Quote of the Day: Mises

From the introduction of Ludwig von Mises’ Human Action.

“It is true that economics is a theoretical science and as such abstains from any judgment of value. It is not its task to tell people what ends they should aim at. It is a science of the means to be applied for the attainment of ends chosen, not, to be sure, a science of the choosing of ends. Ultimate decisions, the valuations and the choosing of ends, are beyond the scope of any science. Science never tells a man how he should act; it merely shows how a man must act if he wants to attain definite ends.”

I often read online Austrian economic commentary. A common theme I note in these threads is the erroneous conflation of Austrian economics with libertarian political theory or some other philosophy about the good with regard to political organization. While many Austrian economists are indeed political libertarians, Austrian economics and libertarianism are not synonymous. As Dr. Steve Horwitz defines, Austrian economics is “a set of analytical propositions about the world and how to study it,” not “a set of policy conclusions or settled interpretations of history.” Unfortunately, this mistake is as common among proponents of Austrian economics as it is among the Austrian school’s critics.

In that vein, I recommend this video by Prof. Steve Horwitz about what Austrian economics is and what Austrian economics is not.

A New Vision

I first created this website intending it to become my online writing portfolio. I wanted to keep all my published articles in one place in order to show prospective employers, find more freelance work and keep my pieces organized.

I’ve since learned this is a pretty sorry way to promote my stuff. Not only were my grandparents the only people who ever visited the site, but I shouldn’t really be re-posting entire articles here anyways–submitting them for publication almost always means giving up rights over the article to the publisher.

That said, I’m going to start blogging here. I’ll keep my professional writing portfolio on the “Articles” page for future reference, but this site will primarily be for my blog. By doing this, I hope to write more often and explore subjects I’m interested in but not necessarily qualified to write about for a magazine or journal.

I’ll also be working on the format of the blog over the next few days. I like simple blogs, but I want to link most of my online professional and social media accounts to this page.

I got published: The Key to Achieving “Lift-Off” for the Poor

I got published at ValuesandCapitalism.com. This time, I respond to an article by New York Times columnist Nicholas Kristof about poverty, children and so-called “safety nets.”

“Sounds nice, but safety nets aren’t for lifting off. They are for catching falls. Lift-off requires a firmer foundation—one that can withstand the ebbs and flows of recession, unemployment and other extraneous dampers on economic success. That firm foundation is a moral culture.”

Read the article at Valuesandcapitalism.com, originally published on March 21, 2014.

I got published: President Obama Doesn’t Know His History

I got published at ValuesandCapitalism.com. I write about President Obama’s stilted view of history as displayed during his State of the Union Address last Tuesday.

In essence, President Obama claimed that technological advances that undermined old-fashioned ways of doing things inhibit middle-class growth. They pull the rug out from underneath Americans who depend on hard work and responsibility to make ends meet. No longer do people’s financial futures depend on their own effort, but rather, technology and competition has introduced extraneous factors into the economic equation that undermine the norm of hard work being the key to financial success.

Technology, he says, makes life harder.

Read the article at ValuesandCapitalism.com, first published on January 30, 2014.

I got published: Securing Economic Progress: A Lesson from Robinson Crusoe

I got published at ValuesandCapitalism.com. I wrote about the prerequisites of economic progress.

Property rights are an essential ingredient for economic progress. If human beings doubt that the fruits of their labor will remain theirs to use as they wish, they will be less likely to work so hard gathering resources and more likely to consume their resources as soon as possible.

Read this article at ValuesandCapitalism.com, first published on Wednesday, January 15.

I got published: Economic Progess: Don’t Take it for Granted

Assuming that next year will automatically be better than the last is a bad idea. Read why in my new article at ValuesandCapitalism.com.

History shows time and again that significant economic regress is possible. Unlike in America, economic relapse and distress have lasted for decades in many regions around the world, not just for the few months and years following a financial crisis.

Read the article at at Valuesandcapitalism.com, first published on January 7, 2014.

New Year’s Resolution: Save and Sacrifice Now to Flourish Later

My wife is a nurse. Every evening, she tells me stories about her patients.

One day, she told me about a patient who quit taking her insulin. She was recently diagnosed with diabetes, and decided she didn’t have time for insulin shots. They were painful. They took time out of her day. For her, the present inconvenience of following the doctor’s orders wasn’t worth whatever pain it might prevent in the future.

Her health quickly deteriorated. She returned to the hospital one month later—this time to the emergency room. Because of her uncontrolled diabetes, a small sore on her leg had developed into a serious bone infection. She would never walk again.

Unfortunately, stories like this are common at hospitals. The sickest people are often those who ignore their doctor’s advice; yet hospitals exist, of course, to serve the sickest people. Because of this, doctors and nurses expect to see many patients admitted for preventable illness—it comes with the job.

Medical professionals are not the only ones that deal with such behavior, however. I recently spoke to a financial advisor who recounted similar stories about some of his clients. One couple in particular ignored his advice and took a 401(k) loan to buy a second home. They’d seen a family friend double his investment in just six years and were convinced they would do the same. That was in 2007.

I’ve heard economists discuss similar frustrations with policymakers in Washington. While extending new credit and driving interest rates down might stave off recession in the short term, such policies are not sustainable in the long term. Nevertheless, the Federal Reserve continues to use new money to stimulate demand. They’ve guaranteed low interest rates for months and even years to come, enticing investment into risky projects that remain untested outside of our inflationary economic environment.

Another obvious parallel are the spending habits of the average American. Half of all Americans have less than three months’ worth of emergency savings and one in three is not saving for retirement. Of course, not everyone enjoys a steady job and enough income to make ends meet. But more than half do. That being said, such decisions are anything but conducive to a secure financial future. They defy the most basic of instructions about wise financial planning, and I doubt any of the culprits would honestly disagree.

Like my wife’s patient, the behavior I describe above indicates a general disregard for future wellness in favor of present satisfaction. Economists call this a “high time preference.” Instead of investing in long-term projects that yield generous and lasting returns, many of us prefer instead to spend in the present. We value today more than tomorrow. We live as if the future holds only blessings.

I’ve seen the negative effects of high time preference in my own life, with regard to both my health and personal finance. I’m sure you have, too. Like the woman in the story above, the effects are painful—and sometimes permanent. They might arrive via phone call from a debt collector or via notice from your landlord. They may surface on your report card or on your bathroom scale. If enough of us give in, they can even show up in the form of economic recession, when we realize there just isn’t enough money to go around.

But how they arrive is not important. What matters is that they always will.

So take time at the beginning of this year to reflect on your thinking with regard to the future, the present and how you use what you’ve been given. Make 2014 your year of growth—not catch up and squeak by. Remember that though it may always be uncertain, the future is worth preparing for.

This article was originally published at Valuesancapitalism.com on January 2, 2014.

How the Fed Makes Unemployment a Good Thing

This article was originally published at Valuesandcapitalism.com on December 3, 2013.

Imagine a world where unemployment is good—where fewer people working means more prosperity. Both time and resources would be infinitely abundant. Consumer goods would invent themselves. The standard of living would improve most swiftly when human beings stay out of the way.

This world, of course, is a fantasy. Until someone invents a self-improving robot fueled by human indolence, unemployment only hampers economic growth.

That is, until November 2013.

If history is any guide, the Labor Department’s announcement earlier this month that the U.S. economy added 204,000 jobs in October—twice what most economists expected—should have sparked excitement across Wall Street and the nation. But while markets did gain on the day, early-morning futures turned quickly negative after gaining before the report’s release. The talk of the town was anything but positive.

Explanations for this twist of events were quick and forthright: Indications of economic progress sparked fear that the Federal Reserve would taper its bond-buying program.

Since 2009, the Federal Reserve has created money to funnel into the economy via bond-buying and bailouts (a.k.a. “quantitative easing”). This policy was designed to lower interest rates, create credit, and stimulate demand with the ultimate goal of lowering unemployment. The result has been significant growth in stock prices and apparent economic recovery evidenced by a slow and steady drop in unemployment.

Understandably, investors have come to love quantitative easing. Though many voice concerns about the long-term effects of this policy, few deny that quantitative easing mitigated the immediate effects of the 2008 financial crisis. Even fewer would deny that quantitative easing is now vital to the health of many major financial institutions.

But of course, such a policy cannot continue forever. Quantitative easing must eventually come to an end—a fact even Fed officials often note. It is this ominous thought that sparked last month’s scare. Lower unemployment signals economic recovery. Economic recovery signals a sooner end to the Fed’s bond-buying and bailouts.

A similar episode occurred earlier this year when Federal Reserve Chairman Ben Bernanke hinted that quantitative easing may taper off if inflation remains steady and unemployment continues to drop. The stock market lost 4.3 percent over the three trading days following his comments.

U.S. Treasury Securities

This last episode was different, though, because no announcement was needed. The strong jobs report alone was enough to spook investors even before the Fed could announce changes to quantitative easing. What is good news at almost any other time and in any other place is bad news on Wall Street today.

This spells disaster for the American economy. The same quantitative easing policy designed to decrease unemployment is itself the cause of investors’ fear of strong jobs reports and other positive economic news in general. The fact that lower unemployment hurts the stock market means the Fed has created a lose-lose situation whereby lowering unemployment creates a simultaneous collapse in stock prices. They have kept up their money-printing too long. The Fed has become its own worst enemy.

But even worse, the Federal Reserve has pitted Wall Street against the American people by inadvertently linking lower unemployment with lower stock prices. Big banks now have reason to want high unemployment in order to extend the life of quantitative easing. While bankers themselves do not make economic policy, they do control the flow of money into and out of their vaults. They can tighten and expand credit. Conspiracy theories aside, banks do have considerable power over the rate of economic growth, and knowing that investors at-large fear a slow-down to quantitative easing does anything but encourage them to help speed up the recovery process.

While high unemployment will never be good news for the real economy, that doesn’t mean that financial institutions and the economic powers that be will always feel the same crunch. When economic stimulus is directly linked to the unemployment rate, like the Fed has done with quantitative easing, those depending on stimulus for their profits should only be expected to react negatively to news of job growth.

Placing Blame Where Blame is Due

This article was originally published at Valuesandcapitalism.com on November 29, 2013.

In his book “Life at the Bottom,” Dr. Theodore Dalrymple describes the common behaviors that he observes in many of his lower-class patients. Among the most apparent of these is an attitude of “dishonest fatalism”—a consistent unwillingness to accept blame.

“The knife went in,” said one patient awaiting his trial for first-degree murder. Another blamed his thieving ways on an insatiable addiction to the thrill of stealing—an addiction he expects the doctor to treat. A third insists his “head just went,” to explain away his assaulting a companion.

While Dalrymple beats me in time spent with lower-class criminals, I know just the attitude he describes. I see it all the time, and not just among the poor.

It goes like this: As human beings find themselves in dire financial, medical, social or emotional circumstances, they often cope with guilt by shifting blame from themselves to others, or even to objects. Whether the discomfort is or is not their own fault, they explain their situation in terms of how their environment is responsible for it. Unemployment is caused by greedy managers; obesity by the availability of fatty foods; divorce by unreasonable spouses; laziness by clinical depression. Whatever the problem, its cause (and solution, for that matter) is fate—someone or something beyond the victim’s control.

Dalrymple is hardly alone in noting the implications of this attitude on poverty and working-class crime. In fact, entire studies exist on the psychology of the lower class as it pertains to control over their financial future and their motivation to escape the poverty cycle.

But fatalistic thinking is not unique to the poor. In some way or another, we all pass the blame for our problems to avoid the pain of recognizing our own deficiencies. And in our era of big government, politicians are the most common scapegoat. Whether to explain unemployment, failing schools and even obesity, liberals and conservatives alike target bad policy as the prime mover behind the nation’s biggest economic and social problems.

Of course, much of this blame is deserved. Governments at every level are generally poorly-managed and financially insolvent. Officials are often short-sighted—motivated by special interests more than by their constituents’ well-being.

But blaming government can also be dangerous, as it often masks underlying personal deficiencies that only contribute to the problem at hand.

Take, for example, America’s student loan crisis. According to the Federal Reserve, Americans now own more than $1.2 trillion of student loan debt, prompting some economists to call the program “unsustainable.” Only 40 percent of student loan borrowers make their scheduled payments, and almost 10 percent of all loans in repayment are delinquent.

Without a doubt, government policy has only exacerbated this problem. For decades, politicians wooed young voters with lenient, low-interest student loan policies, enticing young adults to take on massive debt long before they have any stable income. Now, some even propose laws that make student loan forgiveness easier for struggling borrowers, further encouraging young adults to finance their education with borrowed cash.

But the decision to borrow money is not made by government agents, admissions counselors or the increasingly competitive job market. Yes, college tuition can be prohibitively expensive and many jobs require a degree, but acquiring debt is the sole decision of the borrower. Inability to repay indicates poor financial decisions—ones from which borrowers should learn lessons to apply to their choices in the future.

Similar examples include debates about poverty, abortion and gun control. Even as concerned citizens, we too often forget our own role in encouraging unwise choices and instead blame politicians. Like Dalrymple’s patients, we are often blind to our own faults and quick to point out the problems with everything around us, and with government most of all.

Until we shuck this habit, consider any and all government policy ineffective. There is little politicians can do to counteract bad choices on the part of their constituents. Likewise, there is always something we can do to improve our own lives, no matter how difficult the current environment.

Bad laws make life harder, but so do vanity, sloth and even a poor diet. Taking the blame when it’s yours to take is the easy first step toward improving poor circumstances—economic, political and personal alike.

Material Problems Have Moral Solutions

This article was originally published at ValuesandCapitalism.com on April 18, 2013.

Is material prosperity the key to moral improvement?

For Marxists, the answer is yes (as explained in my last post). In fact, according to Marx’s narrative, the moral and social ills of society are directly attributable to material poverty. The only way to improve moral life, then, is to first improve economic conditions.

But history tells a different story.

In his book “Economics as Religion,” economist Robert Nelson tells the story of Zambia in the late twentieth century. As one of Africa’s poorest nations, Zambia was, for many years, the number one recipient of foreign aid. Hoping to improve the economic life of the Zambian people, nations around the world poured millions into Zambia in an attempt to spur investment and economic growth. But after three decades of aid, Zambia’s economy actually worsened—its GNP was smaller than when the aid first began.

Needless to say, economic factors alone are not enough to improve the moral life of poor people. In fact, causation is precisely the other way around.

The Zambian story shows clearly that without strong moral foundations—especially with regard to theft and property rights—economic growth is almost impossible. Wealthier nations could pour all the capital they wanted into the Zambian economy, but as long as officials failed to respect the rights and lives of their countrymen, it would never make a difference.

In the early twentieth century, famed economist Frank Knight argued a similar thesis in response to progressives and socialists who sought to use government economic programs as a means to eradicate societal ills. He wrote in 1939:

The idea that the social problem is essentially or primarily economic, in the sense that social action may be concentrated on the economic aspect and other aspects left to take care of themselves, is a fallacy, and to outgrow this fallacy is one of the conditions of progress toward a real solution of the social problem as a whole, including the economic aspect itself.

According to Knight, then, social progress occurs not when public officials realize that all social problems have economic causes, but rather, when they understand that this idea is a fallacy. Instead of reforming economic policy, then, to try and improve social conditions, human beings everywhere ought to remember that the source of social ills is not necessarily economic, and that even economic problems may not have economic causes.

For example, consider poverty. Of course, many people around the world are born in to poverty and never escape it. Others are the unfortunate victims of fraud, disease or natural disasters that have taken a permanent toll on their economic life.

But it’s no secret that many economic problems have their cause in moral or familial breakdown. The children of married parents, for example, have more economic resources, more parenting from their fathers, and face less risk of psychologically traumatizing parental break-up. According to the US Census Bureau, children of divorce are more likely to be in poverty, diminishing their prospects of paying for a college education. Additionally, even the poor themselves are extremely likely to name drug abuse as the number one cause of poverty.

Material prosperity is important for societal health. It facilitates saving and investment that drive the engine of economic progress. But material deprivation alone is not the cause of societal breakdown.

Helping the poor, then, is often more a matter of moral support than an issue of economic policy.