• oldfactory

    Austrian Capital Theory


    Garrison Lect-1. 1 Capital Theory
    Slides by Dr. Roger Garrison

    Garrison Lect-1. 4 Hayek and Friedman
    Slides by Dr. Roger Garrison

    Garrison Lect. 3 Hayek and Keynes
    Slides by Dr. Roger Garrison


    Austrian Capital Theory
    Lecture by Dr. Roger Garrison, Mises University 2013

    Hayek and Friedman: Head to Head
    Lecture by Dr. Roger Garrison, Mises University 2013

    Hayek and Keynes: Head to Head
    Lecture by Dr. Roger Garrison, Mises University 2013


    1. What (if anything) is the unit of capital?
    2. What are the differences between Knight’s and Hayek’s capital theorems?
    3. Why does Knight say that time is irrelevant? How does Hayek refute him?
    4. What happens to the structure of production when savings are increased? Decreased? Why?
    5. What is the role of maintenance in the capital structure? Is capital constant or permanent?
    6. In what sense does Friedman agree with Keynes when it comes to economics? In what ways do they differ?
    7. How do the Austrian School and Chicago School differ in their methodology? How does this affect their analyses?
    8. Why does Friedman dismiss interest rates as being a variable when describing recessions?
    9. What is the money velocity equation? Is this a valid concept?
    10. How does the Austrian School use statistics?
    11. What are the methodological differences between the “circular-flow” framework and the “means-ends” framework? How does the concept of equilibrium differ between the  two views?
    12. What causes the bust to occur in the Keynesian framework? How is this fundamentally different from the Austrian School?
    13. Keynes insisted that savings and investment are not influenced by the interest rate. Why is this rejected by Hayek (and the rest of the Austrian School)?
    14. What was the one graph included in Keynes’ General Theory? Why was this graph included?
    15. Why does Garrison separate consumption and investment in the PPF?
  • Skyline of the Freest Market in the World

    Hong Kong: A Model of Free Market Success

    As the plane descended, I saw the spectacular coastline and mountainous region that make Hong Kong a destination of such natural beauty. This was my first time in Asia and hoped it would be one of many. Fifteen hours later, I was finally on the other side of the world.

    From the moment I landed there, it was nothing short of amazing. As a special administrative region of the People’s Republic of China, Hong Kong follows the “one country, two systems” model, referring to how its political system differs from the mainland. As a sovereign state, Hong Kong enjoys a high level of autonomy for the next 100 years as stipulated by the British government upon passing control back to China in 1997.

    Along the Avenue of the Stars

    Along the Avenue of the Stars

    The first weekend I was there, I toured Hong Kong and saw the famous city skyline of Kowloon. I walked along the Avenue of Stars under the beautiful night sky illuminated by the bright lights along the water. Modeled after Hollywood’s Walk of Fame, Kowloon pays tribute to some of Hong Kong’s most famous residents, such as the late Bruce Lee, Jet Li and Chow Yun-Fat.

    Statue of Bruce Lee in Kowloon

    Statue of Bruce Lee in Kowloon

    Halfway along the Avenue of Stars, Bruce Lee, Hong Kong’s most famous resident, is memorialized in bronze against the backdrop of the skyline. Serving as a sad reminder of his premature death, the statue depicts him striking his classic pose as seen in his 1972 movie The Fist of Fury.

    World renowned for its economic prosperity and high quality of life, Hong Kong is the world’s freest economy according to the Index of Economic Freedom. Jointly created by the Wall Street Journal and the Heritage Foundation, the index measures the degree of economic freedom in every country around the glob

    Implementing the belief that individual liberty results in greater prosperity for all of society, the index designates which nations are more conducive to economic prosperity. As a supporter of free markets and limited government, I witnessed Hong Kong’s economy firsthand in a program through Georgetown University.

    In conjunction with the Asia Institute for Political Economy, I spent the month of July studying Hong Kong’s economy and how it became a free market success story. Our professors covered various topics, including the theories of Austrian economists Ludwig von Mises, Murray Rothbard, Friedrich Hayek, Carl Menger as well as economic prosperity, free trade and the decline of the American dollar.

    One of our many important economic lessons

    One of our many important economic lessons

    Another component of this unique program was to hear from the leading political, business and economic experts in Hong Kong today. Memorable guest speakers included Richard Vuylsteke, president of the American Chamber of Commerce in Hong Kong; Thomas Easton, Asia business editor of The Economist; and Andrew Work, co-founder of the Lion Rock Institute, Hong Kong’s leading free market think tank.

    While there, I wanted to absorb the culture and interact with the residents, which I was able to do during our first out-of-class activity.  An exciting yet challenging assignment for our economics class was to negotiate for five items at the night market. Temple Street marks the location of Hong Kong’s longtime tradition of vendors lining the streets selling their goods at rock-bottom prices. The night market was bright, humid and crowded as I witnessed shoppers haggling with merchants in Mandarin.

    I spent a lot of time just wanting to get lost in Hong Kong and immerse myself into its customs and traditions. A lot of us spent time exploring Lan Kwai Fong, which is a section of cobblestone streets lined with numerous shops, restaurants, bars and clubs. Known for its nightlife, Lan Kwai Fong is home to the unique Balalaika Russian Ice Bar & Restaurant. Well known for its closed-in freezer ice bar, it can accommodate a small party and is stocked with a full bar, ice counters, ice seats and fur mats.

    Lantau Island’s scenic and quaint Tai O fishing village

    Lantau Island’s scenic and quaint Tai O fishing village

    While there, I wanted to see other parts of Asia, which prompted a weekend visit to China’s other administrative region, Macau, as well as Lantau Island. I also toured an old Chinese fishing village, sang karaoke, visited an interactive exhibit in the dark, went to a trolley party, ate dim sum, climbed the highest peak for a stunning view of Hong Kong, and got caught in a typhoon.

    Hong Kong was not the only destination to choose from, but I clearly picked the right one. Due to mainland China’s oppressive government and policies, I have had some people ask, “Why China?” Anyone who has been there would understand.

    Hong Kong felt like paradise with its tropical climate and stunning landscape. It is an enchanting place full of history, high-rise buildings, mountains, bays, parks, waterfalls, and sections reminiscent of a jungle. It is, after all, Asia’s Gateway City, known for its skylines, the ice bar and free markets.

  • MisesLibrary

    Never Before Seen: Ludwig von Mises Translations!

    Join us as we review two newly-unearthed English translations of works by esteemed economist, Ludwig von Mises: “Ideas about  the Post War Economy”, and “Comments about the Mathematical Treatment of Economic Problems”.

    Mises wrote “Ideas” for the Spanish-language publication, Cuadernos Americanos, and it has been translated by Austrian economist Andrew silva. Silva will be joining us at the event, and he will share tales of studying with and meeting famed Austrian economists, such as Ludwig Lachmann, Murray Rothbard, and others.

    The second essay is a new translation of a notable Mises work that came to us by way of influential Austrian economist, Bettina Graves.

  • MisesLibrary

    Newly Rediscovered Translations of Ludwig von Mises

    Thanks to economist Andrew Silva, the Boston Austrian Economics Group has two newly unearthed translations of Ludwig von Mises.

    The first, translated by Mrs. Helena  L. Ratzka, is “Comments About The Mathematical Treatment Of Economic Problems“, an article first published in Studium Generale VI, No. 2 in 1953. This article comments on the importance of using the correct methodologies for the different sciences. Mathematics may be appropriate for the physical sciences, such as chemistry and mechanics, but it is not applicable to human action.

    The other article, translated by Andrew Silva, is “Ideas About The Postwar Political Economy“, an article originally published in the July/August 1942 edition of Cuadernos Americanos. This article, written at the height of World War II, highlights the necessary conditions for peace in Europe, and elsewhere.

    Many thanks to Andrew Silva, who has provided us with these texts!

  • money

    The Pattern of Indirect Exchange


    Chapter 3: The Pattern of Indirect Exchange
    Man, Economy, and State, Murray N. Rothbard

    Chapter 3 Study Guide
    Study Guide to Man, Economy, and State, Robert P. Murphy


    3.01 The Limitations of Direct Exchange


    3.02 The Emergence of Indirect Exchange


    3.03 Some Implications of the Emergence of Money


    3.04 The Monetary Unit


    3.05 Money Income and Money Expenditures


    3.06 Producer’s Expenditures


    3.07 Maximizing Income and Allocating Resources



    1. Name two different problems with direct exchange. (pp. 187-88)
    2. Explain the term medium of exchange (p. 189)
    3. Why are some goods more marketable than others? (p. 190)
    4. In what sense is a telescope relatively unmarketable (i.e., difficult to sell)? Couldn’t the owner lower its price until he found a buyer?
    5. What does it mean to purchase money (p. 194)
    6. What is the price of money?
    7. Rothbard says that the unit of money is a weight. How does this apply to the U.S. dollar? (p. 197)
    8. Why does the marginal utility of money decline as its supply increases? (p.218)
    9. How does a person decide whether to work for himself or an employer? (pp. 221-22)
    10. How does the owner of a durable good decide whether to rent or sell it? (pp. 225-27)
  • barter

    Direct Exchange


    Chapter 2: Direct Exchange
    Man, Economy, and State, Murray N. Rothbard

    Chapter 2 Study Guide
    Study Guide to Man, Economy, and State, Robert P. Murphy


    2.01 Types of Interpersonal Interaction: Violence


    2.02 Types of Interpersonal Interaction: Voluntary Exchange and the Contractual Society


    2.03 Exchange and the Division of Labor


    2.04 Terms of Exchange


    2.05 Determination of Price: Equilibrium Price


    2.06 Elasticity of Demand


    2.07 Speculation and Supply and Demand Schedules


    2.08 Stock and the Total Demand to Hold


    2.09 Continuing Markets and Changes in Price


    2.10 Specialization and Production of Stock


    2.11 Types of Exchangeable Goods


    2.12 Property: The Appropriation of Raw Land


    2.13 Enforcement Against Invasion of Property



    1. Do different praxeological laws apply to situations of isolation versus society? (p. 79)
    2. What is Rothbard’s definition of society? (p. 84)
    3. Give an example of autistic exchange. (p. 84)
    4. Suppose someone says, “In order for an exchange to be just, each person must give up an equal value for an equal value.” What do you think Rothbard would say about this? (p. 85)
    5. What are three sources of ownership? (p. 93)
    6. What is the law of association? How does it relate to Boulding’s example of the doctor and his gardener? (p. 98)
    7. In Figure 16, how many horses will Smith demand at a price of 85 berries? At that price, how many total berries will Smith offer in exchange? (p. 125)
    8. What will happen to the price if the total demand to hold is higher than the stock? (pp. 137-140)
    9. How can the principles of this chapter be applied to shares of ownership? (p. 166)
    10. What is Rothbard’s response to Henry George? (pp. 171-172)
  • chess-board

    Fundamentals of Human Action

    This is our first week starting Man, Economy, and State by Murray N. Rothbard. We will be using both the original text, as well as the study guide by Robert P. Murphy.


    Chapter 1: Fundamentals of Human Action
    Man, Economy, and State, Murray N. Rothbard

    Chapter 1 Study Guide
    Study Guide to Man, Economy, and State, Robert P. Murphy


    1.01 The Concept of Action

    1.02 First Implications of the Concept

    1.03 Further Implications: The Means

    1.04 Further Implications: Time

    1.05 Further Implications: Ends and Values & The Law of Marginal Utility

    1.06 The Factors of Production: The Law of Returns

    1.07 Factors of Production: Convertibility and Valuation

    1.08 Factors of Production: Labor vs. Leisure

    1.09 The Formation of Capital

    1.10 Action as an Exchange

    Appendix A: Praxeology and Economics

    Appendix B: On Means and Ends


    1. If an infant cries immediately after birth, is this action in the praxeological sense? What if the infant, several months later, has learned that crying will often lead to attention from parents? (pp. 1-2)
    2. When doctors in the 1800s used leeches in an attempt to help patients, was this an example of human action? (p. 7)
    3. Suppose a man is strumming his guitar while sitting on the sidewalk in a large city, and that his only purpose is to listen to the enjoyable music. How should the guitar be classified? What if passersby begin giving the man loose change, so that he now views the guitar as a means to earning money? (pp. 8-9)
    4. Suppose that a boy, on June 4, is offered the choice of seeing a fireworks show that day, or in exactly one month. If the boy chooses the show in the future, has he violated the law of time preference? (pp. 15-16)
    5. Suppose someone says, “I like steak more than burgers, and I like burgers more than hot dogs, but my preference for steak over burgers is definitely stronger than my preference for burgers over hot dogs.” What do you think Rothbard would say about this statement? (pp. 18-19)
    6. Imagine that a chemist measures two bottles of water, and finds that the first contains 8.002 ounces of water, while the second bottle contains 8.001 ounces of water. The chemist concludes that the bottles of water are definitely different objects. How should the economist treat them? (p. 23)
    7. What are the two ways that capital increases productivity? (p. 48)
    8. What are the definitions of consumption, saving, and investment? (pp. 48, 53)
    9. If capital goods increase the productivity of labor, why don’t people create as many capital goods as possible? (pp. 48-49)
    10. Suppose that a farmer normally sets aside ten percent of his harvest as seed corn. His son says, “That’s silly! We should sell all of our harvest and make as much money as possible.” What would this policy lead to? (p. 55)
  • bitcoin2

    Moksa Bitcoin ATM

    Moksa is a Pan Asian restaurant located in Cambridge, Massachusetts’s buzzing Central Square. Owners Solomon and Rokeya Chowdhury serve a wide variety of Asian-inspired tapas alongside an award-winning beverage program.

    Nestled inside Naga, one of the city’s most sought-after entertainment venues, Moksa allows guests to enjoy multiple styles and flavors throughout the meal and is perfect for large groups, social gatherings, after-work cocktails as well as lunch and dinner with friends in a fun, upbeat atmosphere.

    They recently installed a bitcoin ATM at their restaurant (Click here for more info). Solomon Chowdhury, Moksa’s owner, says more and more people are asking if the restaurant could accept Bitcoin, and he wants to give his customers what they want.

    Let’s go check out the new Bitcoin ATM and have dinner.

  • nate-silver

    The Signal and The Noise, by Nate Silver: an Austrian review

    Nate Silver is a figure who needs no introduction – thanks to the spectacular success of his election forecasting system, he has become a household name in recent years. In late 2012 he released a book, The Signal and The Noise, which quickly became a bestseller. In it, he discusses the art of using data intelligently in order to make predictions, with illustrative chapters showing how the ideas can be applied to fields ranging from climate science to poker. It is, overall, a superb book, meticulously researched and lucidly written, and Silver’s versatility in discussing such a wide variety of real-world applications is particularly impressive.

    However, Silver conspicuously fails to ask one very important question: how do we know which disciplines are amenable to this type of empirical reasoning in the first place? Nowhere in the book does he question the assumption – so common in modern discourse – that the road to understanding always lies in data; that if a field of inquiry can conceivably be approached via study of quantitative variables, there is no question that it should. As such, it will come as no surprise to an Austrian reader that when Silver turns his attention to economics, the results are far from convincing, even when taken on their own terms. Interestingly, the economics chapter does contain a healthy dose of Silver’s typically incisive reasoning; despite the inauspicious choice of Paul Krugman as one of his primary sources, he nonetheless manages to form a perceptively critical evaluation of the profession’s status quo, astutely highlighting many of the difficulties that economists currently face. But because he stops short of questioning the central premise of modern economics – that an economy can be evaluated through statistical measurements, and that forecasting these measurements is therefore what economics is ultimately all about – he is unable to resolve these difficulties satisfactorily, and his conclusions end up ringing decidedly hollow. A later chapter in the book is devoted to the Efficient Market Hypothesis, and the particular phenomenon of bubbles; here Silver’s approach gets him into even deeper trouble, and his explanation ends up being entirely unconvincing. It may seem unfair and unproductive to criticize an economics discussion in what is primarily a book about other topics. We nonetheless find it worthwhile to do so, because The Signal and The Noise serves as a particularly vivid illustration of the importance of methodology in the ongoing debate between Austrians and mainstream economists.

    Silver’s chapter on economics gets off to a promising start, as he takes the profession to task for their woeful record of predictive success. He notes that economists are much too confident in their GDP-forecasting ability – leading them to make predictions that have proven to be “poor in a real-world sense” – and points out that in contrast with fields such as meteorology, economic forecasts have shown little improvement over the past few decades. Guided by his discussion with Goldman Sachs chief economist Jan Hatzius, Silver then offers several very insightful explanations for why this is so. To begin with, he notes that there is little stability in the cause-and-effect relationships that emerge from the study of economic variables – for example, five of the seven “leading indicators” of the 1990 and 2001 recessions failed to indicate a problem in 2007. Furthermore, economic forecasting involves not only anticipating changes in policy decisions, but correctly gauging how these changes might impact the forecasting model itself. He cites Goodhart’s Law, which tells us that the targeting of variables by policy-makers causes them to lose their predictive value – housing prices, for instance, cease to function as a bellwether of increasing prosperity when they are deliberately manipulated by government policy. As Silver explains: “Most statistical models are built on the notion that there are […] inputs and outputs, and they can be kept pretty much separate from one another. When it comes to the economy, they are all lumped together in one hot mess.” A related problem is that the economy is a complex, ever-changing entity; as such, a seemingly well-established empirical relationship can cease to hold, seemingly without warning. This phenomenon was well illustrated in 2009, when the venerable Okun’s Law suggested that 2 million jobs should have been gained – instead, 3.5 million were lost. And as if this were not enough, we are also faced with the difficulty that much economic data is simply not very good, subject as it is to official revision months or years later. As an extreme case, the initial 4.2 percent growth estimate for the fourth quarter of 1977 was eventually rewritten as a contraction of 0.1 percent.

    At this juncture, the reader is surely entitled to ask an obvious question: why are we so certain that empirical analysis is the right approach to economics in the first place? After all, we have been convincingly shown that economic data is inherently unreliable, and that even when taken at face value, it necessarily maintains only a tenuous correspondence with the real-world phenomena that it purports to explain. Surely one very reasonable conclusion would be that economics is simply a discipline that is most effectively approached through purely deductive methods – this, of course, is what Austrians have maintained all along. But amazingly, not only does Silver fail to embrace this idea, he never even seems to consider it as a possibility. While he does praise Hatzius for basing his gloomy 2007 forecast on a coherent narrative (being “right for the right reasons”) , it remains clear that he views logic merely as a guiding force toward better empirical predictions, rather than the methodological substance of good economics in its own right. The idea that one could dispense altogether with the statistical element remains an anathema.

    A particularly striking microcosm of the entire chapter occurs when Silver acknowledges that the steady GDP growth of so-called Great Moderation between 1983-2006 was “fueled by large increases in government and consumer debt, along with various asset-price bubbles.” Very true: a more compelling indictment of GDP-based economic analysis would be hard to imagine! But Silver brings this up only in order to illustrate his point that changing economic conditions make statistical analysis a difficult task in economics. And so it leads him to offer only the stunningly insipid conclusion that the Fed may have erred in their 2007 GDP forecast because they failed to adequately consider data from prior to 1983. (!!)

    This leaves Silver in something of a bind when he tries to offer a prescription for how the economics profession might improve its performance. He remains implicitly devoted to the idea that this performance must be in the form of statistical forecasting – yet he has just finished presenting strong evidence that this approach is merely an exercise in futility. So it is no surprise that the chapter ends on a feeble note: apart from the aforementioned suggestion that predictions should be based on a logical understanding of how the world works (with which, needless to say, we entirely agree) his only substantial suggestion is that economists need to be given stronger incentives to make good predictions. But surely this is hopelessly far-fetched. As Silver himself notes, the resulting implication is that there currently exist willing consumers of bad economic forecasts; this is a rather implausible notion, and Silver gives no real evidence of why we should accept it. Moreover, even if we grant that professional incentives are in some sense a problem, it remains unclear how a successful resolution would be sufficient to overcome the formidable obstacles to successful prediction that Silver has just outlined. Will the economy cease to be a “hot mess” of inputs and outputs, just because economists are more motivated to provide accurate forecasts? As a result, in stark contrast with the other sections of the book, the reader comes away from this chapter having been offered no convincing explanation of how signal and noise are to be separated in economics.

    That Silver has failed to develop an entirely sound understanding of economics is confirmed several chapters later, when he turns his attention to financial markets, and the phenomenon of bubbles in particular. This is a prime example of an issue where the logical approach to economics favored by Austrians proves its superiority. It is quite easy to identify the underlying cause of bubbles through a simple thought experiment: where is the money coming from to support these ever-rising asset prices? Is there any evidence whatsoever that they are financed by decreased expenditure on other goods and services? When the question is considered in this manner, it immediately becomes clear that inflation of asset prices, no less than of consumer prices, is always and everywhere a monetary phenomenon. On the other hand, bubbles are inherently difficult to study empirically, so it is no surprise that commentators beholden to the positivist approach have largely come to grief in their efforts to explain them.

    Unfortunately, Silver proves to be no exception. Like so many other writers in the wake of the financial crisis, he apparently believes that psychological considerations alone constitute a sufficient explanation, and his variation on this well-worn theme is no less fundamentally inadequate. He begins by blaming bubbles on the incentives of individual traders: “so long as most traders are judged on the basis of short-term performance, bubbles involving large deviations of stock prices from their long-term values are possible – and perhaps even inevitable.” But the reasoning that he offers in support of this is blatantly circular: he notes that given the empirical probability of crash in stock prices, it can take a long time for a bubble to burst, and claims (not implausibly) that anyone who prematurely calls the top during this time is likely to find himself out of a job. The problem, of course, is that the frequency of market crashes is itself the result of the aggregate actions of individual traders – it cannot be the ultimate cause as well. Silver’s attempt to ground his case in an innate psychological propensity for “herding” behavior does not fare any better. In support, he refers to a 2008 InTrade incident, where a rogue trader temporarily pumped up the market value of John McCain’s election probability, only to see the “true” price restored six hours later. But it is difficult to understand what he is getting at here. Surely this anecdote actually provides stronger evidence for the Austrian conclusion: that in the absence of sustained manipulation, the market will rapidly smooth out all misaligned prices. Why did the InTrade distortion resolve itself in a matter of hours, instead of turning into a long-term mania? (Conversely, would anyone have noticed the housing bubble if it had lasted for six hours?) Finally, as if somehow sensing that he has not quite proven his case, Silver tosses in one final attempt at an explanation near the end of the chapter: “There might be a terrific opportunity to short a bubble […] once every fifteen or twenty years when one comes along in your asset class. But it’s very hard to make a steady career out of that, doing nothing for years at a time.” This, however, is simply bizarre: why on earth should we assume that “bubble-popping” is such a specialized career niche that its practitioners are incapable of other activity during normal market conditions?

    The upshot is that bubbles prove to be an unfortunate lacuna in the context of The Signal and The Noise, just as they are for mainstream economics in general. Silver’s discussion is sadly illustrative of the hopeless muddle that invariably results once commentators fall into the trap of attempting to explain economic processes through purely psychological mechanisms. It also highlights the vital importance of methodology in the study of economic phenomena. Had Silver come to the conclusion – so thoroughly implied by his discussion in the economics chapter – that it is a discipline best approached through a priori reasoning, he would surely have found the correct answer without difficulty. As it is, having initially chosen the wrong set of tools, not even his powerful intellect was able to construct anything close to a compelling explanation.

    In The Signal and The Noise, Nate Silver offers Austrians a ray of hope, by revealing the degree of skepticism that many well-informed commentators possess toward mainstream economics. More importantly, however, he also gives us an invaluable (if inadvertent) reminder of where we must focus our rhetorical efforts, in order to take full advantage of this state of affairs. It is nothing short of astonishing that a thinker of Silver’s caliber, having marshaled such an impressive array of evidence against the mainstream data-crunching approach, should fail to even consider Austrian-style methodology as a possible alternative. This is a quintessential example of the unquestioning belief in positivism that underlies contemporary thought – “data uber alles” seems to be the credo of 21st-century epistemology. It is this methodological error that we must first seek to correct, if we ever hope to make substantial progress in converting intelligent, open-minded people – such as Nate Silver – to Austrian economics.

  • Capture

    5 Non-Idiotic Economic Reforms Millennials Should Work For

    Rolling Stone, that bastion of intellectual economic policy analysis, has recently produced the article “5 Economic Reforms Millennials Should be Working For.” Libertarians far and wide have already rebutted the nonsense in this article, and I decided to do my part by producing a sane alternative. After all, as philosopher/engineer R. Buckminster Fuller once said: “You never change things by fighting the existing reality. To change something, build a new model that makes the existing model obsolete.” So here is my attempt to make Rolling Stone more obsolete than it already is, which may be difficult, since Rolling Stone is already pretty obsolete.

    1.) No More Slavery

    During the height of chattel slavery, roughly 4 million Americans were imprisoned for a crime against no one. (1) How could such a horror take place? Could you imagine if millions of Americans today were imprisoned for a crime against no one? Well, this is precisely the situation today: In modern America, 7.3 million Americans are imprisoned (2), and 75% of prisoners are in prison for crimes against no one, meaning drug, weapon, public order, and immigration “offenses” (3).

    Offenses against the state are not crimes against a victim: The state is a concept, not a person. Offending the state is a crime against no one unless there is a real victim involved. This means that there are MORE people imprisoned for crimes against no one today than there were in 1860. President Obama, with a stroke of a pen, can pardon/free more slaves than there were at the height of chattel slavery.

    It should be noted that all of Rolling Stone’s “reforms” involve taxation i.e. forced payment under threat of imprisonment. Disobeying a tax law is a crime against the state, i.e. a crime against no one. Rolling Stone’s suggestions, then, are incompatible with the abolition of slavery.

    2.) The Legalization of Summer Jobs

    It’s getting tougher and tougher for teens to find summer jobs. “Less than a third of 16- to 19-year-olds had jobs this summer…” (4) What gives? Are teenagers a bunch of lazy bums who don’t like money? Do greedy capitalists hate teenagers and deny them jobs on purpose? One obvious culprit for the absence of summer jobs is that the vast majority of potential jobs in the US are illegal.

    Think of it this way: If the government imposed a minimum income requirement on small businesses, outlawing any small business that didn’t make the minimum income, would this help the small businesses who are currently making below the minimum income? Will consumers suddenly flock to the less successful small businesses they weren’t patronizing before, in order to help the businesses comply with the law? No, of course not, the least successful small business owners would find themselves unemployed.

    Every wage laborer is a small business owner, a capitalist in charge of his own human capital, who must convince customers/employers to buy the wage laborer’s labor. If the government makes the product too expensive through price fixing, the supply and demand won’t match: There will be a shortage, and a shortage of jobs is called unemployment. Economists nowadays are generally in agreement that price fixing for goods like gasoline and laptops would result in shortages. But for some reason many turn a blind eye to the most important price of all: Labor.

    Minimum wage laws don’t just hurt teens: They also hurt young adults and many other sets of workers trying to make their way up the career ladder. Many businesses would offer training and valuable work experience to low-skill workers as apprentices/interns, but unless the worker is producing an amount of goods/services worth at least the minimum wage, it is not economically feasible to hire them. Businesses have found a loophole whereby they can pay workers nothing and call them volunteers. Obviously making nothing is not an improvement over making a buck less than the minimum wage, and so workers are worse off due to the minimum wage law.

    But even this is becoming illegal: California and several other states have passed a law mandating college credit be attached to unpaid internships. (5) So now, anyone who isn’t in college will be shut off from opportunities to climb the first rung in the career ladder. Everyone who does get to work has to pay thousands of dollars for college credit to do so. Paying thousands of dollars to work, of course, is not an economic improvement from being paid a buck less than the minimum wage.

    Among poorer populations, minimum wage laws can be so destructive that workers threatened with unemployment will riot: South Africa workers, for instance, revolt whenever the minimum wage laws are raised. (6)

    3.) An End to the College Bubble

    This one won’t require much work from millennials, since all bubbles pop, but millennials should be demanding that it pop as soon as possible. Like the Housing Bubble, the College Bubble is the result of easy-money subprime loans, guaranteed by the federal government, that created an asset bubble. “Federal aid for students has increased 164% over the past decade, adjusted for inflation… After adjusting for differences among schools, the authors find that Title IV-eligible schools charge tuition that is 75% higher than the others. That’s roughly equal to the amount of the aid received by students at these schools.” (7)

    The Housing Bubble was very painful when it popped, but all bubbles must pop eventually. The sooner the bubble pops, the less damage it causes. The cost of an asset bubble is what that money otherwise could have been spent on: Instead of loans going for overpriced houses, loans could have gone to machinery, job training, research and development, or any number of other investments that increase real wealth in the economy. And, indeed, during the peak of the Great Recession, as housing prices were plunging, money started being used for productive uses. GDP was falling due to the housing market, but manufacturing hit an all-time high in 2009. (8)

    The money that students currently spend paying off their overpriced college loans could be invested, used to produce real goods and services instead of bloated college bureaucrat salaries. $200,000 could be lent more productively to start-up companies instead of 18-year-olds majoring in art history. If the government stopped incentivizing college loans by insuring them, you would see the price of college plummet (along with the endowments of many colleges, which will not make college administrators happy, so expect them to lobby for a bailout).

    4.) Cut Off Our Welfare-Queen Parents

    If the government neatly separated the population into two tax groups, one with an average net worth 49 times higher than the other, and then took a chunk out of the poorer group’s paycheck every week and sent it to the richer group, this would be a travesty! And it is! “Older Americans are 47 times richer than young” (9), but a hefty chunk of the young people’s salaries are stolen from the poor and given to the rich, so to speak.

    In The Simpsons, a homeless man asks Grandpa Simpson if he has any change, to which he replies, “Yeah! And you ain’t gettin’ it! Everybody wants something for nothing!” He then promptly walks into the Social Security Office and says, “I’m old, gimme gimme gimme!”

    Social Security in the US is not invested in an account that grows like the Chilean Social Security System or a 401k (10). Social Security is a direct transfer from the young to the old, and since the population demographics are getting older, young people have to pay in more than they get back. Congress set aside a Social Security Trust Fund account to ostensibly make things slightly fairer for millennials, but this Trust Fund is filled with US Treasuries (11), which are promises by the federal government to tax the young even more! And even if young people were getting back everything they put into Social Security adjusted for inflation, this would be a raw deal, since they would be losing money when they need it most (economically, you can say that the marginal utility of money for young people is higher).

    Adjusted for inflation: “A single earner couple turning 65 in 2010 and earning the average wage would have paid in about $294,000 in Social Security taxes over a lifetime — but would get about $447,000 back” (12). Again, there is no interest being earned on Social Security “investments”, they are a zero sum game: Any “capital gains” on them means increased theft from the young. And Social Security is not the only form of indentured servitude for millennials: “If you add up all the promises that have been made for spending obligations, including defense expenditures, and you subtract all the taxes that we expect to collect, the difference is $211 trillion.” (13) That’s over $700,000 in debt per American; in other words, young people are born with a mortgage and no house.

    5.) Cheaper Weed

    I was expecting to at least agree with Rolling Stone about drug legalization, but it was conspicuously absent from their “reforms”. I already covered the truly sadistic aspects of drug laws when discussing slavery, but there is another economic side to drug laws that destroys human happiness and productivity.

    Drug laws make drugs more expensive: In Canada, legal THC-free cannabis costs 45 cents a pound (14). An anonymous, confidential source I cannot possibly disclose tells me that illegal cannabis costs thousands of times more (and is sometimes awful). The two goods are not equivalent, but legal hemp does give us a window into how far economies of scale, capital investment, and a fairly deregulated market could drive cannabis prices down. If alcoholic beer were illegal and cost $20 per bottle on the black market, and legal non-alcoholic beer cost 50 cents per bottle, it would give us some cause to believe that legalization would make beer cheaper.

    If drugs were far cheaper, what would the money gained by drug consumers be spent on? This, in the words of 19th-century French economist Frédéric Bastiat, is the unseen cost of prohibition. Some consumers may currently be doing cheap, deadly drugs such as methamphetamines or krokodil (15). Were drugs legalized and prices driven down, these consumers could switch to safer drugs like cannabis. This is one hypothetical reason why, when Portugal ended its drug war, drug abuse rates fell by 50%. (16)

    But what of the new, legal markets for THC-containing cannabis in Colorado and Washington? State legislators have seen the light, told the US Supreme Court to shove it (17), and created legal “taxed and regulated” cannabis markets. The only problem: If you tax and regulate a market too much, you interfere with that market’s ability to match supply and demand. The result is that there are widespread cannabis shortages in Colorado’s legal market, legal cannabis prices have been driven sky high, and the situation is so bad most cannabis consumers have chosen to risk jail and continue using the black market. (18) Millennials should be striving for a true, free market for cannabis, not a highly regulated, state-planned faux market.

    *                                         *                                      *

    Millennials should shake off their Stockholm Syndrome and stop demanding small welfare bribes in lieu of real, meaningful reform. End slavery, don’t reform it. Legalize jobs. Fire the academic establishment’s pampered bureaucrats. Stop stealing from the poor and giving to the rich. And let us have the cheap, quality weed that only a deregulated market can provide.


    (1) http://economics.ucr.edu/papers/papers03/03-12.pdf
    (2) http://www.nytimes.com/2009/03/03/us/03prison.html?_r=0
    (3) Data from 2009: This statistic is actually higher than 75%, because some misdemeanors are victimless crimes, and the study doesn’t separate misdemeanors into categories, so I didn’t count them. http://www.bjs.gov/content/pub/pdf/fjs09.pdf
    (4) http://online.wsj.com/news/articles/SB10001424127887323423804579025192355931448
    (5) http://www.policymic.com/articles/50069/unpaid-internships-aren-t-the-problem-working-for-credit-is
    (6) http://www.nytimes.com/2010/09/27/world/africa/27safrica.html?pagewanted=all
    (7) http://www.marketwatch.com/story/why-college-aid-makes-college-more-expensive-1330033152060
    (8) http://www.industryweek.com/global-economy/manufacturing-index-hits-all-time-high
    (9) http://money.cnn.com/2011/11/07/news/economy/wealth_gap_age/
    (10) http://news.investors.com/ibd-editorials/092613-672776-score-another-one-for-the-chilean-model-of-private-pensions.htm
    (11) http://www.ssa.gov/pressoffice/factsheets/WhatAreTheTrust.htm
    (12) http://www.urban.org/UploadedPDF/social-security-medicare-benefits-over-lifetime.pdf
    (13) http://www.npr.org/2011/08/06/139027615/a-national-debt-of-14-trillion-try-211-trillion
    (14) http://www.omafra.gov.on.ca/english/crops/facts/00-067.htm
    (15) http://sacramento.cbslocal.com/2013/09/27/cheap-heroin-alternative-krokodil-eats-users-flesh-from-the-inside-out/
    (16) http://www.forbes.com/sites/erikkain/2011/07/05/ten-years-after-decriminalization-drug-abuse-down-by-half-in-portugal/
    (17) The US Supreme Court even told the states that they couldn’t have medical cannabis:
    Luckily, 20 states and even the District of Columbia have disobeyed them on that:
    (18) http://business.time.com/2014/01/04/colorados-pot-shops-say-theyll-be-sold-out-any-day-now/

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