To Kill Markets Is the Worst Possible Plan

To Kill Markets Is the Worst Possible Plan

Momentous events usually leave strong memories on those who have lived through them, and those memories often become passed on to later generations in the form of historical interpretations of why and what had happened in the past. This has certainly been so in the cases of the Great Depression, the Second World War, the Civil Rights Movement, the Vietnam War, the terrorist attack of September 11, 2001, the financial crisis of 2008-2009, and now, no doubt, in the face of the Coronavirus pandemic of 2020.

One very important aspect to many of the interpretations of these past events is the lessons drawn in terms of the role of government in the free society. The dust is very far from settling in this latest health crisis that is, truly, enveloping the world. But even in the urgency of finding and implementing ways of minimizing the impact on human life and well-being from the Coronavirus, the outlines of how this crisis may be interpreted in the future is already showing its outline in the present.

Wrong Lessons That May Be Learned from the Coronavirus Crisis

One lesson that will, no doubt, be claimed is that this has once again demonstrated the limits of free markets and the need for activist and centralized governmental oversight, control and command. Dealing with a health issue like the Coronavirus cannot be left up to the decisions or discretion of individuals or even local governments. There has to be designed and directed health-management through central planning by government “experts” and agencies in this type of crisis, it will be said.

As part of this lesson will be the additional claim, as happened in many previous national disasters, of the need to prevent the greed of those in the private sector who try to take personal advantage of a human disaster by “price gouging” and grasping at unwarranted profits at their neighbor’s expense. Price controls in the form of price ceilings and possibly government-organized rationing of essential goods in short supply must be placed outside the everyday arena of ordinary market supply and demand, it will be insisted.

A second lesson that will be suggested by some will be the “dangers” and undesirability of international interdependency for many of the goods and services needed by communities and countries, the supplies of which can become limited or completely lost during a world health crisis such as the Coronavirus due to the supply chains of production that criss-cross national boundaries under the current global system of division of labor.

Better that some essential and vital resource supplies and manufacturing of such goods be “homespun;” that is, produced and supplied domestically in the name of the “national interest.” Some conservatives who have long been wary of “American” industries and employments being “lost” to producers and workers abroad are already saying that the current health crisis shows the need for greater economic self-sufficient “independence.”

And, third, voices are being heard along a wide range of the political and ideological spectrum for the need and necessity for “activist” fiscal and monetary policies to temper and stabilize the negative financial, production, and employment recession-like effects that the Coronavirus is spreading around the world. Markets cannot be left on their own without even more dire consequences for societies beyond the tragic physical hardships and losses to human life from the pandemic.

It is said that even lower interest rates and greater amounts of money and credit are needed to bolster investment and production, while fiscal “ease” in the form of government spending and general or targeted tax breaks are essential to keep small, medium and too-big-to-fail larger businesses afloat. Investment stimulus and aggregate demand-management are once again shown to be the tried and true Keynesian spending cures to the economic ills of society, by the macroeconomic policy managers.

Government Failures in China and America in Fighting the Virus

Given these likely and emerging interpretations of the Coronavirus pandemic, it is, first of all, important to appreciate that delays in effective communication about the existence and potential dangers from the virus, and then the failure of more widely spread testing in the United States are, in fact, failures not of a free marketplace but of government central planning and control.

The press has been full of stories of how early indications about the virus and its potential dangers were suppressed by the Chinese communist government. The reality of this went “viral” even on China’s highly censored and controlled social media platforms when news got out that one of the physicians attempting to inform and publicize what was being discovered was ordered by the Chinese government to keep quiet, and then ended up dying from the Coronavirus himself.

And in typical political form, the Chinese government has attempted to shield President Xi Jinping from any criticism of being responsible for policies that delayed an earlier response by making up factitious stories about how President Xi was “ahead of the curve,” guiding and directing the nationwide lockdown and medical commands that have “saved” the country. And that it was really all due to the U.S. military whose personnel visiting the epicenter city of Wuhan brought the virus to China to keep that proud nation “in its place,” in a world of American “hegemony.”

The media in America, including “The New York Times,” have chronicled how America’s own health care central planning system prevented many of the more early responses to the virus due to the rigid top-down rules and procedures imposed by the Pure Food and Drug Administration (FDA) and the Centers for Disease Control (CDC) in hamstringing local and decentralized development and use of Coronavirus testing tools, since nothing could be done without approval and permission of the American government’s health and drug planners.

Furthermore, when some “rogue” healthcare providers around the country attempted to disobey the health care overseers and social engineers by utilizing their own testing methods and equipment to determine who and to what extent the virus may have spread in their area of the U.S., they were told to cease and desist, and wait for whatever and whenever the testing devices were made available to them by and according to the standards of the federal regulators. (See, Adam Thierer’s article, “How the US Botched Coronavirus Testing”.)

However, rather than questioning the centralized process of permitting the development and use of methods for disease testing, the lesson to be learned, it is presumed, is that the government merely needs to introduce more “flexible” rules and procedures to better team up with state and local health and medical treatment agencies to deal with the current and future crises of this type.

Government Regulation vs. Market Discovery

The idea that virtually all such matters might better be left up to the private, competitive marketplace seems to not even be considered in the arena of debate. Potential “market failures” are seen everywhere, and possible “government failures” are brushed aside as incidental errors and omissions on the pathway to better political oversight of the health and medicine.

But as Austrian economist Friedrich A. Hayek (1899-1992) argued more than half a century ago, “Competition is a Discovery Procedure” (1969) through which individuals and enterprises have the opportunity and the incentives to not only discover the new and better and improved, but to find out what might be possible. Not only can we not know until a competitive process has been allowed to play out who may be the “winner,” but it is only in an arena of competition that individuals have the motive and ability to find out what they are capable of; something that they, themselves, cannot fully know the answer to until they are at liberty to try and have a reason to want to.

The hoops and hurdles that pharmaceutical companies and other manufacturers of medical and health related products must make their way through under the rules, procedures and permissions of federal agencies such as the FDA and the CDC only succeed in reducing the incentives, raising the costs, and narrowing the field of those who otherwise might be willing and able to undertake research, experimentation and marketing of those medicines and medical-related products that could save or improve lives.

A common and reasonable response is, of course, but what about standards and experimental procedures to assure consumer safety from poorly tested and hastily marketed health-related products in the pursuit of profit? Is that not the reasonable rationale for government to centrally approve and oversee regulatory methods over all such marketed products?

The Incentives of Self-Regulating Markets

The word “regulate” is defined by Webster’s dictionary as meaning “to govern or direct according to rule,” or “to bring order, method, or uniformity to . . .” The Oxford Dictionary says to, “control (something, especially a business activity) by means of rules and regulations.” Understood in this way, there is little if anything that any of us do that is not according to “regulation,” both as individuals and in association with others, even without government.

We each have our time schedules and procedures that we follow in various ways and to varying detail. Even when what a person does does not seem to make much sense, do we not sometimes say such things as, just look beneath the surface and you’ll “discover the method to the madness?” Private sector clubs, associations, business enterprises and arenas of market interaction all have their own participant-generated regulations to facilitate and coordinate how and for what the participants interact with each other for smoother and more predictable pathways to mutual success; and to reinforce confidence on the part of any participant about how his interlocutor has acted and what procedures they may have followed leading up to the transaction and trade.

Many of those rules and procedures that “regularize” how people do things, for whatever purposes, and with whatever degree of surety of reliability and confidence in the conduct of those with whom we buy and sell have, historically, emerged before the modern era of government regulation, and often continues parallel to or independently of any such regulatory rules and procedure imposed by government.

No pharmaceutical or medical equipment company concerned with its long-term viability as a profit-making enterprise can count on staying the course in the marketplace by killing their customers, adulterating their products, or making intentional false promises or guarantees. Hollywood movies may make their millions by portraying every drug company as a murderous monster in its pursuit of more profitable market shares, but that is not how real, market-based companies can afford to operate. Possible lawsuits, sky-high insurance premiums and the loss of brand-name reputation always dog any company thinking of cutting corners to any extent. (See my review of “Regulation Without the State”.)

Regulations Serving Vested Interests

Economists have long emphasized what is sometimes called the “capture” theory of government regulation. That is, the industry being regulated by the government often has lobbied for that political intervention, or when this is not the case, has come to see it as an opportunity to use the regulatory intervention as means of raising the “barriers to entry” to any would-be new entrants and enterprises that might want to compete against the existing and established firms in that corner of the market.

Therefore, one of the central purposes of leaving markets free of government control is precisely to not block the way to potential rivals and to force the current firms in that industry to more effectively compete and innovate to maintain any profitable position in the market; and to permit the flexibility and adaptability to changing market conditions. It is open competition that assures consumer-oriented production and pricing, and it is government regulation that tends to foster rules and restrictions designed to shelter existing firms from new and creative competition.

If any such firms may be clothed with a “black hat,” it is those who wish to use the government’s regulatory power to, therefore, stymy market competition. The fault is not with a free market, but from the introduction of government interventions and regulatory agencies manned by those who presume to know what is better for people than those people themselves, and whose activities almost inescapably always fall victim to the designs of the larger companies those agencies are set up to regulate.

In addition, sight should not be lost of the self-interested purposes of those who live on and off government agencies such as the FDA and the CDC. Their recent responses to attempts to introduce methods and procedures outside of their straitjacket of regulatory control demonstrates their desire not to permit the weakening of the institutional structures by which they justify their power, positions, and incomes within the government maze of bureaucracies.

Price Controls Only Make Supply Situations Worse

The other ingredient in the regulatory mix is that when a crisis occurs such as the latest one in the form of the Coronavirus, concerns and even “panic” break out among many people in an attempt to obtain supplies of those goods viewed as essential or desirable to meet the real and imagined circumstances now facing them in the impacted communities. Around the United States, most recently, fears of mandated lockdowns and voluntary quarantining to reduce spreading of the Coronavirus may reduce or stop the availability of such essential products as toilet paper or bacterial and virus-reducing cleaning products.

Retail store shelves normally filled with such products are either empty or low in inventory. People have been scurrying from store to store in search of any brand name and type of toilet paper, for instance, even if they are not sure whether it might not “rub them the wrong way!” In the face of normal production levels and shipment schedules, quantities in the supply line to the retail stores have been lacking due to the unusual and unexpected increase in immediate demand.

To prevent “price gouging” 34 states currently have laws on the books making it illegal to “excessively” increase prices on high demand goods during a declared or generally considered “emergency.” This is meant to prevent those selling these products from “unfairly” taking advantage of people needing and wanting such products.

After forty centuries of price controls, it would be hoped that, finally, the counterproductive and disastrous effects of all such systems of government-imposed price controls would have been learned by now. But, alas, not. Market prices have work to do, including in times of social crises such as the one with the Coronavirus. But the government price controllers seem to never learn.

Price flexibility enables the coordination and balancing of market supplies and demands at moments in time and across time, given the degree of demand for goods and the existing supplies of them in the same time frames. Market-generated prices create the incentives for consumers to economize in the face of increased demands or reduced supply, and they create incentives for sellers to find ways to increase production and availability when there is a decrease in existing supply or an increase in consumer demands to buy.

Prices Convey Knowledge and Coordinate Markets

As F. A. Hayek also emphasized, all of the knowledge in society exists in no one place or in any one mind or group of minds, no matter how knowledgeable and well-informed those individuals may consider themselves to be. Knowledge, in its many facets and forms, is dispersed and decentralized among all the minds of all the people in society in their, respective, corners of the world.

The “social problem,” Hayek argued, is to have some means and method to bring to bear what others know that can serve the purposes and needs we may have in mind when we are inescapably separated from each other by time and space. That is the communication role of a competitive and unrestricted price system. People in different parts of the country or the globe are able to inform each other about what they want or what they can supply through the medium of market prices. It is like a shorthand or Morse Code of supplying to others the relevant minimum of information about what and where and at what value people somewhere want and would be willing to buy what those others might have available or could produce to fill the demand.

While the concern has recently been expressed about the general availability of Coronavirus testing kits, effective face masks, respiratory equipment, and related medical supplies, the fact is that there are different intensities of demand for them, given where the higher clusters of reported or feared cases of infected people are located around the country. Allowing the price system to openly and competitively function, with no government rationing scheme preventing or delaying supply-shifting from less to more urgent areas, would rapidly assure that the existing supplies of these things were more efficiently and effectively reallocated to where prices indicated they were most in demand to meet the medical needs for them.

But not only will a functioning price system for these and other goods bring about a more “rational” allocation of the scarce and given quantities of these goods in the present, but rising and unrestrained prices for the various goods, with no penalty for profits earned from their current and future sale, would also serve as the essential method and mechanism to generate the incentives to increase their supplies over time and work to improve their effectiveness in fighting the virus. That is part of the advantage, dare I say, beauty, of setting creative minds free with the liberty to reap the benefits from applying their talents to solve a social problem like the current one.

The Coronavirus crisis has been compared to the seriousness of war against a life-threatening enemy. It is perhaps interesting to note that in September 1939, as Great Britain just entered into its war against Nazi Germany and the British economy needed to gear up for the conflict through new patterns for using resources and goods away from civilian uses to military production, Hayek wrote an article making the case for leaving market prices free from government controls:

“The required quantities of the urgently needed factors of production ought to be released from those uses in which they can be dispensed with at the least sacrifice of other necessary things. But this is just what will happen if the scarce factor rises in price, since producers will dispense with it precisely for those purposes where it costs least to do without it . . . A little consideration will show that a rise in price is incomparably more efficient a method of bringing forth the additional supplies than alternative methods of achieving the same result [through price controls and rationing].”

Price controls only succeed in short-circuiting the means of people to converse and communicate with each other so they can share vital information in the simplest and most adaptable form to constantly and continuously bring about the short-term and longer-term adjustments of goods and resources to meet the needs of people, including at a moment of a crisis like the present one. (See my article, “Price Controls Attack the Freedom of Speech”.)

Using the Coronavirus as a Rationale for Economic Nationalism

The Coronavirus crisis began in China, and the world soon saw the Chinese government’s draconian locking down and shutting in of areas of the country containing tens of millions of people in the attempt to stop or slow down the spread of the virus. The supply chains of raw materials, component parts, and manufacturing and product assembly that interdependently link China with the economies of many other countries around the world were suddenly disrupted and thrown into disarray.

Companies in countries not yet significantly affected by the Coronavirus searched around for possible substitute supplies and warned of the unavailability of various goods due to the production stoppages in the Chinese stages of numerous production processes.

In this setting, voices are being heard calling for a turn to greater economic nationalism, with government limiting a continuing dependency on, for instance, the Chinese market. For example, conservative writer Patrick Buchanan said in his March 13 column: “In retrospect, was it wise to have relied on China to produce essential parts for the supply chains of goods vital to our national security? Does it appear wise to have moved the production of pharmaceuticals and lifesaving drugs for heart disease, strokes and diabetes to China?”

The implication being that the U.S. government should manipulate the market through taxes, protectionism, and regulations to bring these productions back to America.

Economic nationalists like Buchanan seem to be applying Rahm Emanuel’s now famous phrase of never letting a serious crisis go to waste in the service of a political agenda that might be harder to push in calmer social and economic times. Supply chain stoppages and shortages that could and would easily be reversed once the virus finishes running its course, and if governments kept out of the way and allowed production relationships between companies and countries to restore and rebalance themselves, are being used as rationales for restricting a market-based global network of specialization and division of labor.

The Benefits from Trade and Temporary Disruptions

People trade because each participant finds that he is able to obtain from someone else a good or service that would cost them more to obtain in terms of used resources, labor, or time if made through their own efforts than if bought from someone else. If I can buy something that I desire from my neighbor for, say, $10 when if I tried to make it myself it would cost me $15 in resources, time and labor, I am far better off acquiring it from that neighbor, and having $5 left over in my pocket to spend on other things I otherwise could not have afforded.

My neighbor, in turn, sells me his product for that $10 because the $10 that he earns enables him to buy something he desires that would cost him more than the $10 if he were to try to make that product for himself. Each of us gets a bargain; we each get what we want from the other at better terms (lower costs) than if we attempted to do so through autarky; that is, economic self-sufficiency, in some or all the things we might otherwise be able to obtain in exchange from trading partners literally next door or halfway around the world.

A wide variety of political criticisms easily may be made against the communist government in China in terms of both its domestic and foreign policies, and a proponent of a free-market liberal society could easily make that into a very long list. But the Coronavirus fits more in the category of a natural disaster, like an earthquake or a hurricane, that disrupts and destroys lives and property, and reduces economic potentials and possibilities for a period of time.

Again, assuming no undue government interventions getting in the way, the human beings whose actions are behind all the work, savings and investment in society, usually undertake the needed reconstruction and rebuilding within a reasonable period of time, after which “life goes on as before.”

Tragically, several thousands of lives have been and many more may be lost before the Coronavirus runs its course around the world. And in the meantime, production processes are and will be slowed down or temporarily halted. But factory buildings have not collapsed, farmlands have not been swallowed up by the earth, great fires have not destroyed places where people live, and cities still stand just as they did before the virus started making people ill.

In other words, “this too will pass,” and people will go back to work, get back to eating out at restaurants, shopping at their favorite stores, and planning their next vacations at home and abroad. While many in society are experiencing a high degree of anxiety and panic due to the uncertainties surrounding some of the properties of this virus, and while the mass media and governments have helped fuel those fears, the fact is that this virus is just a “cousin” of the serious flus that strike humanity around the globe with almost clockwork annual regularity, and which, unfortunately, take tens of thousands of lives each time.

If a hurricane or a drought wipes out the orange harvest in Florida, we would consider it foolish if the people and government of Alaska decided that it would now be wise to invest in hothouses to have orange “independence” at home due to the uncertainties of Florida weather. Wholesalers and retailers in Alaska search out temporary substitute suppliers of oranges located somewhere else in the world, and then return to buying oranges from Florida next season, if once more Florida farmers offer the better fruit at the more attractive price.

A very bad lesson, therefore, from the Coronavirus episode would be to in any way suggest that the disruptions caused by it to the supply chains of international trade justify severing through deliberate government policy the near universal benefits that all of us everywhere on the planet gain from participating in the worldwide system of division of labor, which now includes China. The citizens of any country whose government attempted to do so would experience losses in their qualities and standards of living that have been and can be theirs only through the collaborative global interdependencies of market-oriented specialization and trade.

A Diarrhea of Dollars and Deficit Spending

The economywide disruptions being caused by the Coronavirus are once again bringing forth all the standard macroeconomic panaceas in the form of “activist” monetary and fiscal policies. On Sunday, March 15, the evening before the Monday morning opening of the U. S stock exchanges, the Federal Reserve announced that it would be buying $500 billion in government treasuries and $200 billion in mortgage-backed securities in the coming weeks and months, basically adding three-quarters of an extra $1 trillion to the American banking system. This is combined with the Federal Reserve’s decision to lower its benchmark discount window interest rate (the rate that the Fed charges member banks for short-term lending) to 0.25 percent, in other words, virtually to zero.

At the same time, Congress has passed, and the president has signed two spending bills as emergency expenditures to counteract negative financial impacts of the Coronavirus, additional government expenditures that come to nearly $60 billion – with possibly even a lot more to come. For the first five months of the federal government’s current fiscal year (October 2019-February 2020), Uncle Sam has already run a budget deficit of $625 billion, with the projection that the deficit for the full fiscal year that will end on September 30, 2020 will be over $1 trillion before these new additions to government spending.

The Federal Reserve’s “easy money” policy is supposed to stimulate additional private sector investment and related borrowing to boost production and employment. The federal government’s additional deficit spending is meant to increase demand to create consumer-end and other sales to increase profit margins as a means to sustain or increase output and jobs.

Successful Production Comes Before Coordinated Consumption

All of these are stereotypical “Keynesian” policies designed to get an economy out of a recession caused by a falling off of “aggregate demand.” But, if anything, the global economy effects from the Coronavirus is demonstrating the logic and reality of Say’s Law, named after the 19th century French economist, Jean-Baptiste Say (1767-1832). At the end of the day, there is no consumption without production, and, therefore, there is nothing to demand and demand with, without supply.

If you want to eat, you must first plant the crop and wait for it to mature for harvesting at some point in the future. If you want a woolen sweater, you must first raise sheep, wait for their wool to grow, and then after shearing the sheep, manufacture it with all the related inputs into the sweater you’d like to wear. If you want to have something to write with . . . well, maybe it would be better to just read Leonard Read’s famous account in his essay, “I, Pencil.” (See my article, “Jean Baptiste Say and the ‘Law of Markets’”. )

If production falls off, then the ability to either consume directly what you have produced or to sell it to others as your demand for what they may have for sale declines as well. In China first, and now in an increasing number of countries in Europe, people have been told or commanded by their governments to stay home to self-distance themselves from others as a means of minimizing spread of the virus.

To the extent that factories slow or shut down due to work forces being instructed by governments or their employers to not come to work to fight the spread of the virus, the individual outputs of those businesses decrease or stop; and, therefore, in the aggregate, supply of output as a whole declines, which is only a statistical adding up of all the individual outputs produced by individual firms and enterprises.

Governments cannot be telling people to both curtail their workplace presence and activities to stop a spreading of the virus and, at the same time, maintain their income-based expenditures on the outputs of their national economies. The panic buying that has been seen in many parts of the United States is clearing out existing inventories of goods currently available in retail stores. Replenishing them each day and every week is dependent upon continuing and redirected production reflecting the greater than usual relative patterns of consumer demand for what are widely defined as “essentials” and “necessities” in the present crisis atmosphere.

Increasing dollar or nominal spending via greater government deficit spending does nothing to “stimulate” the maintenance of production and employment if workers are quarantined, factories are partly or totally idle, and goods cannot, therefore, be forthcoming in their usual or changed patterns of demand reflecting upon on what the government spends those billions of extra dollars.

Likewise, the presumed attractiveness of zero rates of interest cannot generate real additional investment spending when the available supplies of labor and other factors of production are on the sidelines due to “social distancing” that restricts people’s participation in the market. (See my article, “The Myth of Aggregate Demand and Supply”.)

Financial Markets Without an Interest Rate Steering Mechanism

We should also not lose sight of the fact that financial markets, due to Federal Reserve policy in recent years and now reinforced with this latest interest rate and security-buying announcement, are operating without a fully functioning price system. Interest rates are meant to be the intertemporal prices to borrow and invest scarce resources across time from willing lenders forgoing the use of their own savings for a period of time.

Zero or near-zero rates of interest must mean either that no one wants to borrow for anything and therefore investment demand is zero, or the economy is so awash in savings that there is more real savings in the economy than a fully satiated investment demand to use that savings for future-oriented production, and therefore savings trades at a zero price. Neither of these conditions can be presumed to hold; that is, either no investment demand of any type for available real savings or so much savings that no investment demand no matter how unprofitable need go unsatisfied from lack of savings.

Of course, we do not fully know what market interest rates should be in either “normal” circumstances or in a virus-based crisis situation like at the present because monetary and credit expansion and interest rate setting and manipulating by the Federal Reserve has and does prevent us from knowing what is the real savings that there may be in the economy and what are the actual market-based profitable investment demands for borrowing at rates of interest formed and set by the interacting forces of supply and demand freed from central bank intervention.

In Some Uncharted Waters Due to the Coronavirus Crisis

In the current climate of public hysteria, mass media hype, and wide-open fiscal and monetary sluice gates, with the possibility of government anti-gouging price controls and “essential goods” rationing, trying to say what policy “X” must and will bring about is impossible to say with complete confidence. But in a situation of declining production due to quarantining and massive increases in potential purchasing power coming on the market via monetary expansion and deficit spending this would suggest, in “normal” times, highly inflationary problems ahead.

But if political pressures bring about municipal, state-level and/or federal systems of price controls and rationing, the result would then be what German economist Wilhelm Röpke (1899-1966) called “repressed inflation.” You’d have resource and commodity bottlenecks with shortages of a growing number of those “essential” and non-essential goods, at controlled and fixed prices, with government-directed allocations for goods for production and consumption. The end product would be a system of government central planning, regardless of what the president and Congress decided to call it.

This is, of course, a “worst case” scenario. Chances are it would be a hodge-podge of politically driven incoherent and inconsistent policies introduced on the fly to meet the expediencies and emotions of the moment, and especially in a presidential election year when everyone is desperately pandering for campaign contributions and votes on election day in November.

Or, maybe, the Coronavirus crisis in America will not be as bad and as damaging as many in the scientific community honestly fear. The whole business may blow over in a few months, like other harmful and killer flu seasons. If this, hopefully, turns out to be the case, the whole episode will merely be another teaching moment in misguided and damaging government policies that markets, once again, successfully endured and survived.

Reprinted from The Future of Freedom Foundation.

Joseph A. Schumpeter, Outsider Looking In

Joseph A. Schumpeter, Outsider Looking In

Seventy years ago, on January 8, 1950, one of the most famous economists of the 20th century passed away at the age of 66, Joseph A. Schumpeter. During and after his lifetime, he has been identified with two related ideas, the notion of the innovative entrepreneur and the imagery of the competitive market as a process of creative destruction. He was also a master of the history of economic ideas.

Properly understood, these two ideas of entrepreneurial innovation and the transformative creativity of market competition explain much about the amazing changes in modern economic times that have raised standards of living and filled the world with technological and other advancements that have radically advanced the way people live, and most of it for the better.

Schumpeter was born in Brno, in the Moravian region of the old Austro-Hungarian Empire (now part of the Czech Republic), on February 8, 1883. His father died when he was only four, and his mother moved to Graz, Austria, where she remarried a much older retired military officer. After attending a prominent Gymnasium (or exclusive high school) in Vienna, Schumpeter entered the University of Vienna in 1901, where he earned his doctoral degree in the faculty of law in 1906, with a specialization in economics.

In 1919, he briefly served as Minister of Finance in the new post-World War I Republic of Austria government, and in 1921 became the president of a small Viennese bank that went bust in 1924. In 1925, Schumpeter accepted a professorship at the University of Bonn, Germany, a position that he held until 1932, when he moved to the United States with an appointment at Harvard University in Boston, which he held until his death in 1950.

Schumpeter’s Roots in the Austrian School 

It was during his student days at the University of Vienna that he came under the intellectual influence of two of the leading members of the Austrian School of Economics, Eugen von Böhm-Bawerk (1851-1914) and Friedrich von Wieser (1851-1926). While already in his university days Schumpeter strayed from these “Austrian” roots, their personal impact clearly remained with him for the rest of his life.

Not long after Böhm-Bawerk died in August 1914, Schumpeter wrote a lengthy and most moving appreciation of him. He had participated in Böhm-Bawerk’s famous seminar at the University of Vienna (with many other outstanding students, including Ludwig von Mises), and the experience left a permanent impression concerning the qualities of academic professionalism, intellectual integrity, and political uprightness that he had found in everything that Böhm-Bawerk did.

Schumpeter also had an affectionate attachment to Wieser as teacher and mentor. In addition, Wieser showed Schumpeter the connections between economics, history, and sociology that became hallmarks of much of his own writings over the decades. But Wieser seems to have also been an influence in Schumpeter’s understanding of the entrepreneur as “the leader” of a private enterprise who guides, directs, and brings about great changes in what is produced, as well as how, where, and for what purposes.

At the age of 25, Schumpeter demonstrated his already wide interdisciplinary reading when he published The Nature and Essence of Economic Theory (1908). While containing a concise explanation and defense of methodological individualism – the idea that all social phenomena emerge from the actions and interactions of individuals, and can only be understood on the basis of the logic of individual human decision-making – he showed his orientation toward Leon Walras’s mathematical, general equilibrium approach to economics, and his agreement with a “positivist” method concerning the nature of scientific inquiry that economics should be primarily grounded in the quantitative and the measurable, compared to the “subjectivist” focus of the Austrian Economists.

Schumpeter on Entrepreneurship and Dynamic Change

But it was his 1911 volume, The Theory of Economic Development (English translation, 1934), that established for the rest of his life an international reputation as an original and creative thinker. Using as a starting point the “circular flow” of an economy in general equilibrium – the idea that all supplies and demands for consumer goods and the means of production are perfectly and continuously in coordinated balance in and through time – Schumpeter introduced the idea of “the entrepreneur.”

The entrepreneur is the leader who breaks out of the routine, Schumpeter says, who has the will, authority, and “weight” to bend the routinized processes of production out of the inertia and rationality of the existing knowledge and ways of doing things. Through the entrepreneur, economic “development” is introduced into the economic system, the elements of which represent the marketing of new or qualitatively better goods; new methods of production through which goods are produced; the opening of new markets that dramatically change various economic activities; the discovery and utilization of new resources; and radical changes in the organizational structure of industry.

But his image of the entrepreneur is not the image of the “heroic” leader of military combat or political struggle. Instead, Schumpeter argues,

The entrepreneurial kind of leadership . . . consists in fulfilling a very special task which only in rare cases appeals to the imagination of the public. For its success, keenness and vigor are not more essential than a certain narrowness which seizes the immediate change and nothing else . . .

Yet the personality of the capitalistic entrepreneur need not, and generally does not, answer to the idea most of us have of what a ‘leader’ looks like, so that there is some difficulty in realizing that he comes within the sociological category of leader at all.

He ‘leads’ the means of production into new channels. But this he does not by convincing people of the desirability of carrying out his plan or creating confidence in his leading in the manner of a political leader – the only man he has to convince or to impress is the banker who is to finance him – but by buying them or their services, and then using them as he sees fit.

He also leads in the sense that he draws other producers in his branch after him. But as they are his competitors, who first reduce and them annihilate his profit, this is, as it were, leadership against his own will.

Finally, he renders a service, the full appreciation of which takes a specialist’s knowledge of the case. It is not so easily understood by the public at large as a politician’s successful speech or a general’s victory in the field, not to insist on the fact that he seems to act – and often harshly – in his individual interest alone.

We shall understand, therefore, that we do not observe, in this case, the emergence of all those effective values which are the glory of all other kinds of social leadership.

Schumpeter uses these elements to explain the possible workings of a bank credit cycle through which these innovative entrepreneurs are funded to bring about radical transformations in the interdependent structures of the market economy. The existing “circular flow” of production is broken out of by the creation of bank credit that enables the innovative entrepreneurs to outbid and draw away the necessary means of production from other businessmen for the transformative changes in the means and methods and purposes of production to be introduced.

At the end of the day, the entrepreneur’s successful and profitable innovations force his market rivals to copy and improve upon his creative changes, with old ways of producing and marketing pushed out of the market, until, finally, the cycle of change reaches its end; at which point the “new” economy is dramatically different from the old one that it has replaced. And, then, the process begins anew . . .

The Non-Neutrality of Money as a Dynamic Element of Change

As a complement to this theory of credit expansion to fund and transform production that carries with it a form of the business cycle, Schumpeter in 1918 published a long essay on “Money and the Social Product” in which he attempts to explain the determination of the value of money.

But included in this analysis is an exposition of the inherent “non-neutrality” of all changes in the quantity of money, which in a temporal-sequential process brings about both temporary and permanent changes in the structure of relative prices, production activities, and the distribution of income, depending upon the “injection” points through which additions to the money supply are introduced into the economic system. Schumpeter explained:

To begin with, increases in the quantity of money never occur uniformly for all people. Further, people are never completely aware of the nature of the process, so that, at least for some time, they act as if they received higher incomes, when the sum of [real] incomes remains constant. For both reasons, prices never rise uniformly – neither the prices for consumer goods relative to each other nor the prices of consumer goods relative to those of the means of production. Thereby the price rise ceases to be merely nominal. It means a real shift of wealth on the market for consumer goods and a real shift of power on the market for the means of production, and it affects the quantities of commodities and the whole productive process. No doubt, not all these effects are permanent … But very frequently such reestablishment of the status quo is impossible. Newly-won positions may be permanently held, and old ones permanently lost, and much in the life of the economy may thereby change – as forms of business organization, direction and methods of production, etc.

Schumpeter then proceeds to offer a series of possible scenarios of how and for what purposes such increases in the supply of money might come about, each with its own impacts and effects through time. For instance, an increase in the supply of gold-money that enters the economy either as additional consumer spending or as additional reserves in the banking system; or an increase in paper money to cover government deficit spending, such as during a time of war; or the creation of additional bank credit that lowers market rates of interest and stimulates additional borrowing for investment purposes; or an increase in the demand for investment borrowing that is funded through creation of additional bank credit. It is this latter case that forms the basis of Schumpeter’s theory of the business cycle arising from new entrepreneurial innovation.

This attention to the non-neutrality of money was one element of the “Austrian” approach to monetary and business cycle theory that Schumpeter never abandoned. As he said much later in his posthumous, History of Economic Analysis (1954):

The Austrian way of emphasizing the behavior or decisions of individuals and of defining the exchange value of money with respect to individual commodities rather than in respect to a price level of one kind or another has its merits, particularly in the analysis of an inflationary process; it tends to replace a simple but inadequate picture by one which is less clear-cut but more realistic and richer in results.

These themes remained continual elements in Schumpeter’s writings over the decades, and many of the essays on these and related topics may be found in a collection of his shorter pieces edited by Richard V. Clemence under the title, Essays on Entrepreneurs, Innovations, Business Cycles, and the Evolution of Capitalism (1951). The volume includes Schumpeter’s short but scathing 1936 review of John Maynard Keynes’s The General Theory of Employment, Interest, and Money.

He questions Keynes’s simplistic reduction of all economy-wide fluctuations to an interaction between an Aggregate Demand Curve and an Aggregate Supply Curve; he considers Keynes’s references to “propensities” to consume by income earners to be “in the worst style of a bygone age,” since “such a ‘propensity’ is again nothing but a deus ex machina” to reach conclusions that Keynes wants to reach; and he is scornful of Keynes’s ignoring of “the most powerful propeller of investment,” that being entrepreneurial transformations in the means and methods of production, which are doubtful to ever dry up as long as human imaginations remain at work. As for Keynes’s insistence that all that is ever needed to assure “full employment” is paper money and government deficit spending, Schumpeter concluded the review with the following observation:

The less said about the book the better. Let him who accepts the message expounded rewrite the history of the French old regime in some terms as these: Louis XV was a most enlightened monarch. Feeling the necessity of stimulating expenditure, he secured the services of such expert spenders as Madame de Pompadour and Madame du Barry. They went to work with unsurpassed efficiency. Full employment, a maximum of resulting output, and a general wellbeing ought to have been consequence. It is true that instead misery, shame and, at the end of it all, a stream of blood. But that was a chance coincidence.

Business Cycles and the Dynamics of Creative Destruction

Schumpeter’s constant interest in monetary and business cycle matters was also shown in what he had clearly hoped would be recognized as a “masterwork,” his two-volume Business Cycles: A Theoretical, Historical and Statistical Analysis of the Capitalist Process, which appeared in 1939 (Vol. 1 and Vol. 2). At one level it was supposed to be his alternative to Keynes’s The General Theory. Unfortunately, being extremely dense, difficult to read, and nearly impossible to easily find the central threads to which the exposition was meant to lead the reader, Schumpeter’s massive book was poorly received, and has left little noticeable impact within the economics profession. Its early chapters, however, show his often-acute insights into the nature and limits of equilibrium analysis in economics, and the work in general demonstrates his wide knowledge of economic and social history.

Schumpeter is, perhaps, most famous for coining the phrase “the perennial gale of creative destruction” to capture his conception of the constant and continuous workings of the dynamic and entrepreneurially driven capitalist system, as found in his 1942 work, Capitalism, Socialism and Democracy. Here he argues that the static and timeless equilibrium-focused notions of “perfect competition” and “monopoly” as presented in economics textbooks are hopeless and worthless for appreciating and understanding the true dynamic nature of capitalism and entrepreneurship. Attention must be on the dynamic changes and transformations that traverse years and sometimes decades, not the frozen moments of an unrealistic “now” captured in an economic diagram of demand and cost curves.

Or as Schumpeter says:

In dealing with capitalism we are dealing with an evolutionary process . . . that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.

The fundamental impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates. In capitalist reality as distinguished from its textbook picture . . . The kind of competition which counts . . . [is] the competition from the new commodity, the new technology, the new source of supply, the new type of organization . . . The competition that commands a decisive cost or quality advantage . . . It is hardly necessary to point out that competition of the kind we now have in mind acts not only when in being but also when it is merely an ever-present threat. It disciplines before it attacks. The businessman feels himself to be in a competitive situation even if he is alone in his field.

In spite of his seemingly explicit rejection of the “Austrian” approach to economic theory, therefore, it is in his writings on entrepreneurship, the market process, and the “dynamics” of real world competition that one sees a continuing influence of his “Vienna” roots in his conception of the market economy and its workings.

Schumpeter’s Fatalism and Sarcasm on the Coming of Socialism

His book, Capitalism, Socialism, and Democracy, is also famous for another element as well: Schumpeter’s deep fatalism and pessimism that capitalism was doomed and socialism (in some form) was inevitable. He was clearly impressed and influenced by Karl Marx as a sociologist analyzing the tendencies and directions of capitalist society. But Schumpeter was anything but a Marxist, though always fascinated by the Marxian worldview and its appeal in the intellectual and practical world in which he lived.

Indeed, several of his friends were surprised when back in 1919 he agreed to participate in a postwar German government commission to investigate possible means and methods for the “socialization” of the coal and related industries in Germany, since they all knew his negative views on socialism in general. He commented that, “If somebody wants to commit suicide, it is a good thing if a doctor is present.” He was not sure if actual socialism, fully implemented, could work or not, but, “At any rate, it will be an interesting experiment to try out.”

Schumpeter’s almost witty bemusement about the coming of the socialist epoch that seemed to be ahead drove some interlocutors crazy. For instance, the Austrian banker, Felix Somary (1881-1956), who had been in Böhm-Bawerk’s seminar at the University of Vienna with Schumpeter and Mises, recounted in his book, The Raven of Zurich (1960), a meeting that he had arranged between the famous German sociologist, Max Weber (1864-1920), and Schumpeter at a Vienna Café around this time. The conversation turned sour as the discussion shifted to the recent Russian Revolution. As recounted by Somary:

The talk turned to the Russian Revolution, and Schumpeter expressed satisfaction that socialism was no longer an abstract theoretical notion but would now be tested in the real world. Weber said with some heat that communism at the Russian stage of development was a crime – he knew the language and followed Russian affairs closely. He added that developments in Russia would lead to unheard-of human misery and a terrible catastrophe.

‘That may well be,’ said Schumpeter, ‘but it would be a good laboratory to test our theories.’

‘A laboratory heaped with human corpses!’ rejoined Weber.

‘Every anatomy class is the same thing,’ Schumpeter shot back. . .

“Weber became more vehement and raised his voice, as Schumpeter for his part became more sarcastic and lowered his. All around us the café customers stopped their card games and listened eagerly, until the point when Weber sprang to his feet and rushed out into the Ringstrasse, crying, ‘This is intolerable!’ . . . Schumpeter, who had remained behind with me, only smiled and said, ‘How can someone carry on like that in a coffee house!’

Schumpeter’s interest in socialist ideas also can be seen in his well-known essays, “The Sociology of Imperialisms” (1919) and the “Social Classes in an Ethnically Homogeneous Environment,” (1927) the first of which is meant to be a critical response to the Marxian and Leninist theories of imperialism as an end-stage of the capitalist process. Schumpeter sees late 19th and early 20th centuries European imperialism as an atavism, a throwback, to a pre-capitalist mode of conquest and exploitation; capitalist society, with its institutions of peaceful trade and voluntary contract, is the opposite of imperialist command and coercion, Schumpeter reasons. His analysis of social classes is meant to challenge, again, the Marxian idea that “class” is defined by the individual’s relationship to ownership of the means of production.

Schumpeter’s Wistfulness on the Passing of the Liberal Era

In numerous places in his writings Schumpeter explains the classical liberal world before the First World War in words and phrases that clearly show his sadness of its passing and the arrival of variations on the social and economic collectivist themes. For instance, with a wistful nostalgia, Schumpeter explains in, “An Economic Interpretation of Our Times,” a series of lectures delivered in Boston in 1941, that,

[Before 1914, under capitalism] the world was rapidly internationalizing itself . . . Free movement of commodities, restricted if at all only by customs tariffs; freedom, unquestioned in principle, of migration of people and of capital; all this facilitated by unrestricted gold currencies and protected by a growing body of international law that on principle disapproved of force or compulsion of any kind and favored peaceful settlement of international conflicts . . .

At home, practically all civilized countries professed allegiance to the democratic ideal . . . The freedom of the individual to say, think, and do what he pleased was also within very wide limits generally accepted. This freedom included the freedom of economic action: private property and inheritance, free initiative and conduct were essential elements of that [capitalist] civilization. What they characteristically called government interference was held to be justified only within narrow limits. The state had to provide a minimum of framework for the lives of individuals and this framework it had to provide with a minimum of expenditure. The ideal of the cheap state had its natural complement in the postulate that taxation should be kept within such limits that business and private life should develop in much the same way as they would have done if there had been no taxation at all.

That civilization was essentially rationalist and utilitarian. It was not favorable to cults of national glory, victory, and so on. That civilization required rationalist credentials for everything it was doing. It counted the costs of wars and did not back the glory as an asset.

Like in Capitalism, Socialism, and Democracy, which appeared in print the following year, Schumpeter discussed the reasons why he was fearful that the very material and cultural prosperity that came with liberal capitalism generated forces and factors that undermined the sustainability of that wonderful world of freedom and economic well-being. But it was clear that for Schumpeter it was a sad misfortune that free market liberalism was destined to be a passing chapter in the history of modern mankind. He reiterated the shining qualities of the liberal society once more when he wrote the contribution on “Capitalism” for the 1946 edition of the Encyclopedia Britannica, in he which he emphasized,

The familiar features of [capitalism and] its political complement, liberalism, were laissez-faire, in particular free trade, and ‘sound money’ (meaning unrestricted gold currency) . . . A pacific, though far from pacifist, attitude toward foreign nations . . . Unprecedented respect for personal freedom not only in economic but in all matters . . .The principle of leaving individuals to themselves and of trusting their free interaction to produce socially desirable results.

Schumpeter as a Master of the History of Economic Ideas

Schumpeter also was a master of the history of economic ideas. In 1912, he published Economic Doctrine and Method, which though relatively brief in length (only 200 pages in the 1954 English translation), shows a breadth and depth of reading and insight that might be considered unusual for a young man of 29 years of age. He concisely and clearly summarizes many of the important trends in the development of economic thought from the 1700s to the early years of the 20th century.

Over the years he wrote a number of essays on famous economists and their ideas, including biographical and interpretive studies of Karl Marx, William Stanley Jevons, Leon Walras, Carl Menger, Alfred Marshall, Vilfredo Pareto, Friedrich von Wieser, and John Maynard Keynes. Of particular note, as pointed out earlier, is his lengthy and detailed appreciation of the life and work of his Austrian teacher, Eugen von Böhm-Bawerk. They are included in, Ten Great Economists: From Marx to Keynes (1951).

But his true masterwork in the field of economic ideas was his posthumously published, History of Economic Analysis (1954), which was partly unfinished at the time of his death in 1950. Running for 1,200 pages, the reader is awe-struck by the immense knowledge and insight Schumpeter possessed about the evolution and development of economic ideas from ancient times to the present, in extraordinary detail and richness over virtually every aspect of economic theory and practice. Even when the reader does not agree with all of his arguments or interpretations, one remains in the company of and learns from one of the great minds of 20th-century economics.

Schumpeter Left No “Schumpeterian” School

Schumpeter always presented himself as an eclectic and a social scientist standing above and outside of the sectarian bickering of “schools of economic thought.” He never fostered or generated a “Schumpeterian” school, as one might speak of a Ricardian “classical” approach or of Keynesian Economics.

As such, his writings have been admired, criticized and sometimes utilized by others, especially his conception of the entrepreneur and entrepreneurial innovation and change. But they have always, like himself, stood outside of the mainstream of economics, with most economists not knowing how to incorporate his ideas of “creative destruction” or entrepreneurial innovation within the mostly equilibrium models of neoclassical, mainstream economics.

In my view, this is due to the fact that Schumpeter, like his “Austrian” intellectual cousins whom he chose to disassociate himself from, always saw the real essence of economics to be outside of and beyond the confines of mathematical equilibrium, a world of creative and innovative human actors introducing change and initiating market processes that just cannot easily (or at all) be made to fit within the constraints of the mathematical techniques that he insisted were the proper tools of a truly “scientific” economics.

Unable to escape from the Walrasian equilibrium economics he so much admired from the time he was a young man, Schumpeter could not construct an alternative schema for a market process analysis that his views of entrepreneurship and dynamic competition cried out for. And, thus, many of his “positive” contributions to economics remain outside of and unutilized by the mainstream of the economics profession.

Finally, when British economist Lionel Robbins (1898-1984) reviewed Schumpeter’s History of Economic Analysis in 1955, he ended with the following description of the last time he saw Joseph Schumpeter:

The last time I met Schumpeter was on a river picnic in the middle 1930s. He had turned up unexpectedly from the United States on the day of our annual seminar outing at the [London] School [of Economics]; and he was immediately co-opted as an honorary member, so to speak, and pressed into joining the excursion.

It was a lovely day in June; and as we glided down the Thames between Twickenham and Datchet, I can still see him, cheerfully ensconced in the prow of our ship, surrounded by the eager spirits of the day, Nicky Kaldor, Abba Lerner, Victor Edelberg, Ursula Hicks . . . [with] the four fingers and thumb of each hand pressed against those of the other, discoursing with urbanity and wit on theorems and personalities. So I conceive of this book, a splendid excursion down the river of time, with good talk and magnificent vistas.

This captures, in my view, the experience of reading virtually all of Joseph Schumpeter’s writings – “a splendid excursion down the river of time, with good talk and magnificent vistas” – and as such he remains, in many ways, one of those timeless and uniquely thought-provoking contributors to economics, but an outsider always looking in.

Reprinted from the Future of Freedom Foundation.

Examples of Dedication to Freedom

Examples of Dedication to Freedom

When Austrian economist Friedrich A. Hayek (1899–1992) wrote his famous book The Road to Serfdom (1944) in the midst of the Second World War, he mentioned in the preface that he had often been told by his socialist colleagues that he would, no doubt, hold an important position in a future planned society, if only he would come around to agree with them and espouse their collectivist values.

But he could not. He firmly believed that too many people in society were attracted to the socialist vision of a future society without being properly informed and aware of all that such a command economy would entail. In spite of the socialist assurances that government control of economic affairs did not mean any essential reduction or loss in personal freedom and social liberties, Hayek was deeply fearful that once government was responsible for economic planning, no facet of life would remain outside of the control of those in political authority.

I have always greatly admired Hayek for taking the stand that he did because no doubt his professional life would have been well rewarded with recognition and position if he had been willing to go along to get along. He would not have been the first to do so. A good number of free-market–oriented economists changed their tune during the years of the Great Depression, becoming proponents of Keynesian economics with its premise of a need for government monetary and fiscal management of “aggregate demand” to ensure full employment.

Those who compromised freedom

One example was the Harvard University economist Alvin Hansen (1887–1975). It would be an exaggeration to say that Hansen ever approached holding laissez-faire views during any period of his professional career, but in the early 1930s he was generally critical of excessive government intervention in the market, and viewed the economic downturn after the stock market crash in late 1929 as a needed adjustment period to restore a healthier balance to an imbalanced economy.

When John Maynard Keynes published his famous book, The General Theory of Employment, Interest, and Money, in early 1936, which became the lodestar for the Keynesian revolution, Hansen reviewed it in the Quarterly Journal of Economics. He concluded that the work was not the basis or foundation for a “new economics.” Instead it was a passing phase, he said, indicating the changing currents of uncertainty concerning how to correctly understand and remedy a serious depression like the one the world was going through.

Yet within a few years there was no more vocal or prominent advocate of Keynesian economics than Alvin Hansen. It won him stature and prominence in both the economics profession and in the arena of public policy discourse. I know nothing about the motives behind Hansen’s “conversion” to the Keynesian world view. He may have changed his mind in that direction for honest intellectual reasons, having come to be sincerely persuaded about the relevance and correctness of Keynes’s analysis. But it is, nonetheless, the case that coming around and holding those views and fervently arguing for them certainly raised his position in the American intellectual community.

Friedrich Hayek swam against the statist tide.

Friedrich Hayek, on the other hand, chose to swim against the tide. And as a result, his status and stature fell precipitously following the Second World War. From being considered one of the leading (anti-Keynesian) economists in the world and a forthright and prominent critic of the politics and economics of socialist central planning, he disappeared into an intellectual black hole. In the 1930s, he was the third-most cited economist in the economics journals of that decade. In the postwar period, he became an Orwellian “non-person.”

While I was an undergraduate majoring in economics at California State University, Sacramento, Hayek won the Nobel Prize in Economics in 1974. Virtually to a man, every one of my economics professors was baffled by the announcement of the prize. Who was Hayek, they asked? What had he ever seriously written to deserve such an award? Oh, yes, didn’t he write that political diatribe against government planning during World War II? Wait! Wasn’t he that out-of-step economist who assumed full employment when writing about the business cycle during the Great Depression of the 1930s? The Nobel committee must really have had to scrape the barrel of potential recipients to get to Hayek, they all thought.

People who knew Hayek said that for a long time he had bouts of depression that stymied his writing efforts. All that changed with the Nobel Prize. At the age of 75, Hayek experienced a new professional and psychological lease on life. When I met with him in the second half of the 1970s, I found him vibrant and bubbling with new and exciting ideas on economic theory and policy. He had been freed from the intellectual oblivion that clearly weighed heavily on him.

But for the three decades following the Second World War until his Nobel award in 1974, he never wavered in his dedication and defense of a classical-liberal, free-market view of man and society. The fruit of his time in intellectual exile, if you will, were his important works The Constitution of Liberty (1960) and Law, Legislation, and Liberty, published in three volumes over the 1970s.

Ludwig von Mises never compromised.

Another example of similar intellectual courage can be seen in the life of Hayek’s mentor and longtime friend, Ludwig von Mises (1881–1973). In the years before the Second World War, Mises’s place and stature in the European community of scholars was among the highest. Even before the First World War, Mises had laid the foundations for what became known as the Austrian theory of the business cycle, in his Theory of Money and Credit (1912; 2nd ed., 1924). In the immediate aftermath of World War I,
he established his international status with his insightful critique of the logical contradictions and impossibilities in any and all forms of comprehensive socialist central planning, especially in his book Socialism: An Economic and Sociological Analysis (1922; 2nd ed., 1932).

He also forcefully articulated the case for classical liberalism, argued against various forms of government intervention and regulation, and warned of the political and economic dangers from both Soviet- and Nazi-style totalitarianism. Both friend and foe of free-market liberalism and Austrian economics knew and considered Mises one of the leading figures of the time.

But he, too, disappeared into a black hole of intellectual nothingness within the community of academic scholars after the Second World War. Having come to America in 1940 as a refugee from war-torn Europe at the age of 59, he found it difficult to obtain a prominent university professorship; he was a “visiting professor” at New York University’s School of Business from 1945 to 1969, when he retired at the age of 89. That surely should have made him the longest “visiting” professor in history for the Guinness Book of Records.

The economics profession not only ignored Mises, it also ridiculed and satirized his views on socialism and on money and the business cycle. While still at California State, I wrote a short article about him for the student newspaper when he passed away in October 1973. One of my economics professors came up to me and seriously said, “Mises! Mises! I thought he died in the 19th century!”

Everyone who knew Mises during those years of his life in America said that in spite of his treatment by the intellectual community, he always was cheerful and full of the excitement of new ideas. (However, his Memoirs, written shortly after his arrival in the United States in 1940, shows his despair about the world in which he was living.)

But he never compromised, never wavered, in his dedication, determination, and diligence in defending the ideas of individual liberty and economic freedom. He wrote another half-dozen books and multitudes of articles on almost every theme of economic theory and policy during his years in America.

Frédéric Bastiat and his success in the face of failure

Let me also reference the French classical-liberal economist Frédéric Bastiat (1801–1850). Today, among classical liberals, libertarians, and many conservatives, Bastiat is well known for his famous monograph The Law, written shortly before his death. There, in about 50 pages, Bastiat lays down the principles of individual liberty and the role of a limited government in a just society. He explains the danger from “legalized plunder,” that is, the government’s becoming the violator of people’s liberty and property rather than their guardian.

Also written not long before his untimely death is his brilliant essay “What Is Seen and What Is Not Seen.” It is easy to see and be impressed by government actions that seem to raise some people’s prosperity or employment. But, Bastiat said, we must also do our best to see what is less directly seen: the things that did not come into existence because people’s money was taken from them. What are the less visible and indirect impacts of what government does, impacts that may make worse the very circumstances the government said it wanted to make better?

Once you look beyond what is seen, you realize that when government gives money to Peter, it must first take it from some Paul who is therefore worse off. When the government interferes with work and wages or how businessmen go about running their private enterprises, it creates perverse incentives that undermine the economic betterment that the government intervention was meant to advance.

Because of those writings and many more, Frédéric Bastiat is a leading light for those wanting to understand freedom and the dangers from collectivism in our world today. But in his lifetime, he experienced one intellectual frustration after another. He tried to publish a newspaper devoted to free trade, but it failed. He attempted to organize a free-trade association in France like the one that brought about the end to protectionism in Great Britain in the 1840s; he could not get the financial backing or the membership support for it to succeed.

He was elected a deputy to the French Parliament, but was unsuccessful in getting any important classical liberal–oriented legislation through the parliamentary process. He died in 1850, probably considering that a good part of his life had been a failure. Again, in spite of that, during the short period of the 1840s, when he was most active politically and as a prolific writer, he never allowed disappointment or perceived failure to lead him in any way to a compromise of his principles for liberty.

George Schuyler opposed all forms of coercion.

Finally, I recently wrote an article about George S. Schuyler (1895–1977), one of the most respected and widely read black journalists and authors of the middle decades of the 20th century. I would not be too surprised if few of those who are reading this article have ever heard of him. He was, nonetheless, one of the most biting, sarcastic, and ridiculing writers on white racism from the 1920s through the 1960s. Among many other places, his contributions appeared in The American Mercury in the 1920s and 1930s, when it was under the editorship of H.L. Mencken, and in The Freeman, both before and after it became a publication of The Foundation for Economic Education.

Schuyler was scathing in his contempt not just for racist attitudes among whites against blacks. As an editorial writer for one of the leading and largest-circulation black newspapers in America, beginning in 1942, during the war, he wrote over and over again against the forced internment of Japanese-Americans by the U.S. government. He stated that the violation of any individual’s liberty and constitutional rights threw everyone’s liberty and rights into potential jeopardy. It resulted in Schuyler’s being kept under FBI surveillance for the rest of the Second World War and even after as a subversive threat to the war effort by challenging the Roosevelt administration’s imprisoning of an entire ethnic group without evidence or proof of traitorous conduct on the part of any persons so designated.

But from being one of the most respected and recognized voices against racism and the segregation laws of the South, George Schuyler disappeared from the history of the defenders of freedom in America. Why? Because he was an advocate of individual liberty, free enterprise, impartial rule of law, and limited constitutional government.

In the 1960s, he spoke out against parts of the Civil Rights legislation that were proposed and passed during the Lyndon Johnson administration. He argued that forced integration was as unjust and inconsistent with a society of liberty as forced segregation. What freedom for the black man required was the repeal and abolition of all the Jim Crow laws that prohibited in any way the voluntary and free association among people, regardless of who they are.

But freedom did not include compelling association when some people did not desire it. Even if a private decision of non-association was based on racial bigotry, the government had no right to coerce interactions that the parties did not agree to. Bigotry and prejudice by persons could be done away with only through reason, persuasion, and example. It was not the role of government in a free society.

For that, and his criticism of some Civil Rights leaders concerning their goals and tactics, Schuyler was expelled from the black community of public figures. He was condemned as an apologist for white racists because he refused to support the use of political force to make people act in ways they did not want — no matter how foolish and absurd those people’s attitudes and beliefs might be.

Marginalized and limited to getting his articles published in a handful of conservative magazines, Schuyler never compromised his principles of individualism, free markets, and the ideal of human relationships based on voluntary consent. He remained true to himself and to his principles.

Freedom faces progressive and conservative opponents.

Friends of freedom live in personal, social, and political surroundings that are very often hostile to expressions of the ideas of liberty. Particularly in a political environment like that in contemporary America, the polarization of views is centered on merely alternative variations on the same collectivist theme. On the political Left, the progressives and democratic socialists call for the virtual end to the remainders of private enterprise and competitive markets in America. They wish to plunder our pockets even more deeply than has been done already.

Those on the Right have been captured by the mindset of Donald Trump, who says never a word, it seems, about liberty or limited government, but who issues a rhapsody of tweets on how trade wars are fun and easy to win, that businesses had better invest and employ where he thinks they should. And who dreams of a far more restrictive immigration regime, with no thought to the right of peaceful people to go about their affairs when and where they want on the basis of mutual agreement and trade. In other words, Trump conservatism represents a remade mercantilist planning system.

The Republicans and many conservatives have lost any political compass of directing principles. Trump supporters will point to the fact that he has lowered personal and corporate taxes and reduced a noticeable variety of government regulations over private enterprises. But those policies were not based on a philosophy of freedom, but on a mercantilist paternalism of government’s knowing best; thus, some taxes are lowered and other taxes (tariffs on imported Chinese and other goods) are raised according to the president’s plan for “Making America Great Again.”

There is no suggestion, you will notice, of “Making Individual Americans Free Again.” But that is what classical liberalism and libertarianism are fundamentally all about, what their vision and desired goal is focused on. That means that the friend of freedom is often in an unattractive position in that he must challenge both the progressives and conservatives; the social-welfare paternalists and the nationalist paternalists.

Principle is called for, not compromise.

The friends of freedom can lie low and not rock the boat by disagreeing with others, so as not to make relationships uncomfortable for themselves. They may compromise in such trying times, and “give in” to the democratic socialists or the Trumpian nationalists; sure, we need freedom, but what about a very modest universal guaranteed income, or only modest tariff increases to “teach the Chinese a lesson”?

Each of such steps moves us incrementally that much more away from liberty, and incrementally closer to comprehensive government control over our lives. “But we can stop it from going too far,” say the compromisers. The answer is: No, you cannot. Just look at the last 100 years. “Well, a little bit of government regulation; a little bit of government redistribution; a little bit of government intrusion into people’s personal and social affairs; just a little bit of government foreign intervention where it is ‘really needed.’” The “little bits,” may I suggest, end adding up to a lot. It is how we got into the political and economic dilemma we are in.

The only way to stop that from happening is by returning to and remaining true to first principles. Not to waver in the face of pressures not to “be so extreme.” F.A. Hayek, Ludwig von Mises, Frédéric Bastiat, George Schuyler, and others paid heavy personal and professional prices for being true to the idea and ideal of liberty. But they all ended their days, from all indications, without any regrets or second thoughts.

By doing so they have left us not only the words they wrote to inform us, but also the examples of their lives dedicated to liberty to inspire us. Let us follow their lead and restore a society of freedom.

Reprinted from Future of Freedom Foundation.

History is Clear, Central Banks Fail to Assure Economic Stability

History is Clear, Central Banks Fail to Assure Economic Stability

The world has been plagued with periodic bouts of the economic rollercoaster of booms and busts, inflations and recessions, especially during the last one hundred years. The main culprits responsible for these destabilizing and disruptive episodes have been governments and their central banks. They have monopolized the control of their respective nation’s monetary and banking systems, and mismanaged them. There is really nowhere else to point other than in their direction.
Yet, to listen to some prominent and respected writers on these matters, government has been the stabilizer and free markets have been the disturber of economic order. A recent instance of this line of reasoning is a short article by Robert Skidelsky on “Why Reinvent the Monetary Wheel?” Dr. Skidelsky is the noted author of a three-volume biography of John Maynard Keynes and a leading voice on public policy issues in Great Britain.

Skidelsky: Central Banking Equals Stable Prices and Markets

He argues against those who wish to denationalize and privatize money and the monetary system. That is, he criticizes those who want to take control of money and monetary affairs out of the hands of the government, and, instead, put money and the monetary order back into the competitive, private market. He opposes those who wish to separate money from the State.
Skidelsky sees the proponents of Bitcoin and other “cryptocurrences” as “quacks and cranks.” He says that behind any privatization of the monetary system reflected in these potential forms of electronic money may be seen “the more sordid motives” of “Friedrich Hayek’s dream of a free market in money.” The famous Austrian economist had published a monograph in 1976 on the Denationalization of Money, in which Hayek insisted that governments have been the primary cause behind currency debasements and paper money inflations through the centuries up to our own times. And this could not be brought to an end without getting government out of the money controlling and the money-creating business.
In Skidelsky’s view, any such institutional change would be a disaster. As far as he is concerned, “human societies have discovered no better way to keep the value of money roughly constant than by relying on central banks to exercise control of its issue and to act directly or indirectly on the volume of credit created by the commercial banking system.”
Robert Skidelsky is a highly regarded scholar and is knowledgeable about many of the important political and economic ideas and events of the twentieth century, about which he has often written. But one cannot help wondering if his views of central banks and the governments behind them over the last one hundred years don’t concern life on some other planet; because they do not reflect the reality of monetary systems and government management of them on Planet Earth.

The Pre-World War I Gold Standard

The twentieth century began with all the major nations of the world having monetary systems based on a gold standard. Gold was money, the medium of exchange through which goods and services were bought and sold, and by which the savings of some were transferred to the hands of interested and credit-worthy borrowers for investment purposes through the intermediation of banks and other similar financial institutions. There were money-substitutes in the form of banknotes and checking accounts to ease the inconveniences and transaction costs of using metal coins and bullion in many everyday exchanges. But they were recognized and viewed as claims to the “real money,” that is, specie money.
Yes, this was, in general, a central banking managed gold standard. And the gold standard “rules of the game” were not always followed, the essential general principle of which being that banknotes and deposit accounts should only increase for the banking system as a whole when there were net increases in the quantity of gold deposited in bank accounts, for which new banknotes would be issued as additional claims to that greater quantity of gold-money. And vice versa, if there was a net outflow of gold from the banking system due to banknotes being returned to the issuers for gold redemption, then the net amount of those banknotes in circulation was to be reduced.
Though this core “rule” of the gold standard was not always rigidly followed by national central banks, the consequence of which were occasional financial crises and “panics,” the system worked amazingly smoothly, in general and on the whole, in providing a relatively stable monetary environment to foster and assist domestic and international trade, commerce and global investment. When the monetary system did periodically suffer disruptions, the mismanaging hand of the government and their central banks could usually be seen as the primary, or certainly a leading, cause behind it.

Monetary Madness During and After World War I

This came to an end with the coming of the First World War in 1914. All the belligerent nations in Europe went off the gold standard, with banknotes and other bank accounts no longer legally redeemable in gold. Governments used various direct and indirect methods to have their central banks finance growing amounts of loans in the form of created quantities of paper money to cover the costs of their, respective, war expenditures. To use British economist, Edwin Cannan’s, somewhat colorful mode of expression concerning the currency situation of his own country, Great Britain was soon suffering from a “diarrhea” of paper money to feed the cost of the British war machine.
This culminated in the catastrophic hyperinflations that gripped many countries on the European continent in the years immediately following the end of the First World War in 1918. The worst of such instances were experienced in countries like Germany and Austria. Especially in Germany, the paper money had become virtually worthless by the time the hyperinflation was ended in November 1923, by shutting down the money printing presses and introducing a new currency promised to be linked to gold.
However, the new postwar monetary systems that one country after another attempted to introduce were not like the gold standard that has existed before the war. Nominally, currencies were linked to gold at new official redemption rates of so many banknotes in exchange for a unit of gold. But gold coins rarely circulated in daily transactions, as had often been the case before 1914; gold was redeemable only in larger quantities of bullion (gold bars); and few countries kept significant quantities of gold on deposit in their own central bank vaults any more. (See my articles, “War, Big Government, and Lost Freedom,” and “Lessons from the Great Austrian Inflation”.)

The Federal Reserve and the Coming of the Great Depression

The short-lived return to seeming economic “normalcy” with growth and stability in the mid and late 1920s, however, came to an end with the American stock market crash of October 1929, which began to snowball into the “Great Depression” in 1930 and 1931. But why had this happened? In the United States, a major cause was the Federal Reserve’s attempt to “stabilize” the general price level at a time of economic growth and productivity gains that otherwise would have likely brought about a slowly falling general price level reflecting greater outputs of goods and services produced at decreasing costs that would have enabled an increasing number of those goods to be sold at lower prices. In other words, what has sometimes been called a “good deflation.” That is, rising standards of living through a falling cost of living, which need not be detrimental to the profitability of many firms since their ability to sell at lower prices is due to their ability to produce more at lower costs of production.
The Federal Reserve’s “activist” monetary policy to counteract this “good” deflationary process in the name of price level stabilization required an increase in the supply of money and credit in the banking system that pushed interest rates below market-determined levels and therefore brought about an imbalance and distortion between savings and investment in the American economy. When the Federal Reserve cut back on monetary expansion in 1928 and early 1929, the stage was set for a collapse of the unsustainable investment house of cards created by investment patterns out of sync with the real savings in the economy to sustain them.
What might have been a relatively short, “normal” recession and recovery process was disrupted first by the fiscal and regulatory policies of the Herbert Hoover Administration (including a trade-killing increase in U.S. tariffs that soon brought about retaliation by other countries). The was magnified to a degree never seen before in American history with the coming of Franklin Roosevelt’s presidency and the New Deal in 1933: the imposition of a fascist-type system of economic planning in industry and agricultural; increases in taxes far exceeded by massive growths in government spending through budget deficits for “public works” and relate federal projects that increased the national debt; the abandonment of what nominally still remained of the gold standard, followed by foreign exchange instability and paper money expansion.
Matching this were wage and price rigidities due to trade union resistance to money wage adjustments in a post-boom environment, and goods prices frozen due to the regulations of the fascist-modeled National Recovery Administration (NRA); there was also a downward spiral in international trade resulting from the revival of global protectionism; and there was a monetary contraction exacerbated by a fractional reserve system built into the workings of the Federal Reserve that set off a multiplicative decrease in money and credit inside and outside the banking system as bank loans went bad and depositors “panicked” leading to bank runs. All this brought about the tragedy of the Great Depression, which dragged on through most of the 1930s.
How the disruptive inflations during and immediately after the First World War, or the misguided monetary policies of the 1920s which led to the Great Depression whose severity was due to Federal Reserve mismanagement and anti-market government interventions and controls can be laid at the feet of the ”free market,” as Skidelsky asserts, is beyond me.

Post-World War II Monetary and Government Mismanagements

But, perhaps, he means the more “enlightened” central banking policies of the leading nations of the world in the post-World War II period. The immediate years after 1945 saw “dollar shortages” due to government manipulation of foreign exchange rates, experiments in nationalization of industries, forms of “soft” planning, periodic currency crises, and often misguided fiscal policies. Does Mr. Skidelsky not remember how in the 1960s Great Britain was considered the “sick man” of Europe due to government fiscal, monetary, and regulatory policies; or the Lira crises in an Italy that seemed to have a new government every other week? Is all this to be put at the doorstep of the “free market”?
What about the era of “stagflation” in the 1970s, with its seeming anomaly of both rising prices and increasing unemployment that so confused the Keynesian establishment of the time? In America this had been set off by the Federal Reserve’s accommodation starting in the 1960s to create the money to finance the “guns and butter” of the Vietnam War and LBJ’s “Great Society” programs. Was it not the wise and trustworthy hands of the Federal Reserve Board of Governors whose monetary policies created in the late 1970s and early 1980s one of the worst price inflations experienced in American history, with nominal interest rates in the double-digit range?  Another “win,” clearly, for the steady monetary central planning of the Federal Reserve!
What about the high-tech bubble of the late 1990s that went bust, or the recent financial and housing crash of 2008-2009 What had caused them? Alan Greenspan – the central banking “maestro” – set the stage for these with his “anti-deflation” policies at a time when prices were not falling, but which created unsustainable savings-investment imbalances not much different than the disastrous monetary policy followed by the Federal Reserve in the 1920s.
Under the additional guiding hand of Ben Bernanke at the Federal Reserve, interest rates between 2003 and 2008 in real terms were zero or negative; and government housing agencies subsidized tens of billions of dollars in home loans to uncredit-worthy borrowers made possible though monetary expansion and artificially low-cost lending backed with government guaranteed mortgage assurances. Was this all the fault of the “free market”? No. The fingerprints of the Federal Reserve and the agencies of the Federal government are all over this “economic crime.”

Government’s Hand Off the Monetary Printing Press

Yet, according to Robert Skidelsky it is the free market that cannot be trusted to competitively and privately integrate and coordinate the monetary system. How much worse of a track record could a private, competitive banking system create, compared to the monetary disasters of the last one hundred years under the control of central banks, including the American Federal Reserve?
It is not a matter of whether or not Bitcoin or other forms of cryptocurrencies end up being the market-chosen money or monies of the future. What is the fundamental issue is: monetary central planning – with its embarrassingly awful one hundred year track record with paper monies – or getting government’s direct or indirect hand off the handle of the monetary printing press.
Governments cannot be trusted with this power and authority, whether it is done directly by them, or through their appointed central banks. Back in 1986, Milton Friedman delivered the presidential address at the Western Economic Association. He declared that after decades of advocating a “monetary rule,” that is, a steady or “automatic” two or three percent annual increase in the supply of money in place of a more discretionary Keynesian approach, he had concluded that it was all spitting into the wind. Public Choice theory – the application of economic reasoning to analyze the workings of the political process – had persuaded him that the short-run self-interests of politicians, bureaucrats and special interest groups would always supersede the goal of long-run monetary stability, with the accompanying pressures on those in charge of even presumably “independent” central banks.
In this article and others written by him around the same time, Friedman never went as far as calling for the abolition of the Federal Reserve or a return to a gold standard. But he did say that, in retrospect, looking over the monetary history of the twentieth century, it would have been better to never have had a Federal Reserve or to have gone off the gold standard. The traditional criticisms of the costs of a gold standard, he said – mining, minting, storing the gold away, when the resources that went into all this could have been more productively been used in other ways – paled into almost insignificance compared to the costs that paper money inflations and resulting recessions and depressions had burdened society.

Skidelsky’s Straw Man and Evasions

Robert Skidelsky creates a straw man when he tries to put fear into people about unregulated cryptocurrencies threatening the monetary and price stability of the world. He cannot even get his argument completely straight. On the one hand, he says that Bitcoin has an eventual built-in limit on how much of it might be mined; and he warns that a Bitcoin money, then, would reach an maximum that would not have the “elasticity” to meet growing monetary needs of the future. And in the next breath he warns that a Bitcoin-like currency might not have a built-in check against inflation.  Well, which is it: the danger of Bitcoin price deflation or Bitcoin price inflation?
There has emerged during the last three decades an extensive and detailed literature about the possibilities and potentials of a private, competitive free banking system. The economists who have devoted themselves to serious analysis and exposition of such as a free banking system, people such as Lawrence H. White, George Selgin, and Kevin Dowd, to merely name three of the more prominent ones, have demonstrated that a market-based commodity money and a fully market-based banking system would successfully operate with greater coordinating ability and with far less likelihood of any of the monetary and price instability experienced under central banking over the last one hundred years.
It is unfortunate that a scholar usually as careful and thorough as Robert Skidelsky has chosen to downplay the historical reality of the failure of central banking, and not grapple with the serious and real literature on the private competitive free banking alternative.

Originally published as “The Myth That Central Banks Assure Economic Stability” by the Future of Freedom Foundation
Richard M. Ebeling is the BB&T Distinguished Professor of Ethics and Free Enterprise Leadership at The Citadel.
Bernard Mandeville and the Social Betterment Arising from Private Vices

Bernard Mandeville and the Social Betterment Arising from Private Vices

One of the major turning points in social and economic understanding emerged in the 1700s with the theory of social order without human design. Before the eighteenth century, most social theory presumed or took as a working assumption that human society had its origin and sustainability in the creation of social institutions through either “divine” intervention, or by human will and plan.

But in the 1700s, the idea of society as a spontaneous order that emerged out of the actions and interactions of multitudes of individuals, each pursuing their own self-interest, began to develop into a systematic and scientific theory of human association.

Economics Born from Spontaneous Order Insight

In addition, the theory of emergent spontaneous order demonstrated that though not created by intentional plan, the social order showed coordinating pattern, structure, and self-correcting potential that often was superior in it’s beneficial effects for promoting a betterment of the human condition than any purposeful creation or direction of social processes by government could have produced.

This, more than anything, can be said to be the beginning of the development of a science of economics – a systematic analysis of the processes of interpersonal coordination of multitudes of people’s actions within a market-based system of division of labor.

As Austrian economist, Friedrich A. Hayek, observed:

“It was through asking how things would have developed if no deliberate actions of legislation had ever interfered that successively all the problems of social and particularly economic theory emerged. There can be little question that the author to whom more than any other this [development] is due was Bernard Mandeville.”

Mandeville and The Fable of the Bees

Bernard Mandeville (1670-1733) was a Dutch medical doctor, who at an early age settled in London, and spent the rest of his life in Great Britain. In 1705, he published a poem called, The Grumbling Hive, or Knaves Turned Honest, which was then republished in 1714 under the title for which it is, now, famous in the history of social and economic ideas: The Fable of the Bees, or Private Vices, Public Benefits

In this work, Mandeville challenged some of the most time-honored and sacred ideas concerning social morality and religious ethics. Whether it is the ancient Greek philosophers, such as Plato and Aristotle, or the religious teachings of the Christian faith, one of the fundamental ethical postulates has been that self-interested conduct on the part of the individual is often morally wrong and potentially “sinful.”

The presumption has been that human conduct should relinquish self-interest, especially when it concerns material acquisitiveness and wealth, and instead focus on other-oriented sacrifice for one’s fellow men and the “glory of God.” Mandeville argued that it was precisely through men pursuing their material self-interest – including “greed” and human pleasure – that all improvements in society come about.

Pursuit of Self-Interest Generates Social Prosperity

In the poem, Mandeville imagines a hive of bees that copies in its every detail and activity everything seen in human society. Greed, selfishness, the pursuit of material profit and pleasure dominate everyone in their activities and in their conduct toward others.

Read the rest at the Future of Freedom Foundation here.

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