A review of “The Vision of Léon Walras” (audiobook)

So I recently finished an audiobook about Léon Walras (pronounced “Valras”), a French economist who was alive from the years 1834 to 1910. I knew almost nothing about him before I listened to this audiobook about his work, I am sad to say. So I learned a lot from it, which was good for someone like me to know about. (Although I was basically an economics minor, I didn't hear Mr. Walras's name until well after I had graduated. So if you haven't heard of him, you're not alone – although I had heard some of his ideas before, I had never heard of him personally before I graduated.)

A review of “Frank Knight and the Chicago School” (audiobook)

So I recently finished listening to an audiobook about the American economist Frank Knight, who lived from 1885 to 1972. It was just called “Frank Knight and the Chicago School” – and as its title suggests, it was partly about the Chicago school of economics. It was a good audiobook, which spoke about both the philosophical and economic aspects of Mr. Knight’s work. But it also covered some other economists who were prominent in the Chicago school of economic thought.

A review of “The Austrian Case for the Free Market Process” (audiobook)

So I recently finished listening to an economics audiobook about Ludwig von Mises and Friedrich von Hayek. It was called “The Austrian Case for the Free Market Process.” This audiobook was the sequel to another audiobook called “Early Austrian Economics,” which I first listened to some years ago. One might have titled this audiobook “Later Austrian Economics,” except that applying the term “later” to this will no doubt be outdated before too long, if it isn’t already. Besides, “The Austrian Case for the Free Market Process” is probably a more exciting title, and may do more justice to the nature of the subject matter.

A review of “Monetarism and Supply Side Economics” (audiobook)

I recently finished listening to an audiobook called “Monetarism and Supply Side Economics.” In a way, it was almost like two audiobooks that happened to be combined together. The script for the “Monetarism” part had a different writer than the “Supply Side Economics” part. But these two schools come to similar conclusions about a number of issues, and they were both from the same general period in economic history. Thus, it makes sense to cover them together as they do here.

A review of “Alfred Marshall and Neoclassicism” (audiobook)

So I recently finished an audiobook about Alfred Marshall, a British economist who lived from 1842 to 1924. This audiobook was called “Alfred Marshall and Neoclassicism.” As its title implies, it's also about an economic tradition called “neoclassicism” that Marshall helped to found. I knew almost nothing about him before I listened to this audiobook about his work; although I had heard of the neoclassical school of economics before, and already had respect for it.

A review of “The Classical Economists” (audiobook)

“The statesman, who should attempt to direct private people in what manner they ought to employ their capitals, would not only load himself with a most unnecessary attention, but assume an authority which could safely be trusted, not only to no single person, but to no council or senate whatever, and which would nowhere be so dangerous as in the hands of a man who had folly and presumption enough to fancy himself fit to exercise it.”

– Adam Smith’s “The Wealth of Nations” (1776), Book IV, Chapter II

A review of “Early Austrian Economics” (audiobook)

So I recently finished an audiobook about “Early Austrian Economics,” about the famous Austrian School in the late-nineteenth and early-twentieth centuries. This is a school that has long been admired by conservatives, because they supported the idea that free markets reflect the subjective preferences of individuals (specifically consumers). Thus, they considered free markets to be a positive thing on this account. Their work was highly focused on economic science, but it did have obvious political implications as well, because of the insight that markets meet the demand of society, and satisfy its needs and wants.

A review of “Joseph Schumpeter and Dynamic Economic Change” (audiobook)

I recently finished listening to an audiobook about the Austrian economist Joseph Schumpeter, who lived from 1883 to 1950. He eventually emigrated to the United States, and obtained U. S. citizenship. This was a good audiobook about him, and seemed to offer a good summation of his life's work. But I have somewhat mixed feelings about Joseph Schumpeter's ideas.

A review of “The Wealth of Nations: Adam Smith” (audiobook)

“It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages.”

– Adam Smith’s “The Wealth of Nations” (1776), Book I, Chapter II

So I recently re-listened to an audiobook called “The Wealth of Nations: Adam Smith.” It is a modern discussion of this famous work, which is some five hours long. They do not attempt to give their listeners the entire text of “The Wealth of Nations,” since this would take far longer than five hours to do. But they do give a good summary of this famous work, and give the reader a good introduction to the book that created the new “economic science.”

Setting maximum healthcare prices doesn't really help consumers (price controls never do)

You're applying for a dream job at a particular organization. You “just know” that this occupation is right for you – or, at least, that it will lead you to a great career. But then you are told that the position doesn't actually pay you. You have to work for free if you work there, and you won't get compensated with anything else, either. Are you likely to stick around by working for this organization? If you're particularly altruistic, you might stick around just for the rewarding feeling of “helping people.” But most people would quickly abandon the job, and move to something that actually pays – particularly when they've got kids or other obligations to take care of.

Why do we give patent-holders monopolies on the production of their product?

“[The Congress shall have the power] To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries … ”

– Article 1, Section 8, Paragraph 8 of the United States Constitution

Some say that it is “obscene” or “outrageous” to have life-saving technologies at our fingertips, which are expensive by reason of a patent monopoly. Patents involve monopolies which (admittedly) have some drawbacks to them, at least in the short term. Why, then, does society allow them? I will try to explain in this post.

The minimum wage doesn't really help the poor …

One day, a man named Bob goes to the store to buy some milk for his family. Since the price is only $2.00 per gallon that day, he decides to buy 2 cartons of it for a grand total of $4.00. But when he goes to the store again a week later, he finds that the price has risen to $4.00 per gallon. Consequently, he decides to buy just 1 carton this time around for the same price, and wait until the price goes down to buy more. Some people would cut back more than that, and others would cut back less than that. But the demand for the product is not decided by just one customer's purchases. You have to add up the purchases of all of the consumers in that economy to get an accurate demand number. This is known as an “aggregate” figure, and represents the total demand for a given product in a given place at a given time. When you look at these “aggregate” numbers, we can say that the quantity demanded still goes down as the price goes up. Even if some people are still purchasing the same amount of milk as before, the total demand for that milk still goes down. (Applied to your own pocketbook, that logic will probably make sense, at least for some products.)

Why Hong Kong, Macau, and Taiwan didn't go communist (like mainland China did)

One of the basic facts about China today is that most of it is communist - the part that most of us hear about. Thus, it surprises some people to know that some parts of it are not communist at all; but have free-market capitalist systems like those found in the West. Why is this, you might ask? Why did these parts not go communist, when the rest of China did?

Flag of the People's Republic of China

China has two "Special Administrative Regions," which are Hong Kong and Macau

To answer that, you have to examine a little of the history; which explains why the country has two "Special Administrative Regions" (which are Hong Kong and Macau), and lays claim over still another region which is not communist, which is Taiwan. Why is this, you might ask? Why were these particular regions spared the cataclysmic forces that engulfed the rest of the Chinese-speaking world?

Map of the People's Republic of China

History's horror stories: The “grand experiments” with communism

Americans have rightly been interested in their own country's history for a long time - both for the moving stories it contains, and for the secrets of its success. But we have long been interested in the stories of less successful countries as well, and we have a never-ending fascination with historical horror stories like those found in Nazi Germany. It is well that we pay them attention; because along with a careful study of the secrets of our own success, it is good to have a healthy knowledge of the causes of other countries' failures; and how the terrible events so tragically found in other countries could have been allowed to happen.

Iron Curtain, 1949 - border between the two Germanies

In that spirit, I set out to talk about another of history's "horror stories" - a story not as well-known as that of Nazi Germany, but one of vital importance nonetheless; which may be even more topical in this day, due to the expanding socialism found within our own country today. I speak of the experiences of other countries with the horrors of communism.

In defense of John Locke: The need for private property

"The distinguishing feature of Communism is not the abolition of property generally, but the abolition of bourgeois property. But modern bourgeois private property is the final and most complete expression of the system of producing and appropriating products, that is based on class antagonisms, on the exploitation of the many by the few. In this sense, the theory of the Communists may be summed up in the single sentence: Abolition of private property."

- Karl Marx, in "The Communist Manifesto," Chapter II

Communists believe in "abolition of private property," and Locke debunked this claim ...

Karl Marx once wrote that "the theory of the Communists may be summed up in the single sentence: Abolition of private property." (Source: The Communist Manifesto, Chapter II) Much has been said for and against this theory, some of it interesting and some of it rather dull. But one of the most interesting things - for me, at least - was written by the English philosopher John Locke, over a century and a half before.

Are monopolies really as dangerous as Marx said they were?

"Competition engenders misery, it foments civil war, it 'changes natural zones,' mixes up nationalities, causes trouble in families, corrupts the public conscience, 'subverts the notion of equity, of justice,' of morality, and what is worse, it destroys free, honest trade, and does not even give in exchange synthetic value, fixed, honest price. It disillusions everyone, even economists. It pushes things so far as to destroy its very self."

- Karl Marx, in "The Poverty of Philosophy," Chapter 2, Part 3 (as translated into English at Marxists.org)

Most people today know Karl Marx was an opponent of free markets, and that he gave all kinds of objections to them in his writings. But lesser-known is an objection he gave to free competition: that competition inevitably destroys itself - through monopoly.

Karl Marx

Quote from Marx about competition "destroy[ing] its very self"

In the words of Marx himself:

"Competition engenders misery, it foments civil war, it 'changes natural zones,' mixes up nationalities, causes trouble in families, corrupts the public conscience, 'subverts the notion of equity, of justice,' of morality, and what is worse, it destroys free, honest trade, and does not even give in exchange synthetic value, fixed, honest price. It disillusions everyone, even economists. It pushes things so far as to destroy its very self." (Source: "The Poverty of Philosophy," Chapter 2, Part 3, as translated into English at Marxists.org)

Is it true that competition inevitably destroys itself through monopoly?

The idea that competition needs to be watched - that monopolies need to be guarded against - is held by many today, who are otherwise in favor of free markets. Competition is a good thing, many say; but it needs to be monitored. But ... is it true that competition inevitably destroys itself through monopoly?

Capitol Dome

My own history with this idea

I once believed that this was true, and that there was a needful function for anti-monopoly laws, such as the Sherman Antitrust Law of 1890. This was one of the arguments that fascinated me; because if it was true, then that meant that competition could be dangerous if unfettered, which would undermine my faith in the free market if true. Thus, I had to know whether or not this argument held water; and whether competition was something to be celebrated or feared.

Senator John Sherman, the principal author of the Sherman Antitrust Act

My change of heart in this matter

But I have since come to the conclusion that monopolies are not something to be feared - that there are many forces in place to prevent their rise; and which ensure that if they do appear, that they will not have much power. This might seem to be a strange argument, and I acknowledge that I once saw it as strange myself. But I have come to the conclusion that competition doesn't really destroy itself through monopoly - that free-market forces prevent this from happening, and that Mr. Marx exaggerates their dangers and effects.

Pleas for an open mind in the reader

I will present arguments in this blog post to support this point of view, and challenge Mr. Marx's objection to free-market competition. If this seems counter-intuitive to you, I ask only that you entertain my arguments with an open mind; and refrain from judging them until after you've heard them. So with that in mind, I will now turn to my arguments about free-market competition, and use some quotes from Dr. Thomas Sowell to support them. These will show why competition being destroyed through monopoly is not something that we should worry about.

Thomas Sowell

Why equalizing income conflicts with rewarding good behavior

I posted earlier that one of the most sacred tenets of liberalism is the goal of equality of condition: the idea that there should be no rich or poor, but that all should have the same amount of income and wealth, and that no one should possess any more than any other.

Bill Gates

Liberals are blind to arguments based on wealth being earned ...

In this previous post, I offered several arguments against equality of condition; but refrained from using the critical argument based on rewards. This is because too many liberals have prejudice against it to lead off with it, in a post about this subject. In liberals' minds, rewarding anyone for being productive is tasteless and vulgar; because it would mean that they would have more money than someone else. It's "vulgar" to reward Bill Gates for providing me with a nice computer, because it would mean that he would become even richer than he is now, and would thus have more money than the lazy bum on the street who refuses to work. Arguments based on people's earning the money fall on deaf ears, because liberals believe no one earns money without exploiting others, and they are thus blind to arguments based on wealth being earned.

Should we treat criminals differently?

Yet even they can see the flaws in their argument when it is applied to criminal punishment. They are perfectly okay with discriminating against criminals, for example, when they commit a violent crime like murder. The equality-of-condition argument, when taken to this extreme, would say that the criminal cannot be put in prison; because then we would be treating him worse than someone else. His treatment would be unequal to the freedom that we respect in the law-abiding members of society. Yet even liberals abandon this argument here, because even they can see clearly that the law-abiding citizens have done nothing to merit losing their freedom, while the criminal has. Equality of condition is cast aside in favor of a theory of justice based on rewards, and good citizenship is made a requirement for the otherwise-inalienable right to freedom.

Microsoft Windows

Why equalizing income is a bad goal

One of the most sacred tenets of liberalism is the goal of equality of condition: the idea that there should be no rich or poor, but that all should have the same amount of income and wealth, and that no one should possess any more than any other.

There are both practical and philosophical problems with this ...

There are several problems with this goal, and the problems include both the practical and the philosophical. I will address one example of each kind of problem, to show that this is a goal that is not only impossible to attain, but whose pursuit actually harms society; ultimately backfiring on its advocates, and making society worse off. (In doing so, I should make clear that I do not oppose equality of opportunity, as I am a fiery advocate of this kind of equality. It is equality of condition that I oppose, and it is equality of condition that I will argue against now.)

Does communism cause poverty? (The two experiments that prove it does)

Karl Marx, the chief founder of communism

Does communism cause poverty? And how can this be tested?

Karl Marx

What counts as "testing"?

The short answer is "yes": it does cause poverty. But as far as testing goes, it depends on how you define "test." When hearing the word "experiment," most people have the mental image of a laboratory; but I should acknowledge in advance that experiments are hard to do in economics and politics. Even the possible ones usually require major government actions which may be unpopular, and people generally don't like to be guinea pigs. This is true of any experiment about whether communism has negative effects on prosperity.

Karl Marx

The experiments that no one wanted ...

So is there such an experiment? It turns out that there are two on a large scale, but not ones initiated by any government or university. They are natural experiments, or ones in which "the experimental and control conditions are determined by nature, or by other factors outside the control of the investigators." (source citation) While they were set in motion by human beings rather than nature, their purpose was not experimental at all; but the result of complicated political negotiations following a major war. Both sides in these negotiations - who had been allies during this war - would have preferred that their own system of government be established in the territories of their former enemies; but neither had the military power to do so for all those territories. The result was a compromise, which began two of the most epic natural experiments in the history of economics - two experiments neither side wanted, but which both sides got; and which clearly show a causal relationship between communism and poverty.

Yalta Conference, 1945

Potsdam Conference, 1945

Why Adam Smith is still relevant today

" ... every individual necessarily labours to render the annual revenue of the society as great as he can. He generally, indeed, neither intends to promote the public interest, nor knows how much he is promoting it. By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain; and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest, he frequently promotes that of the society more effectually than when he really intends to promote it."

- Adam Smith's "The Wealth of Nations," Book IV, Chapter II

People still talk about Adam Smith's "The Wealth of Nations" to this day

People still talk to this day about an economics book that was published in 1776. And though the year I'm talking about is rightfully associated with America, this book was actually published by someone in the mother country that we were then at war with. Adam Smith (the author of this book) was a Scotsman, which meant that he was also British.

John Trumbull's Declaration of Independence

Historical note: Adam Smith sympathized with the American Revolution

But his views about the American Revolution were actually fairly sympathetic to the Patriot side. He favored giving the American colonies either representation in Parliament, or independence from the mother country. (For evidence of this, see this blog post.) Because I discussed this subject at length in my other blog post referenced above, I will not go into it further here. Instead, I will now launch into my discussion of his political and economic ideas, and how they apply to our world today.

Adam Smith