Last time I flew, I was stuck overnight in Dallas. Tonight it looks like I will be stuck in SLC. Is there anything to do in Utah?
Amagi-Nation
RSSAdam Kokesh is in federal jail for “resisting arrest” after he was arrested in Philadelphia during a protest of marijuana prohibition (Kokesh had not [yet] been smoking).
I have mixed feelings about Kokesh. Though he preaches some erroneous messages, I admire his passion and his courage to stand up to government. Regardless of how one feels about Kokesh though, this police action is superfluous. Not only is there video where Adam is clearly not resisting arrest, but the notion of arresting an individual solely for ‘resisting arrest’ is egregious. The police are essentially saying that they began arresting him before they had a charge that required his arrest. How can an individual be arrested for ‘resisting arrest’ when they are not previously being arrested for another charge?
Hey President Obama, You Can Shut Guantanamo Whenever You Want. Here
In his press conference Tuesday, President Obama repeated that he wanted to shut Guantanamo Bay but blamed Congress for stopping him. They would not let us close it, he said. But thats wrong. President Obama can lawfully release the detainees if he wants to. Congress has made it difficult, but not impossible. Whatever he’s saying, the president does not want to close the detention center—at least not yet.
Of all tyrannies, a tyranny sincerely exercised for the good of its victims may be the most oppressive… those who torment us for our own good will torment us without end for they do so with the approval of their own conscience.
- C.S. Lewis (via laliberty)
Sweden, Capitalism, and the Welfare State by Nima Sanandaji
Supporters of the welfare state around the world have for many decades pointed out the Scandinavian countries, particularly Sweden, as proofs of how this system can generate both wealth and social equality. Sweden is in fact one of the best examples of how economic freedom fosters development and individual responsibility, whereas big government destroys the foundation for economic growth and personal accountability.
“From the 1950s until the early 1970s, the Swedish social democratic model managed to successfully deliver on its promises of low unemployment, low inflation, and a relatively egalitarian distribution of wealth. But during the course of the past 25 years, the Swedish model has seemed to be headed along a path of slow disintegration, culminating in the disastrous economic recession of the early 1990s.”
~ Jason Coronel. “Foundations, Decline and Future Prospects of the Swedish Welfare Model: From the 1950s to the 1990s and Beyond.” DePaul University Spring 2002
During the 1870s Sweden was an impoverished nation, occasionally plagued by starvation. All this changed as capitalism was introduced in the country. Free markets, property rights and the rule of law created an environment where the Swedish people could achieve a long period of rapid economic development. Between 1870 and 1970 Sweden had the second highest economic growth in the world, second only to Japan.
Socialism had played an important role in Swedish politics, where the social democrats and the labour unions had become the most important political force. But Swedish social democrats were pragmatic and had during the first half of the twentieth century maintained an economy that was one of the freest in the world. The fact that Sweden did not take part in the world wars meant that our economy had a better chance to develop than those of many other western nations. The Swedish people also had a very strong work ethic. Also, Sweden’s Lutheran religion encouraged industriousness and good work ethics.
During the 1960s the social democrats radicalised. They abandoned their traditional pragmatic policies and started a large-scale expansion of the welfare state. Between 1970 and 1990 taxes increased by almost one percent point each year. Income taxes doubled between 1960 and 1990, rising from approximately 30 to 60 percent. During the 1970’s the political left viewed Swedish policies as a success. The massive expansion of the public sector reduced unemployment in the short run. Few questioned if this expansion was a sustainable policy.
“The Swedish system is in serious trouble. The Swedish economy is no longer creating jobs – private sector employment has been shrinking for decades, and the public sector can no longer absorb more workers… Many Swedes are pessimistic about the future, in large measure because they cannot imagine how their system can survive, yet cannot overcome the political obstacles to changing it.”
~ Virginia Postrel, Reason Magazine November 1999
As the cost of regulations and big government grew, entrepreneurship dropped. In the 2002 Global Entrepreneurship Monitor survey Sweden ranked in the 31st place among 37 countries when it came to start-up of new companies. None of the large Swedish companies were established later than 1970. It is not a coincidence that Sweden has gone from being the fourth richest country in the world in 1970 to being the fourteenth richest in 2002. Today the average American has 37 percent higher purchasing power and almost twice as high private consumption as the average Swede. More than 30 percent of the Swedish population falls below the American poverty line.
P.J. O’Rourke once wrote that no American would work if they lived in a system such as the Swedish welfare state, where government is “generous” with benefits to the unemployed, those on sick leave and those that have retired. What makes Sweden interesting is that for a long time people were very reluctant to take advantage of the system. The Swedish population had a strong tradition of entrepreneurship and hard work and continued to work hard even though they now had the option to live off government. But people do adapt their morality to maximize their benefits in the economic system in which they live, although this might take a generation or so.
During the last few years the number of Swedish citizens that are being supported by unemployment, sick leave or early retirement has increased dramatically. Is there a major epidemic that is keeping people from going to work and causing young unemployed people to retire? The social democrats certainly seem to think so, maintaining that Sweden is still a country where most people are willing to accept any full time job if offered.
This denial goes deep in Swedish mentality. Recently Jan Edling, an economist from Sweden’s largest labour union, LO, wrote a report where he explained that it was the welfare system that caused people to go on sick leave or early retirement. According to Edling, Sweden had a de facto unemployment rate of 20–25 percent. As LO refused to print the report Edling resigned after 18 years of service.
Telling the truth might not be popular, but I wish that Edling’s report would be translated and sent to all fans of the welfare state around the world. It shows that the Swedish welfare state has systematically destroyed personal responsibility and work ethics. There is a point where so many people start taking advantage of the system that each individual understands that they will be on the losing side if they don’t maximize their own utility. A system that pays people not to work eventually creates a mentality where many people choose not to work. In the coming years the citizens of the European welfare systems will probably wake up to this reality.
Obama: ‘Any Time Bombs Are Used to Target Civilians It Is an Act of Terror’
Embarrassingly, Obama inadvertently described his own drone war as terrorism, given that he “counts all military-age males in a strike zone as combatants, according to several administration officials,” and has rejected the stipulation of disrupting an imminent threat of attack as a prerequisite to dropping bombs on large groups of unidentified individuals.
Actions
don’t reveal preferences, they reveal expectations.
No they reveal preferences ex ante. Whether said preferences actually end up meeting those expectations is an ex post consideration.
But how do you determine if the preferences were based on the actual result or a different expected result? People don’t prefer making one decision to making another decision, they prefer the expected payoff of a particular decision.
For example, back before the FDA or any kind of medical regulation, there were “doctors” who went from town selling snake oil - a remedy that they alleged cured all sorts of ailments. People bought it with the expectation that it would cure those ailments. More often than not, the snake oil did absolutely nothing. If you’re seriously suggesting that people’s purchase of snake oil demonstrated that they preferred snake oil itself to whatever else that money could have gone to buying (food, for instance) - rather than the expected benefit they believed that they could derive from the snake oil - you’re just ignoring truth in order to make reality fit your preconceived theory.
herp derp but when Austrian economists speak of action they are referring to action and preference at a specific moment in time. So when people were buying snake oil they were indeed revealing a preference over food at that given moment in time.
But it wasn’t for snake oil. That’s the point. It was for the expected value they believed the snake oil was going to give them. The problem with the Austrian view is that it leaves no room for disappointment.
Again, as has been repeatedly noted: there is a distinction between ex ante and ex post. Every action reveals preferences ex ante, meaning at that moment of action based on expected results. The future is inherently uncertain. This is a fundamental principle of economics, which - since you claim to be an economics instructor yourself - is something I imagine you understand.
As Ludwig von Mises notes in his opus, Human Action:
The uncertainty of the future is already implied in the very notion of action. That man acts and that the future is uncertain are by no means two independent matters. They are only two different modes of establishing one thing. … [T]o acting man the future is hidden. If man knew the future, he would not have to choose and would not act. He would be like an automaton, reacting to stimuli without any will of his own.
So, man acts because the future is uncertain and wishes to lessen some perceived unease or to attain a greater level of happiness or contentment. As such, every action reveals a chosen means to a specific end but the action cannot guarantee that end: ‘If I buy this water, my thirst will be quenched’, ‘If I wink at this girl, she’ll come home with me,’ ‘If I vote to outlaw guns, there will be no crime,’ ‘If I buy this alarm system, my home will be safer,’ ‘If I invest in this company, I will become rich,’ ‘If I go to the gym, I will lose weight,’ ‘If use this lotion, I will grow 6 inches,” etc.
Mises, ibid. (emphasis added):
Human action is purposeful behavior. Or we may say: Action is will put into operation and transformed into an agency, is aiming at ends and goals, is the ego’s meaningful response to stimuli and to the conditions of its environment, is a person’s conscious adjustment to the state of the universe that determines his life. …
Action is an attempt to substitute a more satisfactory state of affairs for a less satisfactory one. We call such a willfully induced alteration an exchange. A less desirable condition is bartered for a more desirable. What gratifies less is abandoned in order to attain something that pleases more. …
Action is purposive conduct. It is not simply behavior, but behavior begot by judgments of value, aiming at a definite end and guided by ideas concerning the suitability or unsuitability of definite means. …
Action is always directed toward the future; it is essentially and necessarily always a planning and acting for a better future. Its aim is always to render future conditions more satisfactory than they would be without the interference of action. The uneasiness that impels a man to act is caused by a dissatisfaction with expected future conditions as they would probably develop if nothing were done to alter them.
So action is hopefully clear, but Austrians do not take for granted the results. To the contrary, that distinction is discussed thoroughly. The nature of humanity itself, beyond an uncertain future, is imperfect human actors and the ubiquity of imperfect knowledge and imperfect calculation (see my post on The Calculation Problem and Price Theory). Austrians discuss this imperfection ad nauseam, and indeed it is why they note that a decentralization of decision-making would yield optimal results.
Mises:
It happens again and again that an action does not attain the end sought. Sometimes the result, although inferior to the end aimed at, is still an improvement when compared with the previous state of affairs; then there is still a profit, although a smaller one than that expected. But it can happen that the action produces a state of affairs less desirable than the previous state it was intended to alter. Then the difference between the valuation of the result and the costs incurred is called loss.
Israel Kirzner:
The Austrian approach does not make the perfect-knowledge assumption the foundation for [the market-clearing price] proposition; quite the contrary, Austrians base the proposition squarely on the insight that its validity proceeds from market processes set in motion by the inevitable imperfections in knowledge, which characterize human interaction in society.
Murray Rothbard not only fleshes out this distinction between ex ante and ex post, but he compares the market in this sense to democracy/government (and dedicated a fair chunk of Power & Market to this discussion):
Error can always occur in the path from ante to post, but the free market is so constructed that this error is reduced to a minimum. In the first place, there is a fast-working, easily understandable test that tells the entrepreneur, as well as the income-receiver, whether he is succeeding or failing at the task of satisfying the desires of the consumer. For the entrepreneur, who carries the main burden of adjustment to uncertain consumer desires, the test is swift and sure—profits or losses. Large profits are a signal that he has been on the right track; losses, that he has been on a wrong one. Profits and losses thus spur rapid adjustments to consumer demands; at the same time, they perform the function of getting money out of the hands of the bad entrepreneurs and into the hands of the good ones. The fact that good entrepreneurs prosper and add to their capital, and poor ones are driven out, insures an ever smoother market adjustment to changes in conditions.
Consumers are not omniscient, but they do have direct tests by which to acquire their knowledge. They buy a certain brand of breakfast food and they don’t like it; so they don’t buy it again. They buy a certain type of automobile and they do like its performance; so they buy another one. In both cases, they tell their friends of this newly won knowledge. Other consumers patronize consumers’ research organizations, which can warn or advise them in advance. But, in all cases, the consumers have the direct test of results to guide them. And the firm that satisfies the consumers expands and prospers, while the firm that fails to satisfy them goes out of business.
On the other hand, voting for politicians and public policies is a completely different matter. Here there are no direct tests of success or failure whatever, neither profits and losses nor enjoyable or unsatisfying consumption. In order to grasp consequences, especially the indirect consequences of governmental decisions, it is necessary to comprehend a complex chain of praxeological reasoning… Very few voters have the ability or the interest to follow such reasoning, particularly, as Schumpeter points out, in political situations. For in political situations, the minute influence that any one person has on the results, as well as the seeming remoteness of the actions, induces people to lose interest in political problems or argumentation. Lacking the direct test of success or failure, the voter tends to turn, not to those politicians whose measures have the best chance of success, but to those with the ability to “sell” their propaganda. Without grasping logical chains of deduction, the average voter will never be able to discover the error that the ruler makes. Thus, suppose that the government inflates the money supply, thereby causing an inevitable rise in prices. The government can blame the price rise on wicked speculators or alien black marketeers, and, unless the public knows economics, it will not be able to see the fallacies in the ruler’s arguments. …
Another critical divergence between market action and democratic voting is this: the voter has, for example, only a 1/50 millionth power to choose among his would-be rulers, who in turn will make vital decisions affecting him, unchecked and unhampered until the next election. In the market, on the other hand, the individual has the absolute sovereign power to make the decisions concerning his person and property, not merely a distant, 1/50 millionth power. On the market the individual is continually demonstrating his choice of buying or not buying, selling or not selling, in the course of making absolute decisions regarding his property. The voter, by voting for some particular candidate, is demonstrating only a relative preference over one or two other potential rulers; he must do this within the framework of the coercive rule that, whether or not he votes at all, one of these men will rule over him for the next several years. …
Indeed, failure itself is an important aspect of the market process:
While success is the engine that accelerates us toward our goals, it is failure that steers us toward the most valuable goals possible. Once failure is recognized as being just as important as success in the market process, it should be clear that the goal of a society should be to create an environment that not only allows people to succeed freely but to fail freely as well.
To suggest that “the Austrian view… leaves no room for disappointment” reveals a gross misunderstanding (or, more likely, straw-manning) of the “Austrian view.”
About Amagi-Nation
This blog primarily blogs about austrian economics, history, science, philosophy and religion. I do occasionally talk about music, sports, outdoors, fitness and many of my other interests.
