Tax Flight

When federal and state taxes are accounted for, The United States has the highest corporate tax rate in the world. When it comes to the top marginal rates—including state taxes—of individual earners, many Americans are seeing more than half their income simply taken away. It’s no surprise, then, that some of the most productive citizens are leaving for more hospitable climes.

This behavior is called jurisdictional tax arbitrage. At a certain point, if you want to grow your business or keep the fruits of your enterprise, it makes sense to take advantage of more favorable taxation rates in other countries. In other words: Leave.

Some call this “unpatriotic.” Others attempt to characterize it as some evil superclass that wants to game complex global rules out of sheer greed.

Canadian pundit-turned-politician Chrystia Freeland writes:

What is more relevant to our times, though, is that the rich of today are also different from the rich of yesterday. Our light-speed, globally connected economy has led to the rise of a new super-elite that consists, to a notable degree, of first- and second-generation wealth. Its members are hardworking, highly educated, jet-setting meritocrats who feel they are the deserving winners of a tough, worldwide economic competition—and many of them, as a result, have an ambivalent attitude toward those of us who didn’t succeed so spectacularly. Perhaps most noteworthy, they are becoming a transglobal community of peers who have more in common with one another than with their countrymen back home. Whether they maintain primary residences in New York or Hong Kong, Moscow or Mumbai, today’s super-rich are increasingly a nation unto themselves.

It’s not immediately clear from the foregoing passage whether we’re supposed to love or hate this new “super-elite.” But for the social democratic author of Plutocrats, this nation-unto-itself is just crying out for annexation by a voracious steroid-State that depends on transfers for its very existence.

Quicker than you can say “Koch Brothers,” the left has painted a picture not of entrepreneurs and investors who are trying to protect capital from predatory politicians and bureaucrats, but of a wealthyUebermenschen who have purchased the political process. And it is the grain of truth in this latter description that stokes the fires of redistributionist populism.

It is up to us to reframe such views and to disentangle the makers from the takers—the crony capitalists from the value creators. For if we do not, we will find that those who make the world a better place through principled entrepreneurship will simply take themselves away to Panama or Hong Kong. What will be left behind are precisely the sort of people who are willing to purchase the political process to ensure that rents flow into their coffers. Actually, this is not prediction. This is happening already. The question is, when will this brain-cum-capital drain complete itself?

The United States is no longer a home where value creators are welcome. They are viewed as geese with golden eggs to be slain for a laundry list of progressive ends. And progressive populism, with all its talk of one-percenters and “inequality,” will continue to drive good people to take flight. Worse, progressive populism drives the justification for global tax collectors to jet off in hot pursuit.

It’s a good thing entrepreneurs still have a place to go. If it were less costly to pick up and go, more of us might follow. In a global economy, at least valuable capital is protected from the parasitic political classes for a little while longer. After all, many of those who are taking their money and running are still stewards of capital, meaning it can still be deployed for the creation of goods and services. If Leviathan can get its tentacles on that capital, it will be lost in the belly of the transfer State—feeding the addictions of welfare queens, corporate cronies, and the military-industrial complex.

In honor of those one-percenters who have gotten the hell out of dodge, let us raise a glass and a stogie. Here’s hoping there is still sanctuary in the Caymans for turtles and tycoons.

The July/August issue of the Freeman is now live!

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

What Economic Recovery?

You have to know that the Obama administration has run out of excuses for destroying the U.S. economy when it starts to blame it on the weather.

According to the Commerce Department, the economy based on its Gross domestic product–the value of its goods and services–fell at a seasonally adjusted annual rate of 2.9% in the first quarter of this year. That was the largest recorded drop since the end of World War II in 1945!

The June 20th edition of The Wall Street Journal’s article, “Economy Shrank Rapidly in First Quarter” led off by reporting that “Weather disruptions at home and weak demand abroad caused a contraction in the U.S. economy in the first quarter, renewing doubts about the strength of the nation’s five-year-old recovery.”

unemployment graph

For a larger view click on the graph.

What recovery? When the economy stays in the basement for five years you are looking at an on-going stagnation based on too much government interference with growth, the decline of the nation’s middle class, the lack of new start-up businesses, and the reluctance or inability of consumers to spend money, if they have any to spend.

In May, writing on his blog, Economic Collapse, Michael Synder pointed to “27 Hugh Red Flags for the U.S. Economy” noting, for example, that according to government numbers, “everyone is unemployed in 20 percent of all American families.” The other indicators include:

  • Sales for construction equipment were down 13% in April and have been down for 17 months in a row.
  • During the first quarter of 2014, profits at the office supplies giant, Staples, fell by 43.5%
  • Foot traffic at Wal-Mart stores fell by 1.4% during the first quarter of 2014.
  • It is being projected that Sears will soon close hundreds more stores and may go out of business altogether.
  • Existing home sales have fallen for seven of the last eight months and seem to repeating a pattern witnessed back in 2007 prior to the last financial crash.
  • The home ownership rate in the U.S. has dropped to the lowest level in 19 years.

You do not have to be an economist to understand that President Obama’s economic policies are flat-out failures that include a “stimulus” that wasted billions of taxpayer dollars without stimulating the economy, nor that having a $17 trillion debt means anything other than a nation teetering on a massive economic collapse.

In May, CNSnews reported that “A record 92,594,000 Americans were not in the labor force in April as the labor force participation rate matched a 36-year low of 62.8 percent, according to data released today by the Bureau of Labor Statistics.”

This is not my definition of a “recession” although we are told that it ended in 2009. This is a “depression” for millions of Americans. The labor force participation rate has gone from 63.5% to 63.3%, the lowest since 1979, but the Obama administration keeps telling us that it is “improving.”

Consumer spending is down. Exports are down. Employment is barely increasing. The only thing that is up is inflation.

Edward C. Prescott, a 2004 Nobel Laureate in Economics and Lee E. Ohanian, a professor of economics UCLA, writing in the June 26 edition of The Wall Street Journal, noted that the declining GDP rate was “the worst productivity statistic since 1990. And productivity since 2005 has declined by more than 8% relative to its long-run trend. This means that business output is nearly $1 trillion less today than what it would be had productivity continued to grow at its average rate of about 2.5% per year.”

“Lagging productivity growth is an enormous problem because virtually all of the increase in Americans’ standard of living is made possible by rising worker productivity.”

The Obama administration would have you believe that the economic decline in the first quarter was due to a harsh winter. They will be blaming it on a hot summer come autumn.

This is an administration whose main theme these days is the threat of “climate change”, but it has nothing to do with the climate and everything to do with vast government spending and borrowing, an explosion of regulations that have slowed or stopped the creation of new businesses, a “war on coal” that is forcing a decline in the production of electricity, and a widespread perception that the President is the worst to have held office since the nation began.

There is no recovery. There is a return to the factors that led to the 2008 financial crisis. Government entities Fannie Mae and Freddie Mac that bought up all the sub-prime mortgage loans and packaged them as assets are still in business. Credit card companies are reaching out to sub-prime users, signing them up. Nobody seems to learn anything from the past, even if it is the recent past.

If the control of the U.S. Senate cannot be wrested away from a Democratic Party led by Harry Reid and a GOP increase in the U.S. House that was led by Nancy Pelosi until the 2010 elections cannot be achieved in the forthcoming November elections, the President’s continued attack on the economy—which includes a massive increase in illegal immigration—the nation’s economy will remain tenuous.

© Alan Caruba, 2014


Millennials Unemployment Report: 15.2% of Workers 18-29 Out of Work – ‘More Jobs’ Needed

The Long-Term Unemployment Crisis Is as Bad as Ever

Michele Obama, Jill Biden: Their Husbands are Firing our Military at an Alarming Rate

There are many stories being written about the shoddy care our military veterans are receiving from the Veterans Administration. The untold story is that of how President Obama is firing our military by the hundreds of thousands. This is a crisis for those military members and their families who are suddenly out of a job.

These reductions-in-force have created a national crisis that is turning into a national scandal. A jobs crisis for U.S. military veterans. Jobs is the top issue with these recently fired veterans, just ask any veterans service organization, they will tell you it is all about jobs.

So, President Obama created this crisis and his wife Michele and Jill Biden, the Second lady, have decided to make political hay while the sun shines. They are trying to turn lemons into lemonade with their hire a veteran radio promotions under the “Joining Forces” campaign. On the Joining Forces website Michele and Jill plead, “Support for our Heroes -Let’s make sure no veteran has to fight for a job at home after they fight for our nation overseas.” You may have heard Michele and Jill on iHeartRadio stations asking business to hire veterans, as their husbands continue to reduce our military to pre-WWII levels.

Michele and Jill write in a Fortune Magazine op-ed, “But the challenge of giving them that chance is only becoming more urgent. In the coming years, more than a million service members will be hanging up their uniforms and transitioning to civilian life. That’s on top of the hundreds of thousands of veterans and military spouses already out there looking for work.”

Millions more of our military will be fired. But don’t be alarmed, we will back-fill them with homosexuals, cross dressers and transgenders. Like the new recruitment effort using the transgender “Warrior Princes“, the former Navy SEAL Chris Beck, now Kristin Beck.  Bill Gertz from The Washington Times reports:

“Who’s paying for this?” the official asked. “Especially in these trying fiscal times with reduction-in-force boards, selective early retirement boards and early terminations for our enlisted ranks, someone is wasting money by mainstreaming a transgendered veteran?

Ms. Beck said she is not “pushing” for transgender integration in the military. “I am speaking about being a ‘human’ and the value of people in the armed forces,” she stated in an email. The military is looking at allowing transgenders in the military and “I am giving them correct information instead of stereotypes and misguided information of the past,”

Ms. Beck said, adding that 13 nations permit transgenders in their armed forces.

Read more…

Never let a good crisis, particularly one that you created, go to waste.

EDITORS NOTE: Below are the top 10 military employers in the country, based on Payscale’s skilled labor criteria.

1. Booz Allen Hamilton

Business: Provides consulting services to the U.S. government in defense, intelligence, and civil markets, and to major corporations, institutions, and not-for-profit organizations.

Mission Statement for Veterans: “Booz Allen has maintained a deep and long commitment to the nation’s military community that began with our work assisting the U.S. Navy at the dawn of World War II and continues today with the Military Health System, the Department of Veterans Affairs, and our many engagements with the Department of Defense and armed services.”

2. Science Applications International Corporation (SAIC)

Business: Fortune 500 company provides scientific and technical products and services that contribute to the security and well-being of communities throughout the world.

Mission Statement for Veterans: “SAIC has a long-standing commitment to supporting military veterans and their families. The company currently employs more than 10,000 military veterans, comprising nearly 25 percent of SAIC’s workforce, and was ranked No. 24 on G.I. Jobs Magazine’s Top 100 Military Friendly Employers

3. Northrop Grumman

Business: Designer, systems integrator and manufacturer of military aircraft, defense electronics, precision weapons, commercial and military aerostructures.

Mission Statement for Veterans: “We employ thousands of veterans worldwide and are committed to hiring and assisting our military-experienced candidates and employees. You bring a unique set of skills to our company, and have a first-hand appreciation for our business, products, and services. We value the training and
leadership development that candidates gain from their military service and experience.”

4. L-3 Communications

Business: L-3 is a prime contractor in Command, Control, Communications, Intelligence, Surveillance and Reconnaissance (C3ISR) systems, aircraft modernization and maintenance, and government services.

Mission Statement for Veterans: “L-3 is proud to employ more than 15,000 veterans of the U.S. military, helping them use their unique training and skills to meet our customers’ needs. Many of L-3’s top business leaders are former military personnel who provide critical insight and support for using L-3’s advanced technology and
services to protect our country’s freedoms.”

5. Lockheed Martin

Business: Headquartered in Bethesda, Md., Lockheed Martin focuses on Aeronautics, Electronic Systems, Information Systems & Global Solutions, and Space Systems.

Mission Statement for Veterans: “At Lockheed Martin, we have a long-standing commitment to successful job transition for America’s veterans — providing opportunities for them to continue contributing to the security of our nation even after their military service.”

6. U.S. Department of Defense

Mission: As the nation’s largest employer, the Department of Defense provides the military forces with what is needed to deter war and to protect the security of our country.

7. BAE Systems

Business: BAE Systems is a global defence, aerospace and security company with approximately 100,000 employees worldwide and a primary focus on five home markets: the US, UK, Kingdom of Saudi Arabia, Australia and India.

Mission Statement for Veterans: “At BAE Systems, ‘We protect those who protect us’ is a mantra that we take to heart. It defines our commitment to our customers, our employees and especially to those individuals who have contributed to ‘protecting us’ directly as a member of the military service. It is our goal to provide
mission-centered work that veterans and reservists alike can identify with, contribute to, and become passionate about.”

8. Computer Sciences Corporation (CSC)

Business: CSC is a leading information technology (IT) services company.

Mission Statement for Veterans: “Whether through recruitment, philanthropy or volunteerism, CSC is proud to support our heroic military service members and their familes. CSC values America’s military community for its loyalty, diversity and strong work ethic. We will help you realize your professional aspirations through valuable career choices.”

9. CACI International

Business: CACI International provides professional services and IT solutions needed to prevail in the areas of defense, intelligence, homeland security, and IT modernization and government transformation.

Mission Statement for Veterans: “CACI employs veterans at every level of the organization, from staff to senior leadership. We work side by side with the Department of Defense and intelligence agencies, providing professional services and IT solutions to solve their problems and secure our nation’s interests. We take great
pride in service to our country and to those who have served in the military, recognizing that you have the talent, character, and commitment to duty that will help make our clients’ missions successful. As a military professional, you understand these priorities and possess skills that translate to what we do at CACI. We invite you to explore our job opportunities to find the right fit as you take the next step in your career.”

10. The Boeing Company

Business: Boeing is the world’s largest aerospace company and leading manufacturer of commercial jetliners and defense, space and security systems.

Keynes = Marx to the Power of Ten

The Von Mises organization recently published an article showing how Japanese Prime Minister Shinzo Abe (pronounced Ah‛-bĕ) is severely damaging the Japanese economy through his Keynesian economic policies, borrowed from Uncle Sam, who has had equal “success” with them. Abe introduced a program of currency issuance of unprecedented magnitude that immediately led to an equally unprecedented sales tax increase that has drastically curtailed household spending.

When it comes to economics (and foreign policy in some ways), the libertarians (represented, for example, by the Von Mises Organization) are essentially on the money. Unfortunately, they are miles from the mark in social terms, advocating as they do, for example, unlimited immigration, which they say will be controlled once we get rid of socialism. They seem not to have noticed that we have not yet gotten rid of socialism, inasmuch as their adherents in politics are anxiously striving to establish “immigration reform,” i.e., code for amnesty for undocumented immigrants. Nor do they explain how undocumented workers who cross the border illegally for work would be daunted by a lack of welfare payments (for which they are not eligible anyway). Likewise, they advocate legalizing heretofore illegal drugs, based on the untested postulate that the problem will go away if they can just make drugs legal, because illegality makes them more attractive.

The problem with all –isms is that they degenerate from ideas to religions, and ignore reality. Like all –isms, libertarianism pointedly ignores the real world models, as I have pointed out here and here with regard to addictive drugs and here with regard to prostitution.

But libertarianism is not the only –ism that ignores reality when shaping policy.

The broader point that you should be able to infer from this (knowing what you do about fascism, Nazism, Marxism, etc) is that the scientific method of inquiry is shelved by ideologues of all stripes, who rely solely on propaganda and lofty theoretical writings, speeches, press releases and slogans whose net result is to keep people ignorant of the true effects of their policies and ideologies and to keep their pet ideas safely out of the clutches of serious inquiry. In many cases, we are even told that a highly questionable idea is “settled science,” the ultimate inquiry quencher.

I had outlined previously why the scientific method is key and have pointed out that it is, ironically, almost universally rejected or neglected in those areas where it is most urgently needed.

If a political party could be put together with a libertarian economic platform and a conservative social platform ─ with both being based on real world models and not ideology, it would be a formidable force for revitalizing the Western world in economic, social and cultural terms.

In fact, were all professionals, particularly journalists, and politicians to adopt a scientific approach to reporting facts and ideas, the world would change tomorrow, knowledge would blossom and most of the untoward effects of ignorance would be roundly defeated.

Unfortunately, libertarianism has degenerated into anarchy. Literally. The Von Mises Organization endorses something called Anarcho-Capitalism, as I pointed out and debunked in an article appearing in American Daily Herald.

In addition to adopting a rigorous scientific approach to reporting, what America needs to do right now is stress two issues that politicians on both sides have always been reluctant to touch, and that is, sovereignty (the libertarians ignore it but so do the Dems and Rs) and Keynesianism.

We need to fight hard to recover our American sovereignty (protecting American culture and borders, declaring and defending our independence of groups like the UN and the CFR that remain consistently aloof to the grassroots, abolition of bureaucracies like the Department of Education, Agriculture, Homeland Security, NSA, etc, and restoration of monetary autonomy — freedom from the Fed). And we need to free America from Keynesianism, which is a sophisticated form of Marxism, only more dangerous because it is a virus infecting the entire globe, spreading poverty everywhere. Both of the main US parties are Keynesian through and through, which is why our economy is failing. (That’s why voting indiscriminately for GOP candidates won’t save us until we can successfully launch an anti-Keynesianism campaign that makes words like “stimulus” and policies like government job creation anathema to the public).

The article linked above handily dispatches Keynesian “stimulus” (in this context, we must never write that without quotation marks. Economic “stimulus” as commonly construed only stimulates poverty, nothing else) and shows how it is slowly eroding the Japanese economy, which is the U.S. economy on steroids.

no_new_keynes_marxism_shirtThis is scary, Folks. It is where we are headed if we can’t get rid of most of our politicians and kick out any lawmaker who votes for “stimulus” or suggests that jobs can be created by government.

The only legitimate and authentic job creation is the creation of jobs that pay employees out of earnings derived on the free market, not from the public treasury, and without competition-stifling cronyism. The only true stimulus is less government-business cronyism. We therefore desperately need to introduce and enforce the concept of separation of business and state.

Here’s an idea for a T-Shirt, bumper sticker, poster or the like: Keynes = Marx 10.

Heterogeneity: A Capital Idea! by Sandy Ikeda

When Thomas Piketty’s Capital in the 21st Century was released in English earlier this year it sparked vigorous debate on the issue of wealth inequality. Despite the prominence of the word in the title, however, capital has not itself become a hot topic. Apparently none of his defenders have taken the opportunity to explore capital theory, and, with a few exceptions, neither have his critics.

To prepare to read Mr. Piketty’s book I’ve been studying Ludwig Lachmann’s Capital and Its Structure, which, along with Israel M. Kirzner’s Essay on Capital, is among the clearest expositions of Austrian capital theory around. A hundred years ago the “Austrian economists”—i.e. scholars such as Eugen von Boehm-Bawerk who worked in the tradition of Carl Menger—were renowned for their contributions to the theory of capital. Today capital theory is still an essential part of modern Austrian economics, but few others delve into its complexities. Why bother?

Capital is heterogeneous

Among the Austrians, Boehm-Bawerk viewed capital as “produced means of production” and for Ludwig von Mises “capital goods are intermediary steps on the way toward a definite goal.” (Israel Kirzner uses the metaphor of a “half-baked cake.”)  Lachmann then places capital goods in the context of a person’s plan: “production plans are the primary object of the theory of capital.” You can combine capital goods in only a limited number of ways within a particular plan. Capital goods then aren’t perfect substitutes for one another. Capital is heterogeneous.

Now, mainstream economics treats capital as a homogenous glob. For instance, both micro- and macroeconomists typically assume Output (Q) is a mathematical function of several factor inputs, e.g. Labor (L) and Capital (K) or

Q = f(L,K).

In this function, not only is output homogenous (whether we’re talking about ball-bearings produced by one firm or all the goods produced by all firms in an economy) but so are all labor inputs and all capital inputs used to produce them. In particular, any capital good can substitute perfectly for any other capital good in a firm or across all firms. A hammer can perfectly replace, say, a helicopter or even a harbor.

On the other hand, capital heterogeneity implies several things.

First, according to Mises, heterogeneity means that, “All capital goods have a more or less specific character.” A capital good can’t be used for just any purpose:  A hammer generally can’t be used as a harbor. Second, to make a capital good productive a person needs to combine it with other capital goods in ways that are complementary within her plan: Hammers and harbors could be used together to help repair a boat. And third, heterogeneity means that capital goods have no common unit of measurement, which poses a problem if you want to add up how much capital you have:  One tractor plus two computers plus three nails doesn’t give you “six units” of capital.

Isn’t “money capital” homogeneous? The monetary equivalent of one’s stock of capital, say $50,000, may be useful for accounting purposes, but that sum isn’t itself a combination of capital goods in a production process. If you want to buy $50,000 worth of capital you don’t go to the store and order “Six units of capital please!” Instead, you buy specific units of capital according to your business plan.

At first blush it might seem that labor is also heterogeneous. After all, you can’t substitute a chemical engineer for a pediatrician, can you? But in economics we differentiate between pure “labor” from the specific skills and know-how a person possesses. Take those away—what we call “human capital”—and then indeed one unit of labor could substitute for any other. The same goes for other inputs such as land. What prevents an input from substituting for another, other than distance in time and space, is precisely its capital character.

One more thing. We’re talking about the subjective not the objective properties of a capital good. That is, what makes an object a hammer and not something else is the use to which you put it. That means that physical heterogeneity is not the point, but rather heterogeneity in use. As Lachmann puts it, “Even in a building which consisted of stones completely alike these stones would have different functions.” Some stones serve as wall elements, others as foundation, etc. By the same token, physically dissimilar capital goods might be substitutes for each other. A chair might sometimes also make a good stepladder.

But, again, what practical difference does it make whether we treat capital as heterogeneous or homogenous? Here, briefly, are a few consequences.

Investment capital and income flows

When economists talk about “returns to capital” they often do so as if income “flows” automatically from an investment in capital goods. As Lachmann says:

In most of the theories currently in fashion economic progress is apparently regarded as the automatic outcome of capital investment, “autonomous” or otherwise. Perhaps we should not be surprised at this fact: mechanistic theories are bound to produce results that look automatic.

But if capital goods are heterogeneous, then whether or not you earn an income from them depends crucially on what kinds of capital goods you buy and exactly how you combine them, and in turn how that combination has to complement the combinations that others have put together. You build an office-cleaning business in the hopes that someone else has built an office to clean.

There’s nothing automatic about it; error is always a possibility. Which brings up another implication.



We are living in a world of unexpected change; hence capital combinations, and with them the capital structure, will be ever changing, will be dissolved and re-formed. In this activity we find the real function of the entrepreneur.

We don’t invest blindly. We combine capital goods using, among other things, the prices of inputs and outputs that we note from the past and the prices of those things we expect to see in the future. Again, it’s not automatic. It takes entrepreneurship, including awareness and vision. But in the real world—a world very different from the models of too many economists—unexpected change happens. And when it happens the entrepreneur has to adjust appropriately, otherwise the usefulness of her capital combinations evaporates. But that’s the strength of the market process.

A progressive economy is not an economy in which no capital is ever lost, but an economy which can afford to lose capital because the productive opportunities revealed by the loss are vigorously exploited.

In a dynamic economy, entrepreneurs are able to recombine capital goods to create value faster than it disappears.

Stimulus Spending

As the economist Roger Garrison notes, Keynes’s macroeconomics is based on labor, not capital. And when capital does enter his analysis Keynes regarded it the same way as mainstream economics: as a homogeneous glob.

Thus modern Keynesians, such as Paul Krugman, want to cure recessions by government “stimulus” spending, without much or any regard to what it is spent on, whether hammers or harbors. (Here is just one example.)  But the solution to a recession is not to indiscriminately increase overall spending. The solution is to enable people to use their local knowledge to invest in capital goods that complement existing capital combinations, within what Lachmann calls the capital structure, in a way that will satisfy actual demand. (That is why economist Robert Higgs emphasizes “real net private business investment” as an important indicator of economic activity.)  The government doesn’t know what those combinations are, only local entrepreneurs know, but its spending patterns certainly can and do prevent the right capital structures from emerging.

Finally, no one can usefully analyze the real world without abstracting from it. It’s a necessary tradeoff. For some purposes smoothing the heterogeneity out of capital may be helpful. Too often though the cost is just too high.


Sandy Ikeda is an associate professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism. He will be speaking at the FEE summer seminars “People Aren’t Pawns” and “Are Markets Just?

Red Scare: An Interview with Naomi Brockwell

Naomi Brockwell, also known as Bitcoin Girl, is an actor, producer, journalist, and program officer at the Moving Picture Institute. She’s one among a number of rising personalities in the liberty community who are breaking the mold and setting a new tone. Brockwell is also an opera singer, Reason TV correspondent, policy associate at the NYC Bitcoin Center, and on the advisory council for the Mannkal Foundation for economic education.

We don’t have the space to list her talents and accomplishments. But we can say she is FEE seminar faculty and will be speaking again at Freedom Fest this year for the second year in a rowWe got to sit down with Brockwell for a brief spell among her thousand projects.

The Freeman: Why does changing the world require artists?

Brockwell: If you want to change the world you have to change the underlying philosophy of a culture. You can try to educate people with facts and figures, but unless you understand how to connect to people, and unless you can reach out and speak to what’s important to them, all the data in the world won’t do you any good. People connect through storytelling. The emotionally compelling story of one individual can be more important for social change than all of the white papers stacked on top of each other. People don’t relate to facts, they relate to individuals and their stories, and it’s the role of the artist to tell these stories.

Artists throughout history have not only reflected what’s important in a culture, but they have helpeddefine it. Art changes the way people think, so if you want to change the world, then help artists redefine popular culture. Help artists expose people to new ideas, help them captivate the world with the issues that you believe are important. The fact is, films and stories will reach far more people than a white paper ever could, and this is why artists are so important. They have this immense power at their fingertips, and we need them to help us fight for positive change.

The Freeman: Who is Bitcoin Girl and what does she care about?

Brockwell: Bitcoin Girl is an educational platform that explores the cryptocurrency world and provides an alternative to the current trend in journalism of only printing doom-and-gloom as a way of getting a larger audience. There is massive demonization of cryptocurrency in the media, and it’s no wonder when you consider the vested interests that banks and governments have in destroying cryptocurrency. As a result, the only positive arguments that are honest about the benefits of cryptocurrency tend to be hidden away in esoteric subreddit threads, and are largely inaccessible to the average, unacquainted person. For this reason, the vast majority of people lap up what the mainstream media tells them, which is mainly negative and poorly informed.

Instead of being skeptical about this new protocol, people should be overwhelmingly excited about it and all of its possibilities we haven’t even begun to unlock. Bitcoin technology has the power to bring about incredible social change. It can lift people out of poverty. It can give people back freedom of speech. It can bring community together in a new peer-to-peer world—the full potential of which we’ve only seen a glimpse.

That is what Bitcoin Girl is: a more accessible way for people to learn about bitcoin, so that they are not forced to depend on a biased media for their information. It shows bitcoin in a refreshing way: as an exciting, powerful tool with the potential to create incredible positive change.

The Freeman: Self-awareness is vital to what you’re doing. What does it mean to cultivate one’s own brand?

Brockwell: I think the energy behind bitcoin is incredibly uplifting. I adore going to bitcoin conferences, because the atmosphere is one of creation and positivity. It is fun and inspiring: You’re surrounded by some of the smartest people in the world, and as Jeffrey Tucker astutely observes, they are all living 10 to 20 years in the future. And it’s like they’re in a giant playground. I hope that the Bitcoin Girl brand can harness the same sense of fun and lightheartedness. The one idea that I really want to reflect in this brand is that technology is not to be feared: It is value neutral. It’s really important that people don’t let fear of the unknown paralyze their willingness to explore something that has tremendous potential to benefit all mankind.

The Freeman: What would you say to rising personalities about the importance of projecting yourself in interesting ways?

Brockwell: Of course it’s always good to stand out, but I don’t believe that people will connect with what you’re saying simply because you stand out. Authenticity is supremely important, and you have to be completely passionate about what you are saying. That’s what will make you interesting. It’s not so much the image that you’re projecting that is important, but the principles you live by and the extent to which you are willing to fight for a cause that you believe in. If you want to be a respected personality, or just a respected person, then command respect.

The Freeman: In terms of movement-building, what do you think about the idea of tapping into different subcultures—like bitcoiners?

Brockwell: Bitcoiners value technological innovation, and they recognize innovation as the way of solving the world’s problems. They are also skeptical of the government’s role in this process, and see government interference in their developments and experimental startups as a hindrance rather than a help. They are also skeptical of the need for centralized banks, and are increasingly seeing the value in decentralized, peer-to-peer exchanges where the regulation is build into the technology rather than given to a third party. I think there are a lot of people in the freedom movement who would be really sympathetic to what these bitcoiners are doing if they only understood it better, and I hope to provide a bridge between these two groups.

The Freeman: Are you an optimist or a pessimist?

Brockwell: I’m an incredible optimist. I like the idea of technological determinism, that society organizes itself around its technology, that technology drives social structure and cultural values. If this is the case, then what we seem to be headed toward is a more peer-to-peer society. This is because of all of the peer-to-peer technologies that exist now as part of the Internet: 3-D printers, bitcoin, provably solvent transparencies in companies and banks, digital music sharing, digital movie distribution. This move away from top-down, centralized control and back to the individuals makes me very excited about the future.

The Freeman: In this editor’s opinion, most video that freedom-types put out is mediocre at best. There is a dearth of talent. Resources flow mostly to think tanks and established practices. Production values suffer. In many ways this is a chicken-egg problem, because funders don’t want to divert resources from familiar things until they see some evidence of good media. And yet we won’t see great media until we see more resources put into it. What are your thoughts on this dilemma?

Brockwell: I agree with half of what you say. There is certainly a lack of funding directed toward freedom-oriented films, and I believe that this is because people underestimate the importance of film in shaping our culture. Think tanks do a tremendous amount of good, but when we see think tanks, economists, and research analysts teaming up with filmmakers, that’s when you really start to see magic happen: reaching out to masses more people and moving public opinion. Take the Moving Picture Institute’s film The Cartelfor example: Chris Christie cited this incredible film by director Bob Bowden as being the number one reason why he decided to make education reform his top priority in New Jersey. Or another of the MPI’s films Battle For Brooklyn, an immensely powerful documentary about eminent domain, which was short-listed for an Oscar. Even Hollywood has been producing some great films for the freedom movement lately: Dallas Buyers Club and The Lego Movie are two of my favorites. There are certainly very high quality films being put out there, and this makes it even more necessary to support organizations like the Moving Picture Institute, so they can continue to support filmmakers and get the important messages of those films out there to even more people.

The Freeman: How did a young woman from Western Australia end up as a Reason.TV correspondent?

Brockwell: When you’re a freedom evangelist, passionate about journalism, with a degree in acting, and a long history of film production, it doesn’t take long before you discover and fall in love with institutions such as Reason. I’m honored to be a part of what they’re doing, and thrilled that they enjoy working with me, because Reason is just fantastic. In fact, working with Reason.TV on top of working full time for the Moving Picture Institute, and at the same time making feature films with Hilton Media Management, is pretty much a dream for me. I’m super excited that my first feature film with amazing director Georgia Hilton is coming out this year! It’s been a joy from start to finish working with her and the entire team, so keep an eye out for Subconscious, which will be released all over the world soon!

The Freeman: Who is your favorite economist—living or dead?

Brockwell: My favorite economist who is no longer living would be Murray Rothbard, who first ignited my passionate for economics and monetary policy. My favorite living economist would be Gene Epstein, who first introduced me to the ideas of Murray Rothbard!

Of course I adore Say, Bastiat, and Mises, too, and am always recommending their works to people. And as a communicator, Friedman did incredible work for the freedom movement, and I believe that a lot of people could learn a tremendous deal from him about how to debate ideas.

The Freeman: Thank you, Naomi Brockwell.

Report: Southern Leg of Keystone XL Has Been a Job Creator, Generated Economic Growth

Critics like Tom Steyer’s Next Gen Climate operation wants you to believe that the Keystone XL pipeline will only create a few dozen jobs. However, after looking at the construction of the southern leg of the pipeline, the truth is far different.

A new report finds that construction of the 485-mile Gulf Coast Project, stretching from Cushing, Oklahoma to Nederland, Texas, created thousands of jobs and added billions to local economies.  The Gulf Coast pipeline is the portion of the proposed Keystone XL pipeline that was able to be built because it didn’t require a Presidential Permit.  It is helping improve the transportation of oil sands crude to Gulf Coast refiners – the same crude that Keystone XL will carry.

The report, prepared by Southern Methodist University’s Maguire Energy Institute for the Consumer Energy Alliance, found that in Oklahoma and Texas, the project resulted in

  • Over $5.7 billion in new economic activity.
  • Over 42,000 person years of new employment.
  • Over $217 million in additional state and local taxes.

The authors write:

[T]he Gulf Coast Project pipeline contributed substantially to the economic health of most of the counties along the alignment during the 2012-2014 construction period. In the years ahead, recurring expenditures for operations and maintenance of the pipeline will continue to support jobs while generating income and tax revenues for Oklahoma, Texas and the 24 affected counties.

Counties in Oklahoma where the pipeline was construction saw an average per capita income increase of 78%. Three counties—Seminole, Hughes, and Coal—saw over 90% increases. For counties in Texas, the average per capita income increase was 58%.

On a press call, Bud Weinstein, an economics professor at Southern Methodist University’s Cox School of Business and one of the reports’ authors noted that “most of these counties are comparatively low-income, rural counties.” Construction of the Gulf Coast Project has been a “tremendous economic tonic.” For instance, the report finds “pipeline activities averaged 31 percent of personal income” in Oklahoma.

During construction, TransCanada spent about $6 million per month directly in the local community. Here are some examples of local entrepreneurs taking advantage of the business opportunities the pipeline’s construction offered:

For instance, Clifford Bryant, a local entrepreneur in Prague, Oklahoma, reports that construction of the pipeline “doubled our city sales tax receipts.” Clifford bought a mobile RV and trailer park when he heard that TransCanada would be bringing a construction yard to town for its Gulf Coast Pipeline Project.  Previously, only 11 of the 57 spots in the park were occupied.  Once construction began, all 57 were occupied. Clifford notes that a full RV park contributes as much as $8,000 a month in electricity fees alone to the municipal utility.

In the Southeast Texas town of Kountze, Jeremy Kunk’s Ready Ice Company sold approximately 30,000 pounds of ice per week to pipeline construction sites in its area. The ice improved safety by keeping workers cool and hydrated.  Kunk expects that the economic boost supplied by pipeline projects will be long-lasting. “Pipeline construction such as TransCanada’s Gulf Coast Pipeline Project is going to feed our refineries more product and keep us hopping for the next five, 10 years at least.”

Joe Penland is another Texas business owner who benefited from TransCanada’s pipeline construction. Joe owns Quality Mat Company in Southeast Texas. His company partnered with TransCanada to make the Gulf Coast Project safer. With a patented concept, Penland fabricates more than 250,000 mats per year in his facility inside the Beaumont city limits.  He leased the mats to TransCanada during construction of the Gulf Coast Pipeline in Oklahoma and Texas.

Positive benefits would extend to more states if the northern leg of the pipeline, linking Alberta to Nebraska, were approved by the Obama administration. “Similar state and local economic benefits can be anticipated should the United States give the go-ahead for construction of the Keystone XL pipeline from Hardisty, Alberta to Steele City, Nebraska,” the authors write.

“I would expect similar impacts” to those found in Oklahoma and Texas if the northern leg of the Keystone XL pipeline is approved, Weinstein said on the press call.

Follow Sean Hackbarth on Twitter at @seanhackbarth and the U.S. Chamber at @uschamber.

EDITORS NOTE: The featured photo is of sections of pipe sit on the ground in Atoka, Oklahoma. Photographer: Daniel Acker/Bloomberg.


A Train Wreck You Can’t Look Away From: A government agency gets creative with arts funding by Bruce Edward Walker

There’s a new patron in the arts world, one without a name as lofty as The American Arts Council or National Council on the Arts. In fact, it’s a one-word synonym for missed connections, interminable delays, stale candy bars, filthy restrooms, and stained seats. That’s right: Amtrak has decided it’s going to become a veritable Louvre.

Amtrak’s gameplan involves deftly blending individual donations and foundation grants with money from the National Endowment for the Arts and in-kind contributions of its own (tax-funded, for-profit) services.

True, trains are a significant part of the American culture, featuring prominently in ethnic folk songs, country music, and early rock; Buster Keaton, Western oaters, and Thin Man-franchise film classics; and even Ayn Rand’s Atlas Shrugged. However, the trains were one subject of the art created rather than the progenitor. In other words, Woody Guthrie, Junior Parker, and Hank Williams wrote songs and Jack Kerouac authored a novel (partially) about riding the rails or hearing the “high, lonesome sound” of the train whistle as both metaphorical and real. In each instance, the train provided some unbidden inspiration for enduring art rather than seducing artists with handouts.

Aggression (modified by opulent sensuality)

Today, though, Amtrak provides something a lot closer to commissions than inspiration. It even shelled out for a painter to blast neon paint on buildngs alongside the tracks. The Wall Street Journal reported last week that Amtrak, in tandem with the Southeastern Pennsylvania Transportation Authority, commissioned German artist Katharina Grosse to subject her “psychylustro” form of art to 34,000 daily riders exposed to seven sites along the Philadelphia-New Jersey railway corridor.

Art in America described Grosse’s artistic abilities thusly:

Unlike the Action Painters or Expressionists, with their convulsive brushwork and gestures, Grosse never comes into direct contact with the surfaces. Her physical if not psychological detachment seems related to Conceptual art. However, her technique involves a machismo stance, with aggression modified by a kind of opulent sensuality.

The project is expected to cost just under $300,000. Funding comes from a variety of sources, several of them public. Regardless of what one thinks of Grosse’s art, an unprofitable transportation company reliant on public dollars is in no position to patronize something as subjective as artwork.

Training artists and bureaucrats

As I’ve argued in the past, no government or even quasi-government agencies governed by those employed in the arts can predict whether commissioned pieces may or may not present anything of merit. Nor should public monies be spent on exercises appealing to only a few, arbitrated by committees composed of a narrow cross-section of contemporary aesthetics. And what of the artists who toil incessantly without government largesse?

“I can’t remember the last time public art turned out to be a good idea,” Larry Kaufmann told me. Kaufmann is president of The Liberty21 Institute, a new think tank dedicated to promoting a culture of liberty.

“Artists seem inevitably to go for shock value and transgression, and these qualities were already in ample supply the last time I visited an Amtrak station,” Kaufmann said. “I suppose it would be nice if they commissioned something that captured the glory of train travel in the past—but even that would be romantic nostalgia, not anything that captures the reality of today’s Amtrak.”

Kaufmann continued: “Fundamentally, I don’t understand why we’re spending federal funds we don’t have to beautify a transportation service that no one uses outside the Acela corridor. The arts budget would clearly be put to better use elsewhere.”

Even if Grosse’s effort is of merit, it won’t last long. The WSJ reports the installation has a shelf life of only three weeks, as the work involves coloring the outdoors. “After that, the piece will be subject to elements, both human and natural—from erosion to possible gentrification. Its lifespan may vary from a matter of weeks to several months or, potentially, years.”

Not included in the $300,000 price tag are the salaries of the Amtrak engineers who “are overseeing the action at every site during the artwork’s installation.” Further: “For the next six months, the Mural Arts Program and the City of Philadelphia’s Graffiti Abatement Team have pledged to maintain ‘psychylustro’ and protect it from defacement.”

“Fuel your sense of adventure!”

Writers can also get into the act with the Amtrak Residency. The program, according to the website,

Will allow for up to 24 writers to take long-distance trains to work on their projects. Each writer’s round-trip journey will include accommodations on board a sleeper car equipped with a bed, a desk and outlets. We hope this experience will inspire creativity and most importantly fuel your sense of adventure!

Oh, goodie. The New Republic’s Adam Kirsch writes:

As it happens, right around now is the time poets across America are wrestling with the unbelievably complicated online application process for NEA grants. By contrast, the ease and speed with which Amtrak decided to dispense its largesse feels positively humane. There is a certain PR benefit for the railroad company, of course—this is probably the first time in ages that Amtrak has made the news without the words “accident,” “delay,” or “cost overruns” in the headline. But there is also a sense that the people running the railroad actually responded to the idea that, somewhere in America, there are passengers for whom the idea of riding Amtrak is a dream, not a chore.

But, of course: Solipsism is the artist’s stock-in-trade, is it not? Or, at least it is at Amtrak and The New Republic. And, it seems, at The Paris Review, which published an essay from the program’s first free rider, Jessica Gross, featuring the following bout of navel-gazing:

I’ve always been a claustrophile, and I think that explains some of the appeal—the train is bounded, compartmentalized, and cozily small, like a carrel in a college library. Everything has its place. The towel goes on the ledge beneath the mirror; the sink goes into its hole in the wall; during the day, the bed, which slides down from overhead, slides up into a high pocket of space. There is comfort in the certainty of these arrangements. The journey is bounded, too: I know when it will end. Train time is found time. My main job is to be transported; any reading or writing is extracurricular. The looming pressure of expectation dissolves. And the movement of a train conjures the ultimate sense of protection—being a baby, rocked in a bassinet.

All in all, not bad, and, in fact, close to the woolgathering works I commissioned from authors as editor of several high-minded, small-circulation magazines back in the day. Keep in mind the magazines I edited relied on subscriptions and advertising revenue to stay afloat, and my small stable of writers and their expenses were paid from those proceeds rather than from government handouts. Remarkably, these magazines recognized a profit for their shareholders, to whom I was accountable.

Amtrak, seemingly, is accountable to no one.

So what will taxpayers get for their $300,000? For three weeks, a few Amtrak riders will soak in all the color, verve, and perplexity that comes with Grosse’s pink pigments on old fences and rail yard walls. Then it’ll all be washed away in an ocean of red ink.


Bruce Edward Walker writes on the arts and other topics from his home in Midland, Mich.

Finance for the People: Peer-to-peer finance is democratizing access to capital by Iain Murray

Financial innovation: People like to talk a lot about it these days. But what is it? If you read the business press, it’s all about “high frequency trading” and “dark pools,” shadowy new entities few understand and even fewer know how to manipulate.

But never mind the scaremongering. The world—especially the United States—stands on the brink of a new era of democratization of finance, as technology expands access to capital to ever more of us. We could all be capitalists—if the regulators allow it.

Here’s an example. When I was between jobs a little over 10 years ago, I and a couple of like-minded souls had an idea for a new non-profit enterprise. The trouble is that the idea was so esoteric that it was exceedingly difficult to find seed funders (except for one who would match us a modest amount for funds we raised independently). A bank loan would have been difficult given our situations and our lack of track record.

Thankfully, we knew an excellent Web designer who agreed to provide us with a good-looking online portal to showcase our ideas and help us raise funds. The problem was that we needed to accept credit cards. It took us months to find a financial institution that would provide us with merchant account services. By that time, most of us had moved on and had no time to devote to the site. Things fell apart quickly, our little enterprise doomed by its inability to raise funds.

What a long way we’ve come. Today, you can get access to merchant services easily through services like and payment capability through companies like There are many payment processors like First Data that can handle the credit card processing.

Crowdfunding platforms allow people to run a creative idea up the flagpole and see who salutes. as it were, and they provide a great way of raising the funds to get a project off the ground. Many people are familiar with Kickstarter and Indiegogo, and there are platforms specializing in non-profit fundraising, like SimplyRaise.

Peer-to-peer (P2P) lending services like Lending Club match up people who need money with people who are prepared to lend it to them. No more meetings with a stern bank manager.

The best thing about these services is that you don’t need vast amounts of capital or a long track record to use them. The P2P platform CommonBond even enables students to pay off their student loans more easily than the official way of doing so (and thus provided a model that President Obama ignored in his recent action on student loans).

The trouble is that these innovations are now attracting the attention of regulators. The Department of Justice is targeting payment processors in a regulatory crackdown known as Operation Choke Point, on the supposed justification that they have been used by unscrupulous merchants to channel funds defrauded from victims. As a result, banks are dropping relationships with payment processors in order to avoid the extra expense that increased regulatory supervision brings. This will make payment processing more expensive, harder to obtain, or both.

Congress allowed the creation of equity crowd funding platforms that allow investing in a new venture when it passed the Jumpstart Our Business Startups (JOBS) Act in 2012. However, the Securities and Exchange Commission (SEC) has adopted a narrow interpretation of the act. Under the SEC’s interpretation, “accredited investors” can buy a piece of a company through crowd funding, but for the rest of us it’s going to be difficult. Worse, companies will find using this financing route difficult, given the likely reporting requirements.

This regulation seems strange considering that one can buy an entire company on eBay, but not a part of one through a portal.

So the biggest obstacle to the democratization of finance at the moment is the regulatory agencies trying to protect people from using their own money to help start a business.

Thankfully, innovators have a very good track record at staying a step ahead of the regulators. And while the regulators are playing catch-up, yet more financial innovation will come into play to change the world.

And how it’s changed! Perhaps I should get the band back together and fund that enterprise through one of these new innovative services.

Remember, Google was founded on maxed out credit cards.


Iain Murray is vice president at the Competitive Enterprise Institute.

EDITORS NOTE: The featured image is courtesy of FEE and Shutterstock.

Virtual Worlds, Real Economics by Matthew McCaffrey

Video games rot your brain and teach you econ.

Video games are playing an increasingly large role in pop culture. Whether you play or believe they are art, gaming will no doubt continue to be a major player in the entertainment industry. More importantly, libertarian ideas seem to be popping up everywhere in gaming. Criticism of government is on the rise, for example, and there is new emphasis on the importance of free thought and action.

To cite just two examples, Bioshock Infinite criticizes militarism and jingoism, while Assassin’s Creed 4: Black Flag is largely a celebration of pirate anarchy. Astute gamers may even notice that an animator forGears of War 3 put Mises’s motto, Tu ne cede malis (“Do not give in to evil but proceed ever more boldly against it”) in the game’s credits sequence.

This is all good news not only for libertarian ideas generally, but also for economic education. Gaming culture is a vibrant new arena of action where sound economic ideas have a real chance to take hold. There is already discussion about how in-game economies emerge and evolve—particularly how they deal with money and inflation. But games incorporate economics at even more basic levels. Indeed, gamers are already using the economic way of thinking without even knowing it. Games are all about basic economic concepts: scarcity, choice, trade-offs, opportunity cost, trade, and entrepreneurship. If we think of games like this, we see how their virtual realities imitate real-world economic decisions.

For instance, essentially all resources in the gaming world are scarce—that’s where the challenge comes from. If resources or experience points or time were unlimited, there wouldn’t be much of a game to play. But because gamers routinely face these kinds of scarcity, they are already familiar with the limitations they impose and have taken a first step toward economic understanding.

Scarcity means we have to make choices, and in this area games are pushing boundaries. Improved production values in the gaming industry have increased the immersive qualities of gameplay, to be sure. But it’s the economic simulations that make the experiences so real. Consider games like The Walking Dead, which takes scarcity to an extreme by using the zombie apocalypse as a backdrop. Instead of combat, The Walking Dead game centers on difficult economic decisions, like how to ration dwindling food supplies among survivors. Players become emotionally involved in the story by confronting scarcity and tough choices every step of the way.

Players’ decisions in turn imply trade-offs and opportunity costs. Anyone who has ever played a role-playing game (RPG) knows this territory well; choosing to allocate money or experience to a certain skillset means forgoing other skills. And it’s a short step from there to realizing that the true cost of skills is not the resources you spend to obtain them, but the alternative abilities you could have acquired.

Because players have different opportunity costs, not everyone is equally suited to all tasks: Enter the importance of specialization and social cooperation. Cooperation on a grand scale features in many massively multiplayer online RPGs such as World of Warcraft and EVE Online, where the most important quests can only be completed if a large number of diverse character types work together. Each member of the party specializes in enhancing the strengths or offsetting the weaknesses of the others, producing intricate networks of interdependence.

Trade is another vital form of social cooperation, and through the interactions of hundreds of thousands (if not millions) of players, MMORPGs rapidly develop complex systems of barter and monetary exchange. The teaching moment comes when players get to experience the benefits of the division of labor; even better, the benefits of specialization and trade are more obvious than in some ordinary market exchanges, where economic logic might seem too abstract.

Lastly, gaming showcases some of the best of the entrepreneurial spirit. Being a gamer is about crafting and controlling virtual worlds while at the same time learning to think creatively to overcome obstacles. Entrepreneurs do the same thing when they control productive resources in the constant drive to satisfy consumers. It’s not a surprise then that the gaming industry is growing and innovating in ways similar to Silicon Valley and other focal points of entrepreneurial energy; the two go hand in hand.

The idea that gaming conventions are reflections of economic principles is just one example of the many opportunities for economic teaching presented by the mass appeal of gaming. We’re bound to see more as the industry continues to thrive, so let’s be ready to show gamers that the experience they crave is not just good fun, but good economics.


Matthew McCaffrey teaches economics as a postdoctoral fellow in the Department of Liberal Studies at the University of Illinois at Springfield, and is editor of Libertarian Papers.

CLICHES OF PROGRESSIVISM #9 – Human Rights Are More Important Than Property Rights by Paul L. Poirot

(Editor’s Note: This essay was first published in 1962. Paul L. Poirot was a long-time member of the staff of the Foundation for Economic Education and editor of its journal, The Freeman, from 1956 to 1987.)

The Foundation for Economic Education (FEE) is proud to partner with Young America’s Foundation (YAF) to produce “Clichés of Progressivism,” a series of insightful commentaries covering topics of free enterprise, income inequality, and limited government.

Our society is inundated with half-truths and misconceptions about the economy in general and free enterprise in particular. The “Clichés of Progressivism” series is meant to equip students with the arguments necessary to inform debate and correct the record where bias and errors abound.

The antecedents to this collection are two classic FEE publications that YAF helped distribute in the past: Clichés of Politics, published in 1994, and the more influential Clichés of Socialism, which made its first appearance in 1962. Indeed, this new collection will contain a number of essays from those two earlier works, updated for the present day where necessary. Other entries first appeared in some version in FEE’s journal, The Freeman. Still others are brand new, never having appeared in print anywhere. They will be published weekly on the websites of both YAF and FEE: and until the series runs its course. A book will then be released in 2015 featuring the best of the essays, and will be widely distributed in schools and on college campuses.

See the index of the published chapters here.

#9 – Human Rights Are More Important Than Property Rights

It is not the right of property which is protected, but the right to property. Property, per se, has no rights; but the individual—the man—has three great rights, equally sacred from arbitrary interference: the right to his life, the right to his liberty, the right to his property…. The three rights are so bound together as to be essentially one right. To give a man his life but deny him his liberty, is to take from him all that makes his life worth living. To give him his liberty but take from him the property which is the fruit and badge of his liberty, is to still leave him a slave. 

—U.S. Supreme Court Justice George Sutherland

Tricky phrases with favorable meanings and emotional appeal are being used today to imply a distinction between property rights and human rights.

By implication, there are two sets of rights—one belonging to human beings and the other to property. Since human beings are more important, it is natural for the unwary to react in favor of human rights.

Actually, there is no such distinction between property rights and human rights. The term property has no significance except as it applies to something owned by someone. Property itself has neither rights nor value, except as human interests are involved. There are no rights but human rights, and what are spoken of as property rights are only the human rights of individuals to property.

What are the property rights thus disparaged by being set apart from human rights? They are among the most ancient and basic of human rights, and among the most essential to freedom and progress. They are the privileges of private ownership which give meaning to the right to the product of one’s labor—privileges which men have always regarded instinctively as belonging to them almost as intimately and inseparably as their own bodies. Unless people can feel secure in their ability to retain the fruits of their labor, there is little incentive to save and expand the fund of capital—the tools and equipment for production and for better living.

The Bill of Rights in the United States Constitution recognizes no distinction between property rights and other human rights. The ban against unreasonable search and seizure covers “persons, houses, papers, and effects,” without discrimination. No person may, without due process of law, be deprived of “life, liberty or property”; all are equally inviolable. The right to trial by jury is assured in criminal and civil cases alike. Excessive bail, excessive fines, and cruel and unusual punishments are grouped in a single prohibition. The Founding Fathers realized that a man or woman without property rights—without the right to the product of his own labor—is not a free man.

These constitutional rights all have two characteristics in common. First, they apply equally to all persons. Second, they are, without exception, guarantees of freedom or immunity from governmental interference. They are not assertions of claims against others, individually or collectively. They merely say, in effect, that there are certain human liberties, including some pertaining to property, which are essential to free citizens and upon which the State shall not infringe.

Now what about the so-called human rights that are represented as superior to property rights? What about the “right” to a job, the “right” to a standard of living, the “right” to a minimum wage or a maximum work week, the right to a “fair” price, the “right to bargain collectively, the “right” to security against the adversities and hazards of life, such as old age and disability?

The framers of the Constitution would have been astonished to hear these things spoken of as rights. They are not immunities from governmental compulsion; on the contrary, they are demands for new forms of governmental compulsion. They are not claims to the product of one’s own labor; they are, in some if not in most cases, claims to the products of other people’s labor.

These “human rights” are indeed different from property rights, for they rest on a denial of the basic concept of property rights. They are not freedoms or immunities assured to all persons alike. They are special privileges conferred upon some persons at the expense of others. The real distinction is not between property rights and human rights, but between equality of protection from governmental compulsion on the one hand and demands for the exercise of such compulsion for the benefit of favored groups on the other.

Paul L. Poirot
Freeman Editor, 19561987


  • You own yourself and you own those material things you’ve created or traded for freely with others. These are rights to property—property in yourself and in your possessions—and they cannot be separated from human rights.
  • America’s founders made no distinction between human rights and property rights for good reason: There aren’t any. They are one and the same.
  • Your right to what’s yours is very different from a claim on the person or property of others.
  • For further information, read these articles:

“Human Rights Are Property Rights” by Murray Rothbard:

“The Primacy of Property Rights and the American Founding” by David Upham:

“The Property Basis of Rights” by Clarence B. Carson:

“Freedom or Free-for-All?” by Lawrence W. Reed:


Paul L. Poirot was a long-time member of the staff of the Foundation for Economic Education and editor of its journal, The Freeman, from 1956 to 1987.

EDITORS NOTE: The featured photo is courtesy of FEE and Shutterstock.

An Increased Minimum Wage Equals Greater Unemployment

It’s June, a month famed for marriages, but it is likely to be remembered for the high rate of teen unemployment which has been soaring for a long time. By February, the national unemployment rate for youth, age 16 to 19, had reached 20.7%. By November 2013 it was three times higher than the national average of 6.6% according to the Bureau of Labor Statistics.

Teens are rivaled by the number of American men in their prime working years, a record 1-in-8,who are not in the labor force. These men, age 25-54, represent 61.1 million who are either not working or no longer looking for work. The Weekly Standard reported that “This is an all-time high dating back to when records were first kept in 1955.”

The non-partisan Congressional Budget Office released a report in February that said the wage hike to $10.10 could result in a net loss of about a half a million workers at the same time in increased wages for 16.5 million others.

So, naturally, President Obama in his State of the Union speech, called on Congress to raise the national minimum wage from $7.25 to $10.10 an hour. Soon after, he signed an Executive Order to raise the minimum wage for individuals working on new federal service contracts. That means that taxpayers will pay more for those services as the cost gets passed along. Does he have the power to impose the increase? Probably not.

Meanwhile in California where countless businesses are fleeing thanks to the insanity of its liberal legislature and Governor, as May ended its senate approved a measure that would lift the state pay floor to $13.00 an hour by 2017. If it becomes law, Californians will be interacting with machines for everything from banking to filling their gas tank to having a fast-food meal. Even more insane, Seattle has become home to the highest minimum wage in the nation, $15.00 an hour!

Minimum wage laws have been around a long time. Their original goal was to raise the income of the working poor, but the fact that there is still talk of raising them suggests they don’t work as intended. Letting the job market determine wages holds a greater promise of increased wages because businesses have to remain competitive and that means paying a wage that attracts skilled and even unskilled workers.

As Thomas E. Hall, the author of “Aftermath: The Unintended Consequences of Public Policies” (Cato Institute, $24.95, due in August) notes, “The living wage concept moved to the forefront during the Industrial Revolution, along with calls to end practices such as child labor and conditions poor working women faced. Massachusetts passed the nation’s first minimum wage law in 1912.

One of the outcomes of the Great Depression, 1929 to 1941, was the inclusion of a minimum wage as part of the New Deal’s National Industrial Recovery Act. Suffice to say, the NIRA, which actually encouraged businesses to collude together to set prices, failed to promote economic recovery. It was very unpopular and in 1935 the Supreme Court declared it unconstitutional.

Because liberals never learn anything from experience, the NIRA was resurrected later in the 1938 Fair Labor Standards Act that raised the minimum wage to 40 cents in 1945. “The United States has had a federal minimum wage ever since.”

Politicians and even some demented economists like the minimum wage. Every time it is raised, it appears to the general public that working people benefit. The problem is that the wage increases also include increases in unemployment as businesses try to contain costs in order to remain competitive and make a profit.

As Hall, a professor of economics at Miami University in Oxford, Ohio, notes, “The minimum wage’s first significant impact on national labor market conditions occurred in 1956, when the hourly rate was raised from 75 cents to $1.00.” The increase had its “greatest impact on teenagers because they possess the fewest marketable skills among the working-age population. Also, teens often do, or have in the past, worked at jobs easily replaceable with machinery or by conducting business in a different manner.”

The minimum wage rate, nonetheless, has continued to increase since the 1950s and, “By the early 1990s, these changes had caused to minimum wage to apply to over 90 percent of the U.S. workforce.”

Here’s the fundamental lesson about the minimum wage that continues to be ignored. “President Ronald Reagan, who occupied the White House from 1981 to 1989, did not support further increases because he believed that raising the minimum wage would discourage employment growth…during that decade, the U.S. economy created 18 million new jobs.”

As Hall succinctly points out “Remember that the minimum wage is just a government-imposed price-fixing scheme that creates winners and losers.”

Teens that stayed in school and will either be facing a summer vacation or graduating are particularly disadvantaged by a minimum wage law.

“The effects of high unemployment among this demographic group,” says Hall, “should not be discounted. One reason is that the lack of employment opportunities for young people deprives them of valuable work experience in the form of learning the responsibility of showing up for a job on time, learning to follow directions and complete tasks, learning to work with others…these skills can prove to be beneficial later in life.”

It is likely that the minimum wage is also a factor in why many men in the 25-54 age cohort are not working either. This is hardly the time to be increasing the rate unless you want to see the rate of unemployment increase for all ages and both sexes.

By contrast, in addition to the energy sector, the sector that builds machines to replace human workers is likely to do very well over the coming years.

© Alan Caruba, 2014

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Why is the U.S. Government in the Mortgage Loan Business?

It is often truly astonishing to me the harm done by the way the federal government was expanded well beyond its constitutional limits during the 1930’s New Deal era. One dramatic example is the government’s role in the housing mortgage loan marketplace.

I recently read a commentary by Steve Stanck, a research fellow at The Heartland Institute, a free market think tank, whose title was “Don’t Replace Fannie and Freddie; End Them.” He began by pointing out that “For every 100 mortgages being sold in the United States these days, at least 94% of them have government backing.”

Fannie is shorthand for the Federal National Mortgage Association and Freddie is short for the Federal Home Loan Mortgage Corporation. Both are referred to as “government sponsored enterprises” and Stanck points out that “The housing market was nearly ruined several years ago, and the government’s involvement is a big reason” because, before the 2008 financial crisis, both “were bundling mortgages into mortgage-backed securities and selling them to investors”, primarily banks.

ForeclosureStill largely unknown to the public, the financial crisis was triggered on September 15, 2008 when the Federal Reserve noticed a tremendous draw-down of money market accounts in the U.S. amounting to $550 billion dollars in the matter of an hour or two. This was revealed in a 2008 congressional closed door session and later reported by Rep. Paul Kanjorski of Pennsylvania. Had the Federal Reserve not closed down the accounts by 2 PM that day, the entire economy would have collapsed, followed by the world economy a day later.

To this day, the identity of those who initiated the withdrawal has not been revealed, but the banks that were heavily invested in Fannie and Freddie’s bundled mortgage-backed securities were most at risk. Those securities were regarded as a safe investment precisely because both are, as noted, “government-sponsored enterprises”, implying that they were backed by the government—taxpayers.

When the housing bubble burst in 2008, the federal government put Fannie and Freddie into conservator ship “and handed them $188 billion to stay afloat. The actions of both entities had artificially lowered mortgage interest rates in order to increase home buying and required lenders—banks—to loan money to riskier borrowers.

As Brian M. Carney noted in a July 26, 2010 Wall Street Journal editorial opinion, “The official version of the housing boom and bust, and subsequent panic and recession, tells us that greedy bankers took unacceptable risks, assumed too much leverage, made irresponsible loans, and left the government to clean up the mess. The causes of the crisis, in this version, include banker bonuses, deregulation ideology and predatory lending. Most of this is nonsense.”

Carney noted that “There’s simply no room in this story for two giant government-sponsored enterprises that distorted the housing and credit markets…” Those would be Fannie Mae and Freddie Mac.

Stanck notes that there is a bill in Congress to “wind down Fannie and Freddie. This is good. But they want to replace those organizations with private mortgage bond issuers who would each have government guarantees back by a new entity called the Federal Mortgage Insurance Corporation. This is bad.”

It is bad for the same reason that Fannie and Freddie are bad. The government needs to get out of the mortgage loan business. The bill barely squeaked through the Senate Banking Committee on May 15 with minimal support.

The new entity that the bill would create would charge fees to the private mortgage bond issuers—“fees that would be based on how many people in ‘underserved’ demographic groups receive mortgages” leading to “more of the subprime lending that played such a big role in the most recent housing mortgage collapse.” It is nothing more than Fannie Mae and Freddie Mac with a new name.

Stanck sensibly says “Let borrowers and lenders strike their own deals without government meddling. In that way, mortgage interest rates would better reflect true risk, there’d be almost no way for legislators to inject corruption and cronyism into the system, and taxpayers would not be at risk of shelling out more hundreds of billions of dollars.”

You may read or hear that Fannie Mae and Freddie Mac are returning to solvency, able to turn a profit in the first quarter of 2014 and this is true. Those profits are going straight into the U.S. Treasury to resolve their debt incurred when they were bailed out. When they pay it back, they should, as Stanck says, be ended, not replaced.

So long as they exist, another housing boom and bust, and another financial collapse will repeat what occurred in 2008.

© Alan Caruba, 2014

A Lot of Economics in One Lesson by Sandy Ikeda

Economics in One Lesson (PDF) is by far Henry Hazlitt’s most famous book. Like many, I’ve read some of this other works, including Failure of the New EconomicsMan versus the Welfare State, and The Foundations of Morality. But whether he intended it or not, EIOL is Hazlitt’s masterpiece.

It’s there that he addresses and elaborates on Frédéric Bastiat’s broken-window fallacy, which claims that destruction can be a gateway to wealth. Bastiat and Hazlitt simply point out that, in fact, destruction destroys wealth, and any perceived benefits of destruction are limited only to what is easily seen. It’s a simple lesson, though perhaps deceptively so.

Indeed, if you’re not careful, you might misstate the title as “Economics in One Easy Lesson.” Anyone who’s read the book wouldn’t make that mistake. While the lesson is simple, fully grasping and applying it is not. Even some Nobel Prize-winning economists don’t get it.

But perhaps because of his book’s welcoming title and popular reputation, Hazlitt, while familiar among libertarians and conservatives, has been underrated as an economist and intellectual. (And if you’re philosophically inclined, I would recommend that you tackle his closely argued and enlightening The Foundations of Morality.)

This summer I have the privilege of lecturing at two of the many seminars that the Foundation for Economic Education offers to select college and high school students, and to prepare for them I reread Hazlitt’s classic. Once again, I was impressed by the level of economic analysis it contains, especially in the chapters titled “Saving the X Industry” and “Minimum Wage Laws” for their rigor as well as the sensitivity to and concern for the human condition that they embody.

I’d like to focus on two things that stood out to me on this latest reading.

Learning the full lesson

Hazlitt states the lesson early on:

The art of economics consists in looking not merely at the immediate but at the longer effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups.

So in saving a declining domestic industry with subsidies or protective tariffs, what you don’t see are the more-efficient businesses and new products that won’t now serve customers, the workers and capital that won’t now be efficiently employed in those businesses, and the lower prices that won’t now be charged, all because the lowered efficiency and the higher taxes or monetary expansion needed to pay for those subsidies make them impossible. We need to look beyond those directly affected and past the short term.

But the lesson doesn’t say to discount the short-term and particular effects, either. Libertarians too often make the mistake of looking only at the long-run effects of a change on the general welfare, discounting or ignoring altogether the short-run effects on particular people. (It’s a mistake that Hazlitt claims the classical economists made, and I think he had David Ricardo in mind):

It is true, of course, that the opposite error is possible. In considering a policy we ought not to concentrate only on its long-run results to the community as a whole.

In the debate on raising the minimum wage, although it will cause fewer to be employed than otherwise and shrink the potential benefits of those who remain employed, some desperate people may be helped a great deal. Those who argued for bailing out General Motors point to the people who’ve developed specialized skills over many years who would really take a hit were the company to fail. When we respond that the bailout will reward inefficiency and mean fewer good jobs and products in the future, we shouldn’t overlook those who, through no fault of their own, will suffer because of competition and innovation. Thus, Hazlitt counsels:

It is altogether proper—it is, in fact, essential to a full understanding of the problem—that the plight of these groups be recognized, that they be dealt with sympathetically, and that we try to see whether some of the gains from this specialized progress cannot be used to help the victims find a productive role elsewhere.

I note that Hazlitt does not name any government agency or private charity here. I think he was being careful. The point is that he felt that these folks are indeed victims of the market process, and that those who benefit from that process should help them somehow. One can trace such sentiments in the classical liberal tradition back to Adam Smith and his concern for the most vulnerable in society.

Public Choice in reverse

Another passage that struck me also relates to the impact of innovation on people’s lives. Hazlitt writes:

Now it is often not the diffused gain of the increased supply or new discovery that most forcibly strikes even the disinterested observer, but the concentrated loss.

He uses the example of advances in coffee production and shoe manufacturing that over time will create greater benefit for far more people than are harmed by them.

The fact that there is more and cheaper coffee for everyone is lost sight of; what is seen is merely that some coffee growers cannot make a living at the lower price. The increased output of shoes at lower cost by the new machine is forgotten; what is seen is a group of men and women thrown out of work.

One of the more important lessons of Public Choice economics is that political institutions induce people to choose an inefficient policy when the rules of the game allow them to concentrate benefits and disperse costs.

For example, planting trees along the road at a total cost of $100,000 at taxpayer expense might make economic sense if the total benefit from the trees exceeds $100,000. But if the total benefit is only $10,000, it wouldn’t make economic sense. Suppose though that there are 100,000 taxpayers but only 10 beneficiaries of the trees. The tax cost per person is $1 while the per-person benefit is $1,000. In such a case the beneficiaries may be willing to fight much harder than their tax-paying “benefactors,” which makes political sense.

If the rules of the game allow interest groups to disperse costs and concentrate benefits—the opposite of Hazlitt’s observations on the effects of innovation—the result over time will be inefficiency, corruption, and worse.

It occurred to me that here is another way of expressing the contrast between the logic of politics versus the logic of the market process. Namely, in interventionist politics it makes sense to concentrate benefits and disperse costs, while in a flourishing economy, competition sometimes concentrates negative consequences and disperses benefits. And it’s this unfortunate but often unavoidable feature of competition that gives rise to demands for government intervention, and to thinking in terms of the broken-window fallacy. If you pay attention you’ll see many such connections in his work.

That goes especially for economists who wish to explain complex ideas to a popular audience. Reading Hazlitt we would see how a master marries analytical subtlety with clarity and wit, something rare in what today passes for “economics for the intelligent layman.” But Henry Hazlitt’s scholarship would reward anyone who devotes to it the close study that it deserves.

Thank you, FEE, for giving me the occasion to read him again.


Sandy Ikeda is an associate professor of economics at Purchase College, SUNY, and the author of The Dynamics of the Mixed Economy: Toward a Theory of Interventionism. He will be speaking at the FEE summer seminars “People Aren’t Pawns” and “Are Markets Just?

Capital One forms “Unilateral Partnership” with People’s Cube

This week Capital One has established a new unilateral partnership with the People’s Cube, with the purpose of creating catchy and spectacular advertising materials. The first rule in such a unilateral partnership is that one partner doesn’t let the other partner know anything about it. The second rule is that the other partner doesn’t get any of the proceeds from the resulting revenues.

In practical terms that means that Capital One produces their ads based on the People’s Cube material, and we at the People’s Cube find out about it on Facebook from an alert reader who sends us a link.

The first ad resulting from our exciting new partnership with Capital One features a gloriously red People’s Cube on a rough wooden surface, under the caption, “It just got easy.”

We can only guess what the next Capital One ad will be, but we expect our members to post their suggestions in what may become a very productive and successful unilateral partnership with Capital One.

On our part, laborers at various People’s Cube departments have already enthusiastically signed different kinds of improvised one-sided contracts with Capital One, many of them in triplicate and notarized in red pencil, stating that they don’t want to hear anything about Capital One using their work, demanding that they never be contacted by Capital One representatives, nor receive any compensation for their selfless toil for the Common Good™ in the field of visual agitation and propaganda.

We have scheduled a spontaneous celebration of this historic development at 21:00 behind the tractor barn. Many a rationing coupon is expected to be redeemed tonight to ensure an uninterrupted flow of beet vodka, stale bread, and pickled beet products. And by all means, bring your own beets!

This looks like the beginning of a beautiful unilateral friendship.





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