Ron Paul on the Trump-Kim Summit

Ron Paul on the Trump-Kim Summit

06/12/2018Ron Paul

"I can't help but feel a little bit proud that our views, which aren't mentioned very often, are really being talked about. They are talking about a peace treaty and ending the war. They are talking about bringing troops home. They are talking about spending less money and no more military games over there. Wow. That is very good." - Ron Paul

 

Who Won At The Summit? Trump or Kim?

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Rothbard Graduate Seminar 2018

06/11/2018Tho Bishop

Today was the first day of this year’s Rothbard Graduate Seminar. A total of 27 students from 13 countries have joined us in Auburn to dissect and discuss Murray Rothbard’s economic treatise Man, Economy, and State. RGS stands alone as the sole academic program in the world that applies the tradition of a great book seminar to Austrian economics. It has proved to be an invaluable asset in developing modern scholars in the Misesian tradition, and is possible thanks to the incredible generosity of  Alice Lillie.

Man, Economy, and State is a work deserving of the title "great book, it having played an important role in the history of Austrian economics. Dr. Joseph Salerno has credited the publishing of Rothbard’s masterpiece as being vital to the revival of the Austrian tradition in the United States. As he wrote in his paper, The Rebirth of Austrian Economics — in Light of Austrian Economics:

This handful of scattered contributions to Austrian economics forthcoming in the 1950s, however, would have defined the death throes of the school rather than the prelude to its rebirth were it not for the creative genius of Murray Rothbard, which came to fruition in the early 1960s. The revival of Austrian economics as a living scientific movement can be dated from the publication of Rothbard’s Man, Economy, and State in 1962, a contribution to Austrian economics and to pure economics in general that ranks as one of the most brilliant performances in the history of economic thought.

In his review of the book in 1962, Ludwig von Mises also identified Man, Economy, and State as an important contribution to economics that built upon the contributions of the Austrian school:

The main virtue of this book is that it is a comprehensive and methodical analysis of all activities commonly called economic. It looks upon these activities as human action, i.e., as conscious striving after chosen ends by resorting to appropriate means. This cognition exposes the fateful efforts of the mathematical treatment of economic problems…

In every chapter of his treatise, Dr. Rothbard, adopting the best of the teachings of his predecessors, and adding to them highly important observations, not only develops the correct theory but is no less anxious to refute all objections ever raised against these doctrines. He exposes the fallacies and contradictions of the popular interpretation of economic affairs.

Today’s RGS sessions focused on the first three chapters of Man, Economy, and State, with Dr. David Gordon lecturing on praxeology and Dr. Guido Hulsmann leading discussion on topics such as direct and indirect exchange.

Some photos from today’s sessions can be found below:

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How to Unlock the Free Market Possibilities of Net Neutrality's Repeal

06/11/2018Per Bylund

Past all the incendiary rhetoric, one of the key differences between Democrats and Republicans is the question of how far-reaching government intervention should be. Nowhere is this more apparent than in the most recent battleground over regulations: net neutrality.

Federal Communications Commission (FCC) Chairman Ajit Pai -- a Republican appointee -- championed a commission vote in December to repeal net neutrality regulation, arguing that deregulating internet service providers would bolster the economy.

Under a repeal, broadband providers would no longer be prohibited from blocking websites or charging for higher-quality service or certain content. The FCC, under Pai's leadership, says that ISPs like AT&T and Comcast will offer a better variety of niche services to enhance the customer experience if they are liberated from pesky regulations.

The issue is hardly settled: Democrats in the U.S. Senate disagreed with the FCC move and last month voted 52-47 to quash the repeal, but their bill is not expected to pass the House. And, even if it does, President Trump is extremely unlikely to sign it. As it stands, the repeal of net neutrality is set to take effect today, June 11.

The FCC’s repeal uncorked a tidal wave of outrage from net neutrality advocates, who fear a future of slower internet service, higher costs and fewer consumer choices. But those advocates should hold on -- because the loosening of regulatory hurdles actually fits into a market-oriented mindset that breeds entrepreneurial innovation. Here's how:

Read the full article at Entrepreneur. 
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Trump/Kim Meeting Shows Value of Policy Over Politics

06/11/2018Ron Paul

When President Reagan met with Mikhail Gorbachev in Reykjavik, Iceland, on October 11, 1987, it helped put into motion events that would dramatically change the global system. A line of communication was fully opened with an enemy of decades and substantive issues were on the table. Though the summit was initially reported as a failure, with the two sides unable to sign a final agreement, history now shows us that it was actually a great success that paved the way to the eventual end of the Cold War and a reduction in the threat of a nuclear war.

A year later Gorbachev and Reagan met in Washington to continue the dialogue that had been started and the rest is history. Success began as a “failure.”

We are now facing a similar situation with President Trump’s historic meeting with North Korean leader Kim Jong-un in Singapore. As with the Reagan/Gorbachev meetings, detractors on all sides seem determined to undermine and belittle the opening of a door to diplomacy and peace.

The neocons demand that North Korea give up all its bargaining chips up front in return for vague promises of better relations with the US. Yet in the post-Libya era no serious person would jump at such an offer. Their biggest fear is that peace may break out and they are doing everything to prevent that from happening. Conflict is their livelihood.

I also find it disheartening that many Democrat opponents of President Trump who rightly cheered President Obama’s efforts to reach a deal with Iran are now condemning Trump for opening the door to diplomacy with North Korea. Did they genuinely support President Obama’s diplomatic efforts with Iran, or did they just prefer the person who happened to occupy the Oval Office at the time?

The issue is about policy versus politics and I am afraid too many Americans of all political stripes are confusing the two. Many Americans, it seems, would prefer that we continue down the path to a potentially nuclear conflict on the Korean peninsula because they do not like the current US president. Does that make any sense? Has politics come to over-rule our common sense to the point we would go against our own interests and even our own lives? Let’s hope not!

The truth is, talking is always better than threatening. Just like trading is always better than sanctioning. Detractors on both sides miss the point while they desperately try to make political points. The current thaw with North Korea began with that country’s participation in the Olympic games in South Korea. From that point, North and South Korea came to see each other as neighbors rather than enemies. That process will continue regardless of what comes from the Trump/Kim summit and it is a process we should cheer.

Hopefully this historic Trump/Kim meeting is the beginning of a dialogue that will continue to dial back the tensions. Hopefully we can soon remove the 30,000 US troops that have been stationed in South Korea for seven decades. One thing Washington must do, however: stay out of the way as much as possible so as to allow the two Koreas to continue their peace process.

Reprinted with permission. 

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Anthony Bourdain on Kitchen Hierarchy

06/08/2018Peter G. Klein

Before Kitchen Confidential made him a celebrity, Anthony Bourdain was a real chef, working upscale New York kitchens at places like the Supper Club and Sullivan’s. Bourdain’s style is not to everyone’s taste, but he knows how to manage a restaurant crew. A chef, after all, is not primarily an artist, but a manager, facing the same set of organizational challenges — delegation, incentives, monitoring — as any administrator.

I mention this because I recently stumbled upon an interview with Bourdain in the July 2002 Harvard Business Review. Despite several attempts by interviewer Gardiner Morse to get Bourdain to endorse creativity, spontaneity, and empowerment in the kitchen, Bourdain remains an unreconstructed devotee of Escoffier’s “brigade system,” a sort of culinary Taylorism in which each member of the cooking staff has a fixed place in the production chain, a very narrow job description, and an obligation to obey his chef de partie (section leader) and the head chef without question.

Q: There’s been a trend in business to move away from hierarchies and empower workers, but you’ve embraced a very rigid staff structure and an old style of management with great success. Why do you think it works?

A: You’re defined by the job you do, not by whatever . . . predilections you have. . . . And to have any delusions that you’re better than anyone else, however true that might be as far as your technical skills are concerned, is not allowed. Your commitment is to the team effort. Everyone lives and dies by the same rules.

You have a tremendous amount of personal freedom in the kitchen. But there’s a trade-off. You give up other freedoms when you go into a kitchen because you’re becoming part of a very old, rigid, traditional society — it’s a secret society, a cult of pain. Absolute rules govern some aspects of your working life: obedience, focus, the way you maintain your work area, the pecking order, the consistency of the end product, arrival time.

This is a case where the advantages of hierarchy — the need for fast, coordinated decision-making, the ability to internalize externalities, the possession of “decisive knowledge” by the top decision-makers, and the like — appear to outweigh the high-powered incentives and Hayekian knowledge benefits of decentralization. Look for a future Foss-Klein paper (with Nils Stieglitz) discussing this tradeoff more systematically.

Originally published January 18th, 2008 on Organization and Markets
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Is Marvin Goodfriend’s Nomination in Trouble?

06/07/2018Tho Bishop

The Senate Banking Committee is set to vote next Tuesday on the nominations of Richard Clarida and Michelle Bowman. As I noted when both names were initially announced, neither’s history indicates any reason to think they will shake things up at the Fed. To his credit, Mr. Clarida did indicate during his Senate testimony that he strongly supports normalizing the Fed’s balance sheet and getting it away from direct credit allocation by purchasing non-Treasury assets. That’s a notable improvement.

Reports indicate that it’s possible both nominees will receive some bipartisan support, in notable contrast to the last Fed nominee considered – Marvin Goodfriend. In fact, it seems increasingly clear that Goodfriend’s nomination is in danger. As the American Banker noted today:

There is a bigger question another Fed board nominee, Marvin Goodfriend, whose nomination has faced controversy. Goodfriend is a professor at Carnegie Mellon University and former monetary policy adviser to the Federal Reserve Bank of Richmond.

“The Marvin Goodfriend nomination to the Board remains in limbo, but the odds of his confirmation are slim-to-none at this point,” Isaac Boltansky of Compass Point Research & Trading wrote in an analyst note May 14. “The odds slightly favor both Clarida and Bowman ultimately winning confirmation.

While Trump’s Fed nominees have largely been forgotten by the mainstream media, this development is a big deal. The reason I consider Goodfriend to be the “worst Fed nominee of all time” is that his enthusiastic support for negative interest rates and ambitious strategy for eliminating cash in America makes would make him a uniquely dangerous voice within America’s central bank.

It is worth noting as well that Goodfriend’s nomination is in peril in part due to an interesting coalition that transcends the political left and right. One of the loudest advocates against his nomination has been the organization Fed Up, a progressive organization whose primary policy goals have been greater “diversity” at the Fed and opposition to interest rate increases. While have obvious disagreement on monetary policy, it is promising to see some recognition on the left to the very real dangers negative interest rates and the war on cash can have on working class Americans.

Their advocacy seems to be working, with the expectations that Goodfriend will fail to receive a single Democratic vote in the Senate. Combined with Rand Paul’s committed no vote, Goodfriend is one more Republican opponent away from being done. Hopefully he will receive that from some of the better Republicans on monetary policy, like Ted Cruz or Mike Lee.

While it is a weird situation to see Elizabeth Warren doing more to attack a pro-tax advocate than either the Heritage Foundation or Cato, it does point to the unique political potency of the Fed as a political issue. If a Warren-Rand coalition brings down Goodfriend, America will be better off for it. 

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How Protectionism Squanders Capital

In his early career, Mises was a vocal supporter of the free trade movement, and well involved in the policy proposals of the free trade associations in Europe. In his later years, he maintained his pure laissez-faire view of international trade, but focused more on the battle of ideas. Although scattered throughout his other works, and not collected in a volume on 'international economics', his analyses on trade and trade policy are meticulous and detailed, but clear-cut, as well as indispensable to a correct understanding of international production and exchange. 

For those reading the recent news on the escalation of protectionist measures between the U.S. and its trade partners, here's an excerpt from Mises's Epistemological Problems of Economics (pp. 237-9). The discussion is fully applicable today, 85 years after it was first published. In a short subchapter, Mises (to use one of his favorite expressions) explodes the fallacy of the infant industry argument for trade protection, and employs an original and often neglected argument that highlights the role of monetary calculation and inconvertible capital goods in production and trade.

The infant industries argument advanced in favor of protective tariffs represents a hopeless attempt to justify such measures on a purely economic basis, without regard to political considerations. It is a grievous error to fail to recognize the political motivation behind the demand for tariffs on behalf of infant industries. The same arguments as are advanced in favor of protecting a domestic product against foreign competition could also be adduced in favor of protecting one part of a general customs area against the competition of other parts. The fact that, nevertheless, protection is asked only against foreign, but not also against domestic, competition clearly points to the real nature of the motives behind the demand. 

Of course, it may happen in some cases that the industry already in existence is not operating in the most favorable of the locations that are presently accessible. However, the question is whether moving to the more favorable location offers advantages great enough to compensate for the cost of abandoning the already existing plants. If the advantages are great enough, then moving is profitable and is carried out without the intervention of a tariff policy. If it is not profitable in itself and becomes so only by virtue of the tariff, then the latter has led to the expenditure of capital goods for the construction of plants that would otherwise not have been constructed. These capital goods are now no longer available where they would have been had the state not intervened.

Every tariff under whose protection new plants come into existence that otherwise would not have been built so long as the older plants established elsewhere were still utilizable leads to the squandering of capital. Of course, the fanatics on both sides of the ocean who want to “make the economy rational” do not care to see this.

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Tom Woods Show: The Problem With Government Police

Tate Fegley, a 2018 Research Fellow, joined the Tom Woods show to discuss the perverse incentives that exist with government law enforcement, and how the private market would be a better approach to police services. 

To read more from Tate on the topic, check out his Mises Institute author page. 

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Weighted Voting Not a Cure for Democracy

06/06/2018Gary Galles

The meat-grinder politics beginning with the 2016 campaign has triggered proposals to rescue us from a crisis of democracy. At least two authors — Jason Brennan, in Against Democracy and Dambisa Moyo, in Edge of Chaos — have suggested that letting more knowledgeable citizens’ votes count more might be a useful reform.

Both trace democracy’s problems to voter ignorance. However, its cause is largely that an individual casting a better-informed vote will not change the political outcome, providing them essentially no such payoff for such efforts. And weighted voting would do little to improve that problem, while imposing severe implementation issues.

Allocations of extra voting power would not escape political calculation and control. That omni-interventionist government would be able and willing to do that even-handedly is beyond belief. Further, it doesn’t fix voters’ incentives.

Say you got a double vote. There is still an insignificant chance it vote would swing an important election. It still offers no payoff. Little would change even if some got 100 votes. And any expansion of “informed” voting power further dilutes the incentives of other voters.

Weighted vote advocates also misidentify voter knowledge as the crucial question. More political knowledge does not eliminate bad government policies. That can just as easily be used to advance one’s own interests at others’ expense (experts promoting a wrong answer in the “right” direction) as to advance the “general welfare.” Given how frequently “experts” have driven policy failures, giving them more votes could easily worsen results.

Read more at the Orange Country Register 
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Trump is Right, Trudeau is a Big Fat Phony on Trade

06/04/2018Tho Bishop

Canadian Prime Minister Justin Trudeau is known for dressing up in ridiculous costumes. His latest? A defender of free trade.

Over the weekend, Trudeau took to Sunday morning news shows to criticize the Trump Administration’s tariffs on Canadian steel and aluminum. He called the decision “insulting,” noting that “there are no two countries that are as interconnected, interdependent…You sell more things to us every year than to UK, Japan, and China combined.”

Of course Trudeau’s criticism of the new tariffs is valid, protectionism is bad for everyone but special interest groups they protect. The problem is that Trudeau’s own policies are hard to reconcile with his new found appreciation for free trade.

Canada’s Supply Management System is a perfect example of agricultural protectionism – and a policy that has received the full endorsement of Justin Trudeau. The program involves an impressive collection of bad government policies, including direct subsidies, price fixing, supply regulation, and high tariffs on international imports. In a 2014 article on Canada’s agricultural policy, Predrag Rajsic illustrated the incredible amount of regulation that exists in milk production:

For example, for the past 40 years, the production of milk in Canada has been legally regulated at the federal and provincial levels. At the federal level, production is limited to about 79 million hectoliters per year. Each province has a strictly defined share in the total national production that cannot be exceeded.

For the whole system to function, milk can be produced only by a farmer that is registered with a provincial marketing board. Every farmer is allowed to supply a precisely defined quantity of milk, which is referred to as a quota. A farmer may increase his quota only if another farmer is willing to sell his quota. The exchange of quotas is also regulated in detail and must be approved by provincial marketing boards. Currently, farmers are willing to pay more than $30,000 in exchange for transfer of rights to increase their dairy herd by one dairy cow. However, the soaring quota prices have created barriers for new entrants into the industry. A person that wants to start a small dairy farm first needs to pay more than $1 million just to be allowed to produce milk. These barriers to entry have triggered quota price controls in Ontario and Quebec, the major dairy producing provinces. The price controls, in effect, have reduced the willingness of farmers to sell their quotas. Now the Ontario milk marketing board is offering quotas at subsidized prices to a limited number of new entrants (i.e., not more than ten per year).

Canada’s Supply Management System has faced its biggest internal challenge recently from Maxime Bernier, a member of parliament who sought the leadership nomination of his Conservative Party. Last year he wrote an article praising Trump’s criticism of the protectionism scheme, noting the cost it has for Canadian citizens:

Canadian families, especially low-income ones with children, suffer because of the hundreds of dollars in extra cost they need to pay each year to support this system. Isn't it unfair?

I'm also sorry for the Canadian producers protected from competition by this cartel. It's actually very unfair for some of them, too.

They have to pay $24,000 to $40,000 a cow to their protection racket for a piece of paper giving them the right to produce a certain quantity of milk – and that's before paying for the cow itself! Even when they run a very efficient farm, they cannot grow and sell to foreign markets. That's the price to pay for not allowing foreigners to sell here.

It is encouraging to hear such passionate defenses of free trade being made by both international leaders and news pundits as a result of Donald Trump’s tariffs. Unfortunately, the actions of those leaders – both in the past and present -  undermine their rhetoric. If Justin Trudeau really believes that tariffs between the US and Canada are an insult to both countries, then he should lead by example.

Until then, Trump is right to call out his hypocrisy.

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Mises Research Fellow Demelza Hays Named to Forbes 30 Under 30

06/04/2018Mises Institute

Congratulations to Demelza Hays, a 2015 Mises Research Fellow, for being named to Forbes 30 Under 30 from Deutschland/Austria/Switzerland. Ms. Hays is currently a PhD student at the University of Liechtenstein, specializing in cryptocurrency. Her analysis can be found at incrementum.li, an investment and management company guided by an understanding of Austrian economics. Her articles on cryptocurrency published on the Mises Wire can be found here. 

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