“But this long run is a misleading guide to current affairs. In the long run we are all dead”
(John Maynard Keynes, A Tract on Monetary Reform, Chapter 3)
Why is the philosophy of liberalism not accepted in the Latin American countries, or indeed in general? Much Marxist analysis of this question suggests that libertarian ideas have nothing to offer to people under poverty conditions, and that paternalist systems are the only solution to generate relief for this sector of the population. Therefore, these writers suggest, the ideas of a welfare state naturally tend to be the most popular ones.
However there is an alternative explanation for the rejection of liberalism – defined here as a political paradigm that prioritises free markets, low taxes, small government and peaceful international relations – which utilises the psychological concepts of immediate and delayed gratification. It has been said that men instinctively tend to satisfy their immediate needs, in this way shifting emphasis away from delay of gratification. The latter requires the capacity to control one’s will and thus sacrifice to satisfy the needs of the long-term rather than the short term (Goldman, 2000).
Economics has developed a theory of time preference and opportunity cost (Menger, 1871), but economics fails to explain why these time preferences can be lower or higher in the short or long run. On the other hand, the theory of immediate and delayed gratification can easily provide an explanation for why an individual who has been exposed to a long period of consecutive crises delaying his basic needs, would like to immediately satisfy them. It is not expected that this individual could restrain his will in order to satisfy long term needs.
It is in those moments when man is overwhelmed by impulse that man becomes vulnerable to the implantation of ideas. Thus, when men face a situation that seemingly requires a quick solution, human will becomes weak and tends to succumb to a great deal of harmful, but immediately visible, ideas. On the contrary, men tend to reject in such situations any idea that postpones gratification, even though, in the long run, the final outcome would be better.
LIBERALISM AND LATIN AMERICA
Recent history of central and South American countries is based on successive crises. It is understandable, then, that most people in these countries opt for immediate solutions. Liberalism does not offer quick exits to deep crises; as many practitioners of Austrian economics have pointed out with reference to the Global Financial Crisis of 2007/2008, there is a period of painful adjustment when malinvestments must be liquidated, and when unprofitable firms must go bust. Similarly, the results of turning toward an open economy would take too long to materialize; since the necessary changes are structural in nature.
The second reason, related to the timing of change, is the magnitude of the changes that will need to be undertaken. In order to move toward a market economy, government spending should be controlled and reduced, subsidies and protection should be removed once and for all. These changes would allow markets to take back control of the economy and thus reorganize in order to turn each Latin American nation towards more efficiency. But of course, this transition would leave many people momentarily unemployed until markets are restructured and labour demand arises in the new and natural industries where each country has its own comparative advantage. Now we face a clear problem: there is not a single politician that would want to carry out such reforms knowing that the fruits would hardly be seen in their presidential term and in
those years their popularity would traverse very low levels.
History also shows us that Latin American people have generally chosen the faster solutions to economic issues. Thus in 1990 Peru was about to turn its economy to a market one, but the Vargas Llosa austerity plan frightened most poor people and Peru continued with Fujimoris authoritarian and paternalist government (Gouge, 2007). Another example is Argentina, which could have solved most of its economic problems by cutting the government deficit caused by excessive spending, but instead chose to devalue its currency in order to continue its spending (Lazzari, 2003). The most remarkable example is Venezuela; in 1998 Irene Zaes could have been elected president and turned the country toward liberalism, but Venezuelans were not ready to face these changes and chose Chavez instead. Summarizing, libertarian ideas in Latin American could never defeat paternalism when faced with crisis conditions.
Paternalistic systems manipulate the immediate needs of the population to achieve high levels of loyalty among the people. Politicians know they have to find immediate solutions to win elections, since short-term measures may have their peak of ‘success’ during the same term of its implementation; the long-term negative consequences can be dealt with later. Such is the case of Carlos Menem in Argentina during the 1990’s, when his short term decision to fix the nominal exchange rate later contributed to a financial crisis in 2001. Paternalist decisions fail in the long-run and finally another candidate comes offering immediate gratification to people, wins the election and thus the cycle continues again.
So liberalism faces a great challenge in this region of world, as in other regions of the world, and it is an unfair challenge because paternalist policies do not respect individual rights as liberalism does. Paternalism permits satisfaction of urgent needs through redistribution of property, but liberalism does not. Liberalism in contrast, offers a gradual and sustained wealth creation, going through a period of restructuring that will require adjustment and sacrifices. In other words, it offers long term or deferred gratification which, for the moment, people are not willing to accept.
A question for future research in this area would address whether the problem lies in the minds of a people that seek to satisfy their immediate gratification, or whether liberty ideas should find a way to provide solutions to immediate needs in order to achieve high levels of acceptance in this region of the world.
Goldman, D (2000). Inteligencia Emocional, Vergara, Mexico.
Gouge, T (2003). Exodus from Capitalism:The End of Inflation and Debt.
Jones, B (2007). Hugo! The Hugo Chávez Story from Mud Hut to Perpetual Revolution. Hanover, New Hampshire
Lazzari, G (2003).Apuntes sobre la caída de la economía Argentina. ESEADE, Buenos Aires.
Menger, C (2012).Principios de economía Unión Editorial, Madrid.
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Robert Higgs is a Senior Fellow with the Independent Institute, and is well known for his work on economic history (among other things). Having earned his PhD in Economics from Johns Hopkins University, he has also been a visiting scholar at Oxford University and Stanford University, and has held teaching positions at the University of Washington, Lafayette College and Seattle University.
You built your career in academia and then shifted to the Independent Institute, a research organisation funded by sympathetic donors. What are the main differences between academia and working at a think-tank?
In academia, my prime concern was teaching and training students. In my affiliation with the Independent Institute, my major responsibility was editing the institute’s quarterly scholarly journal The Independent Review.
In my research and writing I was completely independent in both situations. In academia no one ever prescribed what type of research I would do, how I would do it, or what conclusions I would reach. In my work for the Independent Institute, which now continues on a reduced basis, I have enjoyed the same intellectual independence.
Whether nonacademic work is more or less intellectually constrained depends on the organization one works for and the type of work one does. I have been fortunate in both regards.
You wrote a memorial piece for Murray Rothbard which was published by the Mises Institute. However not everyone is a fan of Rothbard; George Selgin - who has had disagreements with Rothbard on monetary issues - thinks he is a nut on fractional reserve banking, and David Friedman has blogged critically about Rothbard (see here and here), calling him intellectually dishonest. I was wondering your thoughts on these debates between wings of the movement.
Murray Rothbard was a personal friend of mine and also someone whose intellect and accomplishments I have always held in high regard. George Selgin is an old friend of mine, and I have known David Friedman for a long time. I try to avoid infighting among libertarians, some of which springs from personal enmities and eccentricities.
It is entirely to be expected, however, that economists in general and libertarian economists in particular should differ somewhat in their views. We do not belong to a cult. Lock-step conformity is neither required nor admired by people who have intellectual integrity. If all libertarian economists held the same views, that situation would signify that our discipline had stultified. Lively controversy is all for the good. It would be best, of course, if people kept their differences on an intellectual plane and did not descend to personal invective or insinuations, but libertarian economists are subject to the usual assortment of human foibles.
Why is Rothbard not taken more seriously by economists?
Rothbard upheld the Misesian approach to economics, which maintains that economic theory is an a priori body of logically connected propositions resting at bottom on the Action Axiom—that “human action,” by definition, consists of the purposive attempt to attain chosen goals by the use of chosen means. (Rothbard did differ with Mises in his understanding of the epistemological status of the Action Axiom, but he did not consider this difference especially important.) In this approach, economic theory is apodictically certain: its propositions are necessarily true as long as they are correctly deduced from the Action Axiom and other incontestable propositions.
Mainstream economists reject this approach to economics (which, by the way, was espoused by many economists in the nineteenth and early twentieth centuries). Modern economics rests on positivistic epistemological foundations of the same sort that (mainstream economists suppose) undergird the work of researchers in the natural sciences. Mainstream economists build models, derive testable hypotheses from these models, and use statistical methods to test the hypotheses. If the observed data are inconsistent with a hypothesis, the economist (in principle) either abandons the hypothesis or returns to the theoretical drawing board to reformulate the model in a way that can account for the variations in the observed data.
Misesians such as Rothbard view the mainstream approach as unsuited to the study of human action, which is always situated in a “complex” and changing context so that no theoretical ceteris paribus proviso is ever satisfied; nor can the researcher artificially impose this proviso statistically in an empirical test. Mainstream economics treats the human actor as no different from an atom or a molecule, expecting that the actor will always behave (at least as a central tendency) in accordance with some fixed “law,” whereas Misesian economics sees the human actor as having the capacity to change his goals, select new means of achieving them, and alter his relative valuations at any moment—hence, in Mises’s expression, there are no constants in economics.
Mainstream economists regard themselves as scientists and regard Misesians such as Rothbard as kooks, so naturally they pay no attention to his work. They view him and others like him as cultists or ideologues. I need hardly add that I consider them wholly mistaken in this regard.
What do you know of Australia and would you ever consider visiting us here?
I know a bit about Australia from having had good Australian friends—above all, the great Max Hartwell—and from having had American friends who have visited or lived for a while in Australia. I very much doubt that I will ever be able to visit there myself, however. I am on the verge of retirement, and I will be emigrating (I hope before the end of 2014) to a remote location in Mexico. Once I’ve left the USA, I probably will not travel anywhere except locally in Mexico and perhaps in Central America (I have many friends in Guatemala.)
One of Australia's free-market think tanks published a policy monograph entitled 'Why Does Government Grow?' which points out that non-combatants during World War II experienced comparable expansions in the size and scope of government (p. 15 of the monograph). Does this line of argument undermine the argument that crises - in this case, wars - are the culprit when it comes to government's growth?
As I wrote in the first chapter of my book Crisis and Leviathan, the modern growth of government has various sources. The researcher’s job is to identify which of them have operated at specific times and places and to determine how much weight to give each of them. Crises certainly have been a fertile source of the growth of government in the USA, many Western European countries, and elsewhere. The detailed historical research on this claim leaves little doubt of its truth.
World War II, however, drew in almost all of the world’s major countries. Of those not drawn in, some experienced the same effects, springing from the same causes. For example, Sweden, which was not a belligerent in either world war, nevertheless prepared for war in both instances, in case it should have to defend itself against attack. The actions the Swedish government took in order to prepare for war closely resembled the actions other countries’ governments took in order to prepare for war and then to engage in it. One should not be misled by formalities such as whether a country declared war or by whether it sent soldiers to fight in it. The important changes prompted by war pertain to the new and expanded powers that governments exercise in connection with war or preparation for war.
Moreover, economic and political history is not physics. In one’s explanation of the growth of government, there is no reason to expect or to insist that a single model must fit every country in the world. Finding cases in which war was not a prime culprit does not, in itself, refute the finding that in other cases war was the prime culprit.
In my work on U.S. history since the late nineteenth century, crisis (along with certain ideological preconditions) is the critical event. War is the crisis that has the greatest effects because it is the one that creates the greatest public fear and therefore leads the public to demand or to acquiesce in the government’s exercise of new or expanded powers ostensibly to allay the perceived threat. However, other crises, such as the Great Depression and other economic turmoil, may also have the capacity to elicit similar expansions of government power and activity because they, too, cause great public fear and apprehension about the security of people’s livelihoods and property values.
More workaday reasons for the growth of government also exist, including those emphasized by mainstream economists under the unfortunate rubric of “market failure.” In my work, however, I have yet to find a historical case in which these sources merit heavy explanatory weight.
One also needs to recognize that what happens in one country, whether it has fought in recent wars or not, affects other countries, including those that may have avoided the fighting. Ideological changes spill across the globe, affecting redistributional politics, government policies, and many other developments. Commercial and financial relations severed or altered during a major war also bear on countries everywhere. International migrations are affected, both in their volumes and in their sources and destinations. A country can scarcely remain unaffected if a major war is occurring somewhere on earth, and some of these effects promote the growth of government.
What would you say to aspiring scholars - is it possible to carry out an Austrian research program in the social sciences and succeed in gaining employment at a major research university? Is good work published in the leading journals and recognized by faculty irrespective of the particular argument put forward by the author?
It is extremely difficult for Austrians to get a job in a top tier university or to place their articles in leading professional journals—not impossible, but extremely difficult. Austrians can succeed in getting jobs at second or third tier schools and in placing their articles in second or third tier journals, but, again, given the overwhelming dominance of the neoclassical paradigm in mainstream economics, even this degree of professional success is quite difficult.
You are now entering retirement. Are you pessimistic or optimistic about the prospects for people understanding just how much unnecessary death and destruction governments cause?
I do not expect that many people will ever appreciate the full extent of the state’s destructiveness. The state has all the advantages, from public schooling to the statist news media to almost every major institution with real power and influence in society. Of course, it has vast funds at its disposal, too, looted from the productive members of the public. People are therefore exposed, from the cradle to the grave, to indoctrination and propaganda tilted in the state’s favor. Very few ever raise the pertinent questions about the state, much less answer them correctly.
States sometimes fail, of course, but when they do, new states quickly replace them, as most people want. Modern people, for the most part, are unwilling to assume the same degree of personal responsibility that their ancestors assumed. They have therefore sold their souls to the state, looking to it for personal and economic security and relying on its general beneficence. In this regard, they evince the triumph of wishful thinking over realistic understanding.
Hans-Hermann Hoppe, an Austrian School economist and anarchocapitalist philosopher, is professor emeritus of economics at UNLV, a distinguished fellow with the Ludwig von Mises Institute, and founder and president of The Property and Freedom Society.
Ben O'Neill is a lecturer in statistics at the University of New South Wales in Canberra, Australia, and an Adjunct Scholar at the Ludwig von Mises Institute. He has formerly practiced as a lawyer and as a political adviser in Canberra.
Cade Share holds a Bachelor of Business and a Masters of International Politics from the University of South Australia. His research interests include anarcho-capitalism and spontaneous order, objectivist ethics, praxeology, state sponsored terrorism, the Hegelian dialect and revisionist history.
Alex Robson is a lecturer in economics at Griffith University, Australia.
John Engle studied Economics and Philosophy at Trinity College, Dublin. He has contributed to a number of political and economic publications, including Mises Daily and the Trinity College Social and Political Review.
Chris Leithner runs a private investment company. Combining Austrian economics with value-investing principles, he authored The Intelligent Australian Investor in 2005. His most recent book is The Evil Princes of Martin Place: The Reserve Bank of Australia, the Global Financial Crisis and the Threat to Australians' Liberty and Prosperity (2011).
Steve Kates is a lecturer in economics at RMIT University in Melbourne, Australia.
Mark Hornshaw is a lecturer in Business and Economics at the University of Notre Dame Australia. He received his MBA from the Sydney Graduate School of Management.
Luke McGrath graduated from Curtin University in Perth, Western Australia, with a Bachelor of Commerce (Economics) and a Bachelor of Social Science (Politics and International Relations). He is a scholar of the Mannkal Economic Education Foundation.
Sukrit Sabhlok graduated with a Bachelor of Arts (Honours) and a Bachelor of Laws from the University of Melbourne. He is completing a Masters at Monash University.
Marc Lerner is a finance student at the University of Sydney, who originally became interested in libertarianism after discovering the novels of Ayn Rand, and has since then maintained a keen interest in Austrian economics, libertarian political philosophy and the application of both to current events.
MARC LERNER Libertarian novels tend to fall into two categories, one good and one bad. Either they are complex, thought-provoking treatises – typified by Ayn Rand’s Atlas Shrugged - or they are reference-laden stories where every line of conversation is predictable to anyone who has read anything libertarian, and will likely only serve to annoy anyone who hasn’t. Mark Tier’s novel, Trust Your Enemies, successfully smashes this dichotomy and establishes a third kind; a novel driven primarily through plot, that gets its message across not through long speeches and introspective discussion, but through a gripping progression of events, where the philosophy emerges naturally as a consequence of what happens. Leonard Peikoff has written that “…after she had completed Atlas Shrugged, Ayn Rand occasionally said that she wanted to write a pure adventure story without any deep philosophical theme”. She never did, but Mark Tier may well have written what it would have been.
The story revolves around three protagonists: Alison McGuire, a chief political advisor to the Deputy Prime Minister, Derek Olsson, a freight and newspaper magnate currently in jail for a drug murder and Karla Preston, a recalcitrant journalist (and Olsson’s current girlfriend) seemingly hell-bent on exposing every politician’s lie in existence.
The novel’s plot twists and weaves, with the first part providing the reader with unsolved drug murders, corrupt politicians, blackmail, religious extremists, dubiously-motivated foreign interventions, mysteriously helpful computer nerds and ex-KGB agents. The dizzying time-shifting plot fully justifies the novel’s length; at over 750 pages, it might at be considered too serious an investment for a thriller, but not a word is wasted. Some distance in, lengthy reminisces about Olsson’s painful childhood may make the reader wonder if Tier isn’t perhaps being too generous with the complex character development... until they turn the page and realizes that no, they just weren’t smart enough to see the relevance. Without giving it away, all that can be said about the ending is that it doesn’t disappoint, with Tier even managing to include a dash of distinctly Rothbardian optimism.
Whilst there is some overt philosophical discussion in the novel, the libertarian message is most brilliantly spread not through dialogue but through the characters’ purposeful actions. Instead of dwelling in depth, for example, on a discussion of the libertarian position on drug use, Tier simply makes one of the main characters get involved in the trade. The character’s entrepreneurial nature makes the choice so obvious, so natural, that a mainstream reader, perhaps uninterested and disdainful of intellectual pursuits, will temporarily fail to notice that what is being done can, in real life, earn one lengthy jail sentences and death penalties. When the realization does come about (likely again through a twist in the novel’s plot), a serious rethink of the issue will be the likely result; whereas had the theme been introduced with a simple conversation, it would likely have resulted in the reader deciding to pick up a Tom Clancy instead. In another example of avoiding the all-too-obvious and painstakingly overt discussion, a side narrative relating to an insider trading and illegitimate mining permits case steers entirely clear of any philosophical dialogue, leaving the reader to figure out the complexities for themselves, a maneuver Tier employs repeatedly and to great effect.
Where the novel does become explicitly philosophical, furthermore, the discussion is almost always in conversation form, and always integrated within the framework of the story itself. For example, when Karla is trying to organize a meeting with Alison’s boss, and is explaining why she prefers to pay for her own expenses:
“‘Without their consent’?” Alison said heatedly. “This is a democracy, after all.”
“So it is,” Karla sighed. “But if taxation were truly voluntary, do you think enough money would be collected to pay your salary? We can talk about it some other time if you want to. In any case, I won’t be coming to Canberra just to talk to your boss. So I’ll pay my own way, okay?”
Strange woman, Alison thought as she put down the phone and turned back to skimming the newspapers (p. 288).
What is most impressive here is how natural the dialogue is and how it fits so easily in the conversation – entirely unlike a philosophical treatise.
Moreover, the novel avoids leaning upon John Galt-style perfect characters. Olsson, perhaps the hero of the story (although it isn’t easy to tell with so many candidates), makes many mistakes along the way, only at the end seriously embracing a well-rounded ideological commitment to libertarianism (which goes unnamed as such, except once when used by a detractor pejoratively). This decision ensures that a reader will not simply be bombarded with what appears to be idealistic propaganda, but rather is taken on a journey alongside imperfect individuals that can be easily empathized with as they develop.
In conclusion, Mark Tier’s novel is a standout amongst libertarian novels, and is particularly notable for gently nudging the reader in the right direction rather than bludgeoning them, as many others do. As far as can be determined, it is Australia’s first libertarian novel, and one of which we should be proud. NOTES
Ayn Rand Atlas Shrugged
, Signet, New York, 1957. 
“Identity,” said the guard, pointing the Taser directly at Harper.
““A is A,”” Mr, Harper replied, evidently bored with the procedure.
J.N. Schulman, Alongside Night
, Crown Publishers, New York, 1979, p.100. 
L. Peikoff (ed), The Early Ayn Rand, Revised Edition: A Selection from her Unpublished Fiction
, Signet, New York, 2005.
SUKRIT SABHLOK Well-written fiction books are a pleasure to read. The good ones are full of plot twists, suspense, passion and can be life changing – or at least thought-provoking. They can make you laugh, cry and perhaps even become angry. Really good ones can capture the imagination of an entire generation, or are adapted to hit the movie screens. To use a recent and well known example, consider how much different the world would be without Harry Potter!
The Frankenstein Candidate is intellectually heavier than your average J.K. Rowling. In designing the plot, Kolhatkar seems to have set out with a clear purpose: to present a specific set of ideas about government and society. It’s a book that features jargon such as ‘Keynesianism’, ‘economies of scale’ and ‘inflation’.
The world Kolhatkar constructs is based around a US election where two of the leading candidates are Senator Olivia Allen and the wildcard billionaire Frank Stein. We are taken on a journey where Olivia and Frank, running on different policy platforms, find that they are more similar than they first thought. Stein is spending his fortune on a quixotic and straight-talking campaign for president, and in many ways reminds me of US Congressman Ron Paul’s most recent bid for the presidency.
Along the way, various shenanigans inspire interest in the characters’ personal stories. It’s here that Kolhatkar is at his best. For example, when he delves into the psyche of Olivia in a scene where she is consulting her psychologist about her ‘imposter syndrome’ (a condition that makes it difficult for her to believe in her own self-worth) the reader feels genuine empathy for her high pressure lifestyle and most people would be able to relate to some degree.
Kolhatkar is a believer in free-markets and libertarianism and the dialogue is written with this strong philosophical undercurrent subtly, and sometimes not so subtly, in mind. Lead characters are in the mould of Ayn Rand’s Atlas Shrugged – intelligent, principled and determined. Stein, for instance, is the type of person who’d say ‘I’d rather be right than be President’.
Where the book might fall short, at least according to mainstream populist standards, is in its focus on technical economic subject matter. Certain passages read like a business article rather than a fiction novel, but this is probably unavoidable given the context in which the story is being told.
Nonetheless, there can be little doubt that this is a novel that will leave readers intrigued. It certainly delivers what it promises: a fast-paced plot packed full of twists and turns that should cement Kolhatkar’s place as an original writer. Published by CreateSpace Publishing (2012).
LUKE MCGRATH It’s a familiar tale for those who have studied economics at high school or university. In the first week or two, you’re exposed to various ideas explaining the astonishing ability of markets to facilitate the creation of wealth by coordinating individual actions. But lest your enthusiasm for markets get the better of you, you’re soon taught that unfettered markets are prone to all manner of deficiencies and shortcomings. Whether it’s creating pollution or generating inequalities of wealth, the lesson is clear: though markets are tremendously beneficial, government intervention is needed to counter the ubiquitous problem of “market failure.” In his book Beyond Politics: The Roots of Government Failure, Randy T. Simmons challenges this notion by defending the robustness of markets and highlighting the much-neglected occurrence of government failure.
Beyond Politics is, foremost, a primer on public choice economics, which is the application of economic theory to politics. While economists had traditionally used their tools to understand the behavior of individuals acting in the private, market sphere, beginning in the 1960s economists turned their sights to the public sphere. Could economic analysis be employed to yield new insights about voting, special interest groups, and other factors in democratic polities? If market participants are assumed to be self-interested, for example, should we not similarly apply this standard when evaluating the actions of those in the political domain? The result of doing this can be crushing to one’s civic sentimentalities, which is why James Buchanan, one of the fathers of public choice, called such analysis “politics without romance.”
The orthodox position as regards market failure is outlined by Simmons in chapters 1 and 2. He introduces us to various economists, particularly welfare economists, whose work established the framework and justification for intervention in the market. People like William Baumol, for instance, whose 1952 book Welfare Economics and the Theory of the State ‘became the economics profession’s standard for the study of market failures and provided an intellectual foundation on which to base proposals for government programs designed to improve on markets’ (p. 12). Simmons goes through a whole raft of alleged instances of market failure, explaining the conventional theory with respect to public goods, externalities, imperfect competition, inadequate information, and transaction costs.
In chapters 3, 4, and 5, Simmons expounds public choice theory, particularly as it concerns government failure. Rather than improving on market outcomes, Simmons argues that governments usually make them worse. ‘The fundamental reason,’ he explains ‘is that the information and incentives that allow markets to coordinate human activities and wants are not available to government’ (p.49). The provision of ‘public goods’ is one oft-cited market failure but, as Simmons points out, even if government does provide such goods, crucial questions still remain: ‘How much is enough? Who shall pay how much? How should payments be made?’ (p.55). In politics, there is a fundamental disconnect between the apportioning of costs and benefits:
In the market, consumers or buyers confront price tags to which they can relate their own estimates of the value of the good. Not so in the polity where there is no direct connection between the costs and benefits of a good or service (p.55-6).
Simmons identifies numerous problems with that most sacred of cows in contemporary democracies: voting. Because the probability of your ballot being the one that decides the election is so infinitesimally low, while the costs of being informed about political issues is so high (staying up to date on the candidates and their positions, voting records, and so on), a situation results where the incentive for voters is to remain uninformed. In one of the many examples one can point to in the book, Simmons eloquently explains and contrasts the underlying economic rationale that distinguishes market behavior and political behavior:
In the market, prudent consumers must consider income and prices before deciding to buy, which must be done at the margin with an eye to one’s future prospects and obligations. In the polity, on the other hand, citizens are not constrained by income or prices. The goods and services of government are provided whether one wants them or not (p.57).
One of the core ideas of public choice is the notion of concentrated benefits and dispersed costs. Simmons sees this ‘separation of cost and benefit considerations [as] perhaps the fundamental political fact’. It explains much of what we see in the world with regard to the undesirable influence of special interest groups because, in a democracy ‘small groups who benefit from government expenditures have more incentives and cheaper means of organizing than do the diffused taxpayers’ (p.64). A subsidy may be worth many millions of dollars to a particular interest group but this cost will be spread out amongst millions of taxpayers. What incentive does an individual have, then, to organize and pressure the government to eliminate such an inefficiency if such action only results in their paying a few cents less for the good at the point of purchase?
In chapters 6, 7 and 8 Simmons dives in to the topics of property, markets, the firm and the law, explaining more thoroughly the importance of these institutions in influencing social behavior. In the seven chapters that then follow, Simmons builds on the theoretical groundwork of the prior sections and evaluates the political pursuit of private gain in numerous case studies. This applied section is very good, with Simons exploring the dynamics of consumer protection legislation, the environment, government schools, the politics of macroeconomic policy, and numerous other issues. The final chapter closes with some general, wide-ranging remarks on how we can use the knowledge of public choice to foster a world that is more free and more prosperous.
It should be noted that Beyond Politics is more than just a work in public choice. Simmons draws on a whole lineage of free market scholarship that includes the Austrian School, the Chicago School, and the New Institutional Economics. At the end of each chapter, he provides a very helpful and instructive annotated bibliography of recommended readings that includes such thinkers as F.A. Hayek, Israel Kirzner, Douglass North, Elinor Ostrom, Gary Becker, Armen Alchian, and Anthony de Jasay. Taken together, this body of thought comprises a powerful case for the superiority of markets over government.
Beyond Politics is a book that can be understood by economics students and lay people alike, with only the occasional appearance of a supply and demand graph to buttress Simmons’ arguments. It’s an accessible and compelling read and is just the book to disabuse people of the notion that government intervention can improve the operation of markets. DOWNLOAD THE PDF OF THIS BOOK REVIEW.
MARK HORNSHAW Written by possibly the most influential libertarian of our generation, Liberty Defined is a must read book. In this collection of essays, Ron Paul lays out a libertarian philosophy on 50 topical issues, arranged in alphabetical order from “Abortion” to “Zionism”. It is a book that can be read in any order you like. But no matter where you start to read, you have to read more.
‘We need intellectual leaders’ said Austrian economist F.A. Hayek, ‘who are prepared to resist the blandishments of power and influence and who are willing to work for an ideal, however small may be the prospects of its early realization'. Such intellectual leaders are hard to find!
A former obstetrician, Ron Paul is a Congressman from Texas and a candidate for the Republican presidential nomination in 2008 and 2012. But nowhere in his book does Paul take even the slightest opportunity to indulge in electioneering or political posturing. Every line and chapter would be equally as potent whether Ron Paul ran for presidential office or not. Nowhere does he say that he is the solution to a problem, if only people would vote for him. At its heart, the book is not about policy prescriptions at all; it is the opposite to the usual political message. It’s about pulling back the proverbial curtain and revealing political schemes and wizardry as being inept and, more often than not, counterproductive. It does this forthrightly, bravely and uncompromisingly – and not just ‘for a politician’ but for anybody.
Ron Paul uses each of the 50 mini essays to hack away at the thick ivy of mystique surrounding government regulations, taxes, programs and schemes. He takes every opportunity to show that governments are the cause, not the solution, to human problems – whether they are related to ‘Slavery’ or ‘Education’ or any other area of concern. The legendary libertarian writer Murray N. Rothbard implores that “the libertarian must never allow himself to be trapped into any sort of proposal for ‘positive’ governmental action; in his perspective, the role of government should only be to remove itself from all spheres of society just as rapidly as it can be pressured to do so".
In these 50 short chapters, nothing is spared from the microscope and the axe, not even the notion of ‘democracy’:
As much as I defend the freedoms of everyone, those freedoms should be limited in the following sense: People should not be able to vote to take away the rights of others. And yet this is what the slogan democracy has come to mean domestically. It does not mean that the people prevail over the government; it means that the government prevails over the people by claiming the blessing of mass opinion. This form of government has no limit. Tyranny is not ruled out. Nothing is ruled out.
If the problem is government, Ron Paul’s solution is summed up in that beautiful and timeless word: liberty. But as often happens with such evocative words over time, liberty has been used and abused in the political mosh pit. It has been so watered down that it can mean anything to anybody. So this book more than anything else is about exactly what the title promises – defining what real liberty is and how a society that embraces liberty might interact with one another in peace and prosperity.
When it comes to foreign policy and trade policy for example, such a society would practice, as Thomas Jefferson famously said, ‘Peace, commerce, and honest friendship with all nations — entangling alliances with none’. He says ‘sanctions and blockades are dangerous and should be considered acts of war’.
A free society would have no place for ‘prohibition’. Paul draws parallels between the various government enforced prohibitions of today, and the havoc wreaked by alcohol prohibition in the 1920s, which bred lawlessness, underworld criminal syndicates, violence and poor quality products that endangered users. Under prohibition all honest people must surrender some of their freedom to the busybody inspectors who want to police the behaviour of others in a misguided effort to correct their habits.
Ron Paul minces no words in calling modern day America a ‘military client-run empire’ which he compares to the Roman Empire of old or the British colonial empire of recent history. With 900 military bases housing US troops in 135 countries, he says ‘Truly, the United States is an empire by any definition, and quite possibly the most aggressive, extended, and expansionist in the history of the world. Do we really find it shocking that some people in the world don’t like this?’ This empire, consuming the lives of American soldiers and the wealth of future generations, is the ‘enemy of American freedom’.
The chapter on unions is particularly well written, and this crude summary may not do it justice. Paul defends the right of people to form groups and to negotiate collectively. But he strongly opposes the use of violence and force against others, and any union powers gained by legislation he puts in this category. Often, big labour, big business and big government combine to enrich themselves at the expense of others. He goes on to show how ‘when the goal is liberty, prosperity flourishes and is well distributed. When economic equality is the goal, poverty results’.
Ron Paul writes to an American audience that is often deeply divided between conservative and progressive, religious and secular, etc. Yet none of these rifts pose any problem to the liberty based society Ron Paul envisions. In the chapter entitled ‘Evolution Versus Creation’ he points out that ‘both sides want to use the state to enforce their views on others. One side doesn’t mind using force to expose others to prayer and professing their faith. The other side demands that they have the right to never be offended and demands prohibition of any public expression of faith’. But on the other hand, he point out that ‘most of the conflict between atheists and believers comes up because of public schools. This issue doesn’t exist in private settings such as homes, homeschools, private schools, churches, and art studios, to name a few. In the private sector, every point of view can find a place and these ideas are no threat to others’.
It is no surprise then that Ron Paul is loved by people of all religious or non-religious persuasions – anybody who wants freedom to live their own life and be at peace with others around them. And he is also feared and ridiculed by people of all persuasions – whose insecurities compel them to employ coercion against others by seeking the reins of power.
 F. A. Hayek, ‘The Intellectuals and Socialism’, in Studies in Philosophy, Politics, and Economics, University of Chicago Press, 1967, p. 194.
 Murray Rothbard, For a New Liberty: The Libertarian Manifesto, Macmillan Publishing, New York, 1973.
STEVE KATES Moral wrong is related to intentionality. You must wish to do harm if the harm you do is to be a matter of blame. Whatever else the people who run our central bank may intend, they are trying to do good as best they can. To describe the Reserve Bank board as “the evil princes of Martin Place” immediately removes the book from being about economic policy to one about morality and blame.
In spite of that, and to my surprise, the first eight chapters turned out to be a very interesting discussion on Austrian monetary theory and the Austrian theory of the cycle. I have not read everything and there may well be other, better books around. But if you would like to understand the Austrian view of how one of the most crucial parts of our economic system works, and why the way it now operates creates dangers for our prosperity, this would be a very good place to start.
But going back to the title on a different matter this time, I think it’s unfortunate that the author chose a title that would make a potential reader assume it is a book mostly about Australia and its central bank when it is a book about the nature of economic policy and central banking everywhere. And the Global Financial Crisis, as the book makes clear, was not a local Australian event but one which began in the United States and has affected economies across the world. The title will therefore and unfortunately deter many people overseas who might have found the book useful from picking it up because of the implication embedded in the title that it is about Australia without a more general international interest.
Moreover, the arguments of the book are built on a foundation of Christian theology and Roman jurisprudence which may not be everyone’s cup of tea and which might also put some people off. It does take some effort to see the point because of this context. But in many ways the historical journey through Roman law, and the distinctions that were important these couple of thousand years ago, provides a basis for seeing that there are other ways of looking at these issues that once did exist and are now lost. I found this discussion fascinating.
The book also provides an historical review of the various issues that is quite extensive. This is the kind of sentence one does not come across very often in anything written nowadays about economics: “From the earliest days of banking, namely in Babylonia perhaps as early as 3500 BCE . . .” but it is representative of Leithner’s approach.
And this is the message that the author wants you to understand. Economies in which normal banking practice systematically creates loans from demand deposits necessarily suffer economic crises, and these economic crises include the failure of large numbers of banks. Therefore, we should stop banks from lending out the money they hold on behalf of other people. A bank can be a place where deposits are held in relative safety and can be used to transfer money from one person to another. But as soon as banks are permitted to lend money out to other people so that there is less than 100% of the value of deposits on hand in the bank when depositors might want their funds, we are well on the way to banking crises, instability, unemployment and inflation. If you put a stop to fractional reserve banking, where deposits are created from nothing and lent to third parties, these kinds of crises will come to an end and most financial instability of this sort will cease.
This is an arguable proposition and while I don’t think it is a complete story it is a story worth thinking about. The value in this approach is to return theory towards the theory of the cycle where broader causes of recessions and large scale unemployment are seen as intrinsic to the way in which the economy operates. Crises and recessions are not blue sky events but have actual endogenous causes unrelated to deficient demand. It is a different way of thinking about economic issues which has now almost totally disappeared from mainstream economic thought.
But really, the context in which he puts his economic arguments are guaranteed to ensure that hardly anyone at all will pay attention to what he says. What sense can it make to discuss any part of our economic system under the heading, “The Central Bank: Mere Idol or Agent of Satan?” (p 527). He may wish to discuss economic policy and the proper theory behind it, but once he decides to indulge himself in that kind of rhetorical overkill he is ensuring that no one pay the slightest attention to anything he says. Even though there are major moral issues involved which are properly part of any such discussion, theological arguments are not economic arguments. There will be no converts based on such arguments. This kind of statement loses the battle even before there is any engagement at all.
And then there the title of Chapter 9 to consider. After eight chapters that deal with the nature of the fractional reserve system and the problems it might or might not cause, he titles this chapter: “The Monetary Roots of Democratic Pathologies”. And then the first sub-heading in the chapter: “Democracy is Evil!” in bold black letters. Seriously, how completely off putting can any statement be. While nothing is perfect, as Churchill famously said, “democracy is the worst form of government except all those other forms that have been tried from time to time”. Those of us who live in democracies like them and do not wish to be rid of them. No one who is apt to read this book would like to live in any other kind of political system. Had he looked to find some means to discredit his own ideas as thoroughly as possible, it is hard to think how he might have done so more comprehensively than this.
And it’s not as if he puts up an alternative to democracy. Whatever may be the economic consequences of democracy, the economic consequences of any other form of political system are far far worse. If Leithner doesn’t think so, he should at least explain why. To say democracy is bad, and the solution to our economic problems is to get rid of democracy, only makes me think that these problems will never be completely fixed and so we should get on with life.
The bottom line. There is an Austrian theory of the cycle. There is an argument to be made against fractional reserve banking. There are useful theological concepts that might be drawn into these arguments. But when all is said and done, the way the book is written, the political and moral judgments overwhelm whatever economic arguments there are. There is a very interesting book to be written that lurks inside the book that was finally published. If you are able to get past the politics, the morals and the theology, you might find this a very interesting book to read. But these are obstacles that will make it hard for many to see the point.Download the PDF version of this article by clicking here.
Abstract: On May 2, 2011 the U.S. Government did not even consider the pretence of due process and a fair trial according to the rule of law. Instead, its military planned and executed the premeditated murder of Osama bin Laden (who, among other things, masterminded the killing of approximately 3,000 people on September 11, 2001). But is bin Laden’s death really a time to rejoice? Or is it instead a time to reflect and ask that others forgive our sins against them and that we forgive others’ sins against us? The unspeakable truth is that the ‘War on Terror’ is a war of terror waged upon innocent civilians in impoverished lands – lands which have been impoverished not least by relentless Western meddling. Moreover, the War on Terror is one of America’s most comprehensive diplomatic, economic and military defeats, one which the U.S. Government has inflicted upon its own subjects.