by healthcare providers will disappear. Prices do not merely affect the quantity of goods demanded; they also affect the quantity of goods supplied. According to the law of supply, if the price of a good decreases, then the quantity of that good supplied will either remain the same or decrease. Again, this occurs for two reasons. First, if the price of a good falls, then the probability that it will depart the price ranges of more sellers increases. Second, if the price of a good falls, then the probability that it will depart the additional-sale price ranges of each seller increases.

Thus, if the government forcibly reduces the price of healthcare to $0.00, then the quantity of healthcare demanded would skyrocket (what consumer would abandon free healthcare) and the quantity of healthcare supplied would enter the abyss (what healthcare provider would sell healthcare for free - they would go broke). At this point, the government has one of three options:

#1.) It can allow healthcare providers to fail to supply healthcare at the price of $0.00
#2.) It can enable healthcare providers to increase the quantity of healthcare supplied to match the rising quantity of healthcare demanded by paying them with tax dollars to produce healthcare
#3.) It can pay healthcare providers to increase the quantity of healthcare supplied but not to match the quantity supplied with the rising quantity demanded

Option #1

Adopting this option would completely prohibit the government from offering free healthcare upon request. If the price of healthcare dropped to $0.00, then the quantity of healthcare demanded would vastly exceed the quantity of healthcare supplied, causing a historic shortage. Healthcare would be as inexpensive as metaphysically possible but completely and permanently unavailable.

Option #2

Adopting this option would enable the government to prevent the onset of a healthcare shortage by equalizing quantity demanded and quantity supplied and therefore achieving equilibrium. However, the problem with this option is that given a healthcare price of $0.00, the quantity of healthcare demanded would soar. Thus, in order to equalize the quantity of healthcare supplied with the quantity of healthcare demanded and therefore achieve equilibrium, the government would have to finance the production of healthcare with tax dollars to match the quantity of healthcare demanded at the new price of $0.00. However, with the quantity of healthcare demanded at this price, such an undertaking would involve incurring tremendous, bankruptcy-inducing costs of production and would therefore be massively expensive to taxpayers.

Option #3

Adopting this option would allow the government to avoid the most severe mal-effects associated with options #1 and #2 but it certainly would not enable the government to avoid the mal-effects entirely. On the contrary, adopting option #3 would inexorably plague the healthcare system with both shortages and high costs of production. Whether the former becomes worse than the latter or not depends upon the direction in which the government takes option #3. Choosing option #3 and leaning towards option #1 i.e., allowing healthcare providers to only marginally increase the quantity of healthcare supplied, would allow the government to hedge against production costs, but an unbearable healthcare shortage would inevitably ensue. Choosing option #3 and leaning toward option #2 i.e., paying for an increase in the production of healthcare to approach the quantity of healthcare demanded, would allow the government to hedge against a shortage, but only by incurring unheard of production costs.

So, in conclusion, the following hypothetical argument sums up what I have argued above:

If the government forcibly reduces the price of healthcare to $0.00, then the quantity of healthcare demanded will skyrocket and the quantity of healthcare supplied will plummet. If the quantity of healthcare demanded skyrockets and the quantity of healthcare supplied plummets, then a suffocating shortage will ensue. If a suffocating shortage ensues, then the government can choose one of three options. If the government chooses option #1, then the suffocating shortage will continue. If the government chooses option #2, then the costs of producing healthcare will become frighteningly high. If the government chooses option #3, then a combination of a healthcare shortage and high production costs will appear, the severity of either depending upon the discretion of the government. Therefore, if the government forcibly reduces the price of healthcare to $0.00, then the healthcare system will be blighted by either an extreme shortage, or extreme costs of production, or less severe manifestations of both.