Liberty Fund

Adam Smith, Scientist and Evolutionist: Part 3

An Alternative Model of Human Sociality by Vernon L. Smith

What Use is an “Inalienable” Right?

If the right to liberty is alienable, whether despotic rule is just or unjust depends on the actual set of agreements between the people and their ruler.

John Gray Separates the Atheist Wheat from the Chaff

Who better than an atheist philosopher to point out the flaws in the arguments of those who insist on a Godless cosmos?

Fiat Money and the Promise of Cryptocurrency

Since the creation of Federal Reserve, the value of the dollar has fallen by more than 90 percent, and that is not a surprise.

Venezuela Is Real Socialism or Real Fascism, by Pierre Lemieux

“It’s corruption, not socialism, that brought down Venezuela,” claims an article in PSMAG (March 14, 2019, by Thor Benson). More worrisome is that some economists—but probably just a small number of them—seem to agree, or have been tricked to agree, ignoring a structural component of economics.

It is not false but misleading to write:

Corruption, not socialism, is the malignant tumor on democracy worldwide—in Venezuela, yes, but also here at home.

The author forgets that corruption is a matter of degree and of individual incentives, and ignores what comes first. The more collectivist—socialist or fascist—is a society or, more precisely, the government that rules over it, the more incentives individuals will have to engage in proactive or defensive corruption. The common denominator of socialism and fascism is that they are founded on the supremacy of collective choices over individual choices and thus favor state power. They ignore the individual incentives of a large part of the citizenry. (The courtiers’, soldiers’, and policemen’s individual incentives are not ignored, though.)

Chief Justice Marshall’s Textualist Originalism

While some scholars argue otherwise, the evidence suggests that Chief Justice Marshall was a type of originalist.

Observations upon Liberal Education, in All its Branches (George Turnbull)

Turnbull was the first member of the Scottish Enlightenment to provide a formal treatise on the theory and practice of education. He applied his ideas on the moral sense to the education of youth. Turnbull showed how a liberal education enables youth to realize a true “inward liberty” and moral strength and thus prepares them to live responsibly and happily in a free society.

Why is the public debt situation in Italy worse than in Japan?, by Scott Sumner

Japan’s public debt is much higher than in Italy, as a share of GDP (roughly 240% vs. 130%, though sources differ). The difference in net debt is not nearly as large, but still significant. And yet Italy must pay a substantial risk premium on its public debt (third largest in the world), whereas Japan (with the second largest public debt) pays roughly zero interest rates on borrowed funds.

In previous posts I’ve discussed one difference; Japan borrows in its own currency whereas Italy borrows in euros.  Thus buyers of Italian debt face a positive default risk, whereas buyers of Japanese debt face a near-zero default risk.

But this doesn’t fully explain the difference.  While the ability to print money allows a country to avoid outright default, the side effect is often inflation.  If investors feared that the authorities would be forced to pay its bills by printing money, then inflation expectations would rise and this would increase nominal interest rates on long-term bonds (via the Fisher effect.)

The Right’s Need for Alternative Institutions

Institutions matter because without them, no cultural change is possible.

The Dissident Ambassador, by Bryan Caplan

In a new paper, Greg Mankiw shares some thoughtful reflections on teaching and heterodoxy:

I have always thought that instructors, especially in introductory courses, are like ambassadors for the economics profession. The role of ambassadors is not to represent their own views but to act as agents for their principal. Just as ambassadors are supposed to faithfully represent the perspective of their nations, the instructor in an introductory course (and intermediate courses as well) should faithfully represent the views shared by the majority of professional economists.

[…]

This perspective of instructor as ambassador raises the question of what instructors should do if they hold views far from the mainstream of the economics profession. If you are an Austrian or Marxist economist, for example, what should you do if asked to teach an introductory course? In my view, there are only two responsible courses of action. One is to sublimate your own views and spend most of the course teaching what the mainstream believes, even if you disagree with it. Because many introductory students will take only one or two courses in economics throughout their educations, it would be pedagogical malpractice, in my judgment, to focus on an idiosyncratic minority viewpoint. The other responsible course of action is to avoid teaching introductory (and even intermediate) courses entirely. In a more advanced elective, there is nothing wrong with teaching an idiosyncratic minority viewpoint, as long as students know what they are getting.

Bastiat on the many freedoms that make up liberty (1848)

Sir James Steuart on the Origins of Commercial Nations

JOSÉ M. MENUDO JOURNAL OF THE HISTORY OF ECONOMIC THOUGHT, Volume 40, Issue 4 Abstract: This paper examines James Steuart’s explanation of the emergence of commercial nations. Unlike other Scottish thinkers of the time, Steuart argues that artifice is necessary for the rise of commercial societies. He uses the term “artificial” to refer to a […]

The Theory of Moral Sentiments: Part III, Chapter III

Of the Influence and Authority of Conscience

The Privileges or Immunities Clause and Unenumerated Rights

The majority in Slaughterhouse correctly rejected the idea that the Privileges or Immunities Clause protects unenumerated absolute rights.

Schiller’s Works Illustrated by Great German Artists, Vol. 1 (Johann Georg Fischer)

Schiller’s Works, illustrated by the greatest German artists, ed. J.G. Fischer with Biographical Introduction by Hjalmar H. Boysen (Philadelphia: George Barrie, 1883). Vol. 1.

Adam Smith on the natural ordering Tendency of Free Markets, or what he called the "Invisible Hand" (1776)

The Destructive Legacy of McCullogh v. Maryland

John Marshall’s famous opinion invited congressional overreach and cut too deeply into the powers of the states.

Lysander Spooner, "Natural Law; or the Science of Justice" (1882) (Lysander Spooner)

The Best of the OLL No. 71: Lysander Spooner, “Natural Law; or the Science of Justice” (1882) (Indianapolis: Liberty Fund, 2016).

Molinari on the elites who benefited from the State of War (1899)

Tax Justice

Emmanuel Saez and Gabriel Zucman have promised us a book on “Tax Justice.” That’s great. Perhaps it will help us understand the op-ed1 they recently published in the New York Times.

It is not strange to see these two economists arguing for confiscatory marginal tax rates. Given their scholarly and popular writings on taxes and inequality, the surprise would be if they had written something different. What’s strange is what they don’t say. They make claims about all manner of things. Let’s consider those claims.

Consider, for example, the nostalgia they seem to feel for the period between 1951 and 1963, when marginal tax rates exceeded 90 percent. In an important recent paper,2 Pikkety, Saez and Zucman dig into the data and show that average tax rates on the top 1% of income earners haven’t changed much since the 1950s. Historically, at least, imposing high marginal rates on the rich hasn’t meant that the rich pay more in taxes. Why, then, consider raising rates? Well, they tell us, “[T]hat few people faced the 90 percent top tax rates was not a bug; it was the feature that caused sky-high incomes to largely disappear.”

Marshall Takes on the Virginia Anti-Federalists

Those who rejected the very premises of the 1787 Constitution, as John Marshall understood them, had to be faced down.

The Genius of the Common Law (Sir Frederick Pollock)

The Genius of the Common Law (New York: Columbia University Press, 1912).

Amy Tuteur on Birth, Natural Parenting, and Push Back

Obstetrician gynecologist Amy Tuteur and author of Push Back, talks about the book with EconTalk host Russ Roberts. Tuteur argues that natural parenting–the encouragement to women to give birth without epidurals or caesarians and to breastfeed–is bad for women’s health and has little or no benefit for their children.

Henderson on Unintended Consequences of Grounding the Boeing 737 Max, by David Henderson

The two recent crashes of Boeing 737 Max airplanes with the deaths of all aboard were tragic. It’s understandable that government agencies around the world, with the U.S. Federal Aviation Agency being the last, have grounded all 737 Max airplanes until they know more.

Those government actions could actually cause more fatalities than they prevent.

The reason is the law of unintended consequences. Any action you take may, in the best circumstances, achieve what you intend. But people’s actions often cause unintended consequences that offset the good effects of the actions. Examples of unintended consequences, especially consequences of partially thought out government policies, are many. In this article, though, I’ll note two, on airline safety and car safety.

Decentralization and the Common Good: A Conversation with Andy Smarick

Andy Smarick discusses Hayek, subsidiarity, and the principles of authentic decentralization.

The Ethics of Confucius (Confucius)

The Ethics of Confucius. The Sayings of the Master and his Disciples upon the Conduct of “The Superior Man”, arranged according to the plan of Confucius with running commentary by Miles Menander Dawson, with a foreword by Wu Ting Fang (New York: G.P. Putnam’s Sons, 1915).

Jeremy Corbyn: A Dreary Ideologue in Full

In normal circumstances, no one would dream of writing a biography of so dreary a man as Jeremy Corbyn. The dreary, alas, are inheriting the earth.

Insurance

Insurance plays a central role in the functioning of modern economies. Life insurance offers protection against the economic impact of an untimely death; health insurance covers the sometimes extraordinary costs of medical care; and bank deposits are insured by the federal government (see financial regulation). In each case, the insured pays a small premium in order to receive benefits should an unlikely but high-cost event occur.

Insurance issues, traditionally a stodgy domain, have become subjects for intense debate and concern in recent years. How to provide health insurance for the significant portion of Americans not now covered is a central political issue. Some states, attempting to hold back the tide of higher costs, have placed severe limits on auto insurance rates and have even sought refunds from insurers. And ways to cover losses from terrorism have become a major issue. Temporarily, in response to the massive losses of 9/11, the federal government adopted a heavily subsidized three-year program for reinsuring terror-related building losses. (The program was extended.) In theory, the government can recoup some losses after the fact by levying a surcharge on the premiums of surviving firms.

Aurelian Craiutu, “How to Combat Fanaticism and the Spirit of Party: Germaine de Staël’s Lesson"

The year 2017 marked the bicentenary of Germaine de Staël's death (1766-1817). Although her name almost never appears in textbooks or histories of political thought in the English-speaking world her political thought is undeniably rich and brilliant. The recent revival of interest in French political thought, as manifested by the publication of many works by and about Constant, Tocqueville, or Guizot, has not extended to Madame de Staël. Therefore, it is high time for her to finally receive the place that she deserves in the history of political thought. This would be an overdue act of justice for a woman who defied many conventions of her time and made a name for herself in a highly competitive and male-dominated world. But there is a second reason why the rediscovery of Madame de Staël's political thought and the publication of her political works should be a priority today. Having lived in revolutionary times, she had a unique opportunity to witness firsthand the importance of ideas and the power of passions in society and political life. In this month's Liberty Matters discussion Aurelian Craiutu, professor of political science at Indiana University, will present arguments why she should no longer remain a neglected political thinker. He is joined in the dicussion by Benjamin Hoffmann, assistant professor of early modern French Studies at The Ohio State University; Catriona Seth, the Marshal Foch Professor of French Literature at the University of Oxford; and Steven Vincent, professor of history at North Carolina State University.

See the Archive of "Liberty Matters".

James Gillray on War and Taxes during the War against Napoleon

In this essay we wish to examine 5 prints drawn by James Gillray in the 1790s and 1800s which explore the theme of the suffering of the British people (“John Bull”) under the heavy taxation and national debt which the British government imposed on them while fighting the war against Napoleon.

The Inescapably Political World of Banking and Finance

Both banks and governments often make big mistakes at forecasting the economic and financial future.

Yves Guyot warns that a new ruling class of managers and officials will emerge in the supposedly "classless" socialist society of the future (1908)