Adam Smith’s Capitalism – Positive or Normative?

On 1 March 2010, In economics, history of thought, religion, By Ryan

Adam Smith’s Capitalism – Positive or Normative?

by Ryan Safner

[This essay was originally written for ECON 3462 - History of Economic Thought]

Adam Smith’s classic argument for capital accumulation is not a positive analysis of a functional market economy, but instead a strong normative account of his preference for investment over consumption.   While Smith is widely hailed as the father of economic science, it is commonly understood that he vaguely mixed positive descriptions with value judgments.  His magnum opus, The Wealth of Nations, functions as the economist’s bible, written archaically and vaguely enough for economic historians to draw numerous contradictory exegeses.  Many of Smith’s more regrettable or idiosyncratic theories on political economy can be explained by his ethical interjections, which in turn reflect his Presbyterian background.  The most vigorous preference he displays is for frugality and thrift over gluttony and conspicuous consumption.  This ethic puts into perspective his confused labor theory of value, specifically the differentiation between “productive” and “unproductive” labors.  The classical conundrum of the diamond-water paradox that he attempted to grapple with was but a mere illusion spawned by these potent inclinations.  The epitome of this bias is his otherwise inexplicable defense of usury laws which blatantly violates his alleged policy of “lassiez-faire.”  Adam Smith’s Wealth of Nations elucidates many truths about the free market economy, but these are unfortunately buried underneath mountains of vagaries and ethical interjections. (more…)

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Repudiating “Anarcho-Capitalism”

On 28 February 2010, In anarchism, emergence, ethics, personal, philosophy, politics, By Ryan

“A man shouldn’t believe in an -ism, he should believe in himself.” -Ferris Bueller’s Day Off

Ever since I first saw Ferris Bueller’s Day Off, which I admit was far too late in my young life, and I heard Ferris say that line in the beginning, I was amazed.  I wrote it down, thinking to myself, how can such a cliche pop-comedy movie possibly espouse such a profoundly philosophical idea?  Regardless, I took the idea to heart.

Labeling is always a hassle.  Words have generally agreed upon definitions through intersubjective consensus, but in the realm of politics and philosophy, words are almost meaningless.  Ask a so-called “conservative” whether he believes in global interventionism:  If he says yes, he might now be a “neoconservative,” if no, he might now be a “paleoconservative.”  Ask a “liberal” if she favors wealth redistribution: If she says yes, she’s likely a “socialist,” if no, she’s might be a “libertarian.”  But of course, all of these people still label themselves “conservatives” and “liberals,” and only a select few will identify with such narrow and nuanced terms as “civil libertarian,” “communitarian,” or “anarchosyndicalist,” even if their views seem to “objectively” (whatever that means) line up with common definitions of them.

For a while now I have styled myself as an “anarchocapitalist,” or ancap for short.  I have come here to repudiate that word, it is a terrible word and I have fallen out of favor with it.  Much of this diatribe will be against the word itself, not necessarily the ideas behind it, which I tend to maintain, though I have broadened the horizons of my beliefs as well as expanded my outlook on things. (more…)

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The Genesis of States

On 27 February 2010, In Uncategorized, history, politics, religion, the state, By Ryan

[This article is a continuation of How Anarchic Market Forces (And Not the State) Created Civilization]

The epoch following the Neolithic Revolution in 10,000 B.C. was characterized by unprecedented growth in human population, culture, technology, and trade unrivaled in all of human history.  The natural emergence of ideas and technology through entrepreneurial innovation and natural market processes over many years selection led to the creation of the necessities of advanced civilization–agriculture, husbandry, pottery, medicine, metallurgy, trade, law, and money.  States, as we consider them today, were conspicuously nonexistent.[1]

While some social stratification based on ability, function, or gender existed, on the whole, Neolithic societies were much more egalitarian than those found today.  Most societies were centered around the family and the village, with some even looking down on excessive accumulation of wealth.  Likely, there were wise elders or elites that emerged in each village based on reputation and respect, who adjudicated any possible disputes between community members; but they were not held to be a separate, superior class.  The marvels of archaeological sites like Çatalhöyük, Abu Hureya, and Ain Ghazal in Ancient Mesopotamia are testaments to the success of voluntary relations and market exchanges.  Based on the evidence found within these sites, it is accurate to say that the civilization predates the State by 4,000 years.

Some of the earliest States to be established were Arslantepe and Uruk, in the form of powerful cities dominating a surrounding hinterland.  The “great” empires of old, Egypt, Babylon, and Assyria would model themselves on these Sumerian structures.  Contrary to whatever fashionable methods are proposed today, a State can only arise through a very specific three-step process: through conquest, establishment of institutions, and ex post facto justification.

(more…)

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A.R.J. Turgot as Austrian Grandfather

On 22 February 2010, In economics, history of thought, By Ryan

A.R.J. Turgot as Austrian Grandfather

by Ryan Safner

[This essay was originally written for ECON 3462 - History of Economic Thought]

Anne-Robert Jacques Turgot’s brief but brilliant writings on political economy portray him as a major intellectual precursor to the modern Austrian school of economics.  Many of his primitive yet revolutionary insights into the nature of a free market bear striking resemblance to major Austrian tenets.  None is so crucial and so well-developed, however, as his vision of a dynamic and emergent market order.  Turgot’s shining brilliance and foresight into this area illuminates the voids of the sycophantic mercantilists and the comparative statics of the classical school.  This grandiose vision would be lost for a century until it was recovered, quite independently, by the original Austrian, Carl Menger.  If Menger is the father of the Austrian school, Turgot would certainly qualify as the estranged grandfather.  Turgot’s prolific vision of market-based progress can be seen through a proto-Austrian lens based upon two key concepts he elucidated – the great role of the capitalist-entrepreneur and that of time.  Turgot observed that it is the entrepreneur, or “undertaker,” who forecasts future conditions and undertakes a profitable venture in the context of ubiquitous risk and uncertainty.  In particular, it is the capitalist-entrepreneur who forwards the money from his saved capital at a future profit to make such an undertaking possible.  Since entrepreneurial action necessitates present action based on future speculation, Turgot is one of the first to highlight the immensely important and often neglected role of time in production and investment.  Their combination makes for an economy where entrepreneurs act as the great equibrilators to the constant flux of market dynamics.  Their actions, as well as their accumulation of capital, allow for the optimistic possibility of an ever-progressing society. (more…)

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Jobs! Jobs! Jobs!

On 21 February 2010, In current events, economics, politics, By Ryan

Jobs! Jobs! Jobs!

(Facts, Fictions, Fallacies)

The biggest spotlight in public policy today, especially due to the dismal economic climate, is the level of employment in the economy.  Professional economists and citizens alike eagerly await the latest government statistics on “job growth” or more accurately, job losses.  Despite these abundantly clear signals of economic and personal pain, establishment mouthpieces still have the effrontery to proclaim “the recession has passed.”

This claim is all the more ironic, as the siren song of political economy to always increase the amount of jobs in a nation, regardless of climate.  Jobs are politically popular – from pork-barrel spending projects that enrich a single district[1], to massive public works programs, the jobs fetish of politicians and mainstream economists knows no bounds.  The epitome of this viewpoint was the quip by the king of make-work programs, British economist John Maynard Keynes, who advocated the government in tough times to “pay people to dig holes and fill them back up again.”[2] Bear in mind, lest we forget, “we’re all Keynesians again.”[3] The Keynesian viewpoint manifests itself in the Obama-Geithner-Bernanke triumvirate over economic policy.  These views are currently being encapsulated in President Obama’s propaganda campaign for a second new round of fiscal stimulus, known as the “jobs bill” to succeed the dubious $787,000,000,000 stimulus package in 2008.

While there might be a strong empirical correlation between the total number of jobs and total economic output (or their respective growth rates), it does not necessarily imply causation.  Sycophantic Keynesians and their devout adherents in Washington make an offering at the jobs-altar with the sacrifice of causal economic laws.  It is not the jobs that are the underlying engine of growth in an economy, but the savings and wealth that they produce.

While there are many fallacies in putting “jobs” on a pedestal, this article will deal with two of the most important: First, that jobs are intrinsically more valuable than the income they provide, and that thus everyone must have one; and second, that the free market naturally tends towards less than “full employment” in the long-run (the brunt of the Keynesian onslaught).

Before addressing the specific theoretical problems in the Keynesian system, every citizen in America, knowledgeable or not, should ask themselves one question: “Why should we ever trust the same people who promised us unprecedented prosperity and made an absolute mess of things to provide the solution to the problems they created?”

(more…)

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