Category Archives: Economics

Economic Myths #11 – The Mixed Economy

The world’s political systems today are, generally, neither fully despotic on the one hand nor completely free on the other. Instead, most of us languish under so-called “social democracy”, a curious mixture in which a degree of sovereignty in the form of voting rights reside in the citizenry while political leadership and control remains distinct in the form of various functionaries such as Presidents, Prime Ministers, Congressmen and Members of Parliament.

A libertarian might contend, of course, that such a social democratic system ends up being worse for individual liberty than a dictatorship or monarchy. The important point, however, is that the ideological extremes have been blended into some kind of soup which, at least from the de jure point of view, represent neither total freedom on the one hand nor total despotism on the other.

In exactly the same way, neither do our economic systems represent any ideological purity. We are neither fully capitalist nor are we completely socialised. Instead we have to put up with some kind of “mixed” economy that contains both capitalistic and socialistic elements. Read more


Economic Myths #10 – Taxes Benefit “Us”

Whenever there is the appearance of some headline berating large corporations for arranging their affairs so as to pay as little tax as possible on profits earned in the UK, the indignation from the general public seems to centre on the belief that the “lost” state revenue was somehow a “lost” benefit to the average citizen. After all, won’t lower tax revenues result in fewer hospitals and worse schools? Such was the fury greeting the news, on August 3rd of this year, that Amazon UK’s tax bill fell from its 2017 figure of £7.4m to just £1.7m in spite of pre-tax profits having almost trebled.

Unfortunately for libertarians, tax avoidance (together with the deliberate blurring of the legal and moral distinction between that concept and that of tax evasion) has become a favourite topic of heavily indebted governments as they attempt to balance their books without reducing their profligate spending. Read more

Economic Myths #9 – Social Safety Nets

It is often trumpeted as a virtue that “civilised”, social democratic countries offer their citizens one or more types of “social safety net” in an attempt to eliminate the most dire effects of, say, unemployment, illness or some other kind of incapacity that could inflict a condition of extreme poverty upon the individual members of the citizenry. The idea is that the most basic wants will always be guaranteed by the state should one be unable to provide them for oneself and no one need have any fear of hunger or lack of shelter – situations that are said to be “intolerable” in a modern, twenty-first century society.

The first problem with this theory is that poverty is not some selectively appearing disease that makes a magical appearance every now and then to infect an otherwise healthy and wealthy society. Rather, poverty is the natural state in which human beings first found themselves. When Adam and Eve were expelled from the Garden of Eden they saw that the world was a barren and harsh place that is capable of providing precious little – may be just air to breathe – without the conscious effort of its inhabitants. The only way to alleviate this terrible situation is for humans to work to produce the goods that they need and, eventually, to bring about capital investment in order to expand the amount of consumer goods that can be enjoyed – whether it’s cheap food, housing, education, holidays or whatever – a process that only really got underway in any significant form in the 1800s. Read more

Tackling Taxes for Economic Prosperity

In a recent essay published on this blog1, the present author highlighted the need for a libertarian strategy to be firmly and uncompromisingly radical, rooted in challenging the inherent injustice of the state as the ultimate destroyer of liberty. This is in contrast to gradualist or, we might say, deliberately half-hearted approaches, which are forced to accept the state’s basic injustices (such as its taxes, regulations, and monopoly over law, order and defence) and replace any radical principle with some kind of utilitarianism.

While it is wonderful that liberty brings with it heightened economic progress in the form of material increases in the standard of living, libertarians recognise that these ends do not justify the means. For example, if it could be demonstrated that murdering red heads would add a few percentage points to GDP we would still regard such acts as evil; the ability of everyone else to buy a few more pairs of shoes would do nothing to change this fact. Therefore, while leaps and bounds in the standard of living certainly add moral weight to the case for a free society they fail to add moral decisiveness.

Interestingly, however, it seems as though wedding oneself to a fundamental principle allows one to examine the economic effects of liberalisation more pertinently and that even on their own terms, gradualists, neo-liberals and utilitarians fail to make proposals which would bring the highest economic benefits. In other words, libertarians such as ourselves, who are derided for being too “utopian”, “principled” and “unrealistic”, seem to have a better grasp of the primary utilitarian case for liberty than do their more pragmatic brethren. We will elaborate on this observation here by examining the problem of taxation. Read more

Economic Myths #8 – Capitalism is Exploitative

The myth that capitalism is exploitative – or rather, that capitalists and entrepreneurs are responsible for the exploitation of both workers and consumers – is almost as old as the history of this political-economic system itself, having been a primary driving force behind the growth of the state and, indeed, of outright socialist and communist revolution. Although much watered down from those early days, the idea that there is some kind of antagonism between the capitalist “class” and the rest of us seems to persist.

As “Austrian” economists we know, of course, that it is absolutely and undeniably true that any free and voluntary exchange, upon which capitalism and private property must rely, only takes place because each party expects to benefit from the transaction. This alone is sufficient scientific proof to dismiss any idea that capitalism exploits one party for the benefit of another. Nevertheless we should, of course, tackle directly the specific incarnations of this myth as they appear today.

The myth has its roots in the Marxian confusion of political castes with economic classes – the idea that the relationship between capitalists and workers, which is free and voluntary, was akin to that of king and subject, or lord and serf, relationships that were involuntary and subjected the masses to servitude. Caste systems were static and designed to keep people in their place; under conditions of free exchange, however, economic classes have a continually changing membership based upon one’s ability to serve consumers. Read more

In Praise of Jeff Bezos

In Praise of Jeff Bezos
by Sean Gabb
21st July 2018

Jeff BezosAccording to a report on the BBC website, Jeff Bezos, the founder of Amazon, is the richest man in the world, with an alleged personal fortune of £113bn. The usual suspects have raised their arms in outrage at the news. Oxfam drew fresh attention to its report from 2017, in which it called “for a fundamental change in the way we manage our economies so that they work for all people, and not just a fortunate few.” A few weeks earlier, The Guardian had lamented:

Amazon’s website is, in the west, the dominant platform for online retail sales…. This is bad for democracy. Commerce ought to reside in markets governed by regulations set by democratic political process not those chosen by the world’s richest man, Amazon’s founder Jeff Bezos.

My view is that Mr Bezos, together with Bill Gates and various other people whose names it will be briefer to let my readers guess than for me to enumerate, is one of the greatest men alive. He has increased the wealth and happiness of countless millions. He is helping to bring into being a world that, just one generation ago, the boldest science fiction writers were cautious to describe. He has earned every penny of his great fortune. Read more

Economic Myths #7 – Government means Harmony

One of the aspects of capitalism and the free market that the typical lay person finds difficult to comprehend is the fact that the complex structure of work, production, distribution, and trade could possibly take place without some kind of centralised, directing authority in order to co-ordinate everybody’s efforts. Wouldn’t there just be chaos and mal-coordination with everyone trying to make their own, independent plans if there is nobody at the tiller to steer the giant ship?

This fallacy stems from the belief – accentuated by holistic concepts such as aggregate, pseudo-statistics like “GDP” or “the national income” – that what we refer to as “the economy” is some kind of enormous machine that has “input”, with a single operator “processing” these “inputs” into “outputs”.

In fact, rather than being one giant, amorphous blob “the economy” is made up of millions and millions of independent, unilateral acts of production and two-way trades, many of which will never have anything to do with each other. I may sell an apple to my neighbour for 10p in London; another person may sell an orange for 20p to his neighbour in Manchester. Neither of the two pairs of people has ever met, nor need any of them have any involvement with the exchange of the other pair; and yet both exchanges would be regarded as part of “the British economy” in mainstream discourse. Read more

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