I, Pencil

Here is the original version of I, Pencil by Leonard E. Read.

Milton Friedman also discussed the complexity and spontaneous order brought about by a free economy through something as simple as a pencil.

Privately Run Cities

Honduras is paving the way for three privately run cities. They will each supposedly have their own police, laws, government and tax systems. It is being done in an effort to promote wealth creation in the area through trade, something like the things that have been done in Dubai.  I am a bit skeptical of this actually happening but it will interesting to see even if only one is accomplished. The question, though, is wouldn't warlords take over?

*Update*
Honduran Model-Cities: A Historical Perspective

An Entrepreneur in the LEGO Story

I recently came across this touching animated story about the creation of the company LEGO. It is both heartwarming and inspirational. Private property rights may be the foundation of capitalism but entrepreneurialism is at its heart. Entrepreneurs are what what make our lives better one idea at a time.

About Locke Smith

(The following is a discussion post from a past assignment for a 300 level government class)

John Locke understood all property as originally being held in common from God, and based the idea of just property acquisition on the process of mixing one’s own labor with a previously common and abundant resource. Through adding labor to a resource it becomes legitimately owned private property. For example, a person would be able to make property claim on a parcel of land if he is able to make use of it through farming, or he could also use the previously common trees and carve out canoes for use or sale. Someone, however, cannot legitimately make a claim to a huge geographic region of uninhibited land—he (or she) can pretend to—but does not possess the actual property right because they would not be able to make use of the vast space; it would be an empty declaration. The act of original appropriation is referred to as the homesteading principle. Locke argued that a field that is tended by human labor to harvest food is worth more than a field left untouched because the productivity of the land has been improved, adding value to the overall material standard of living of those who work or purchase food that would otherwise be more scarce in a state of nature. Through this process money had organically emerged by mutual consent as a means of exchanging perishable goods for non-perishable goods; it also allowed for the more efficient transactions between all goods, which in turn created an environment for humans to think and plan more for the long-term. In a way it is following Genesis 1:28 in subduing the earth by the ability to far more easily invest in long-term capital projects that otherwise would not be possible, or, at the minimum, would prove very difficult to accomplish on such a complex, large scale.

I find the Lockean concept of private property and its acquisition potential to be of critical importance for a peaceful, civilized, and free society. Two particular principles discussed by me earlier that I am familiar with have been developed from Lockean thought: the principles of self-ownership and non-aggression. In other words, "every man has a Property in his own Person” (Strauss, 1997, p.486) and by mixing previously common property with labor it becomes legitimate private property by the individual doing the “mixing.” When any outsider acts with unjust use force (aggresses) or makes a threat against that person or their property, it is to be considered an act of war (Strauss, 1997, 479).  From this reasoning it can be deduced that in nature individuals have God-given rights of life, liberty, and property. These general principles are compatible with Scripture and necessary for voluntary peaceful human civilization.

The rejection of private property rights implies that some greater authority other than one’s self is at play. Many would say that everything is Gods property, which is true, but the rejection of private property rights for individuals on earth logically implies that someone or some group of fellow humans must have rights over other persons and their justly acquired property. I was reminded of an article about a secret agreement that revolutionized China: the secret agreement was to illegally subdivide the previously collectivized property of the village of Xiaogang into family units, and the families would be able to keep any surplus they created rather than be forced to share it. The result of this seriously life threatening agreement was an increased harvest “more than the previous five years combined” (Kestenbaum & Goldstein, 2012). The rejection for private property can naturally include people, too, if it is for the “general will” or “common good.” In the same article, a farmer asked the communist party officials if he even owned the teeth in his mouth. The party replied “No. Your teeth belong to the collective” (Kestenbaum & Goldstein, 2012). This is only one example of the disastrous effects of the rejection of property rights for modern human civilization. Today there is both theoretical and empirical evidence supporting property rights. The latter is found throughout human history but especially in the 20^th century like the example above. The former is supported from many valuable angles too, but the most devastating is the problem of rational economic calculation under a socialist commonwealth, otherwise known as the economic calculation problem (ECP) (Horwitz, 1998, p.430). 

Adam Smith did essentially advance an argument that is similar to the Lockean perspective but he focuses more on moral and economic thought. He seemed to view man as social with natural sentiments that are both self-interested and compassionate for those being oppressed and treated unjustly (Strauss, 1997, p.644). In general contrast to Hobbes and Rousseau, Locke and Smith saw that man in general has both self-interested and sympathetic passions. Both saw a form of limited government with individual freedoms as being most conducive to a peaceful, prosperous civil society. Hobbes and Rousseau, on the other hand, favored certain governments that may appear differently and have opposing foundations from each other, but both placed no limitations of the “absolute sovereign” or the “general will” over the individual.

Like most classical economists, Smith generally held to a labor theory of value. It shouldn’t be denied that labor does indeed play the primary role in the just acquisition of property. The implications of this theory for early laissez-faire economic analysis are fairly negligible, but when alternative systems of economic organization are planned on the basis of this theory, such as Marxism, there are significant problems. Labor cannot be considered as the lowest common denominator from which to rationally calculate and allocate scarce resources in a complex economy with the division of labor (Mises, 1981, p. 101); this is the foundation of the economic calculation problem. Without relative money prices derived from the aggregate decisions of consumers and suppliers in a market economy based on private ownership of the means of production, it is impossible for rational economic calculation; prices are packed with and relay crucial information to everyone about the relative scarcity and demand. Trying to find the relative ratios in labor from a doctor to a janitor and the millions of other occupations is impossible even with a super computer because it cannot account for value that is subjective.

Smith also recognized and put extra emphasis on the relationship between intention and consequences, specifically the convergences and divergences between good intentions and socially desirable outcomes. Paradoxically, when people pursue their self-interest under generally accepted norms of behavior with institutions that legitimately enforce and punish those who resort to the use of force or fraud, they grow wealthier as a whole. “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest” (Smith, 1776, p19). Private ownership of the means of production under the social structure of division of labor was to him, and many today, “the system of natural liberty.”

References:

Cahn, S. M.  (2002). Classics of moral and political philosophy.  New York: Oxford University Press.  ISBN: 0-19-514091-5. 

Horwitz, S. (1998). Monetary Calculation and Mises's Critique of Planning. History Of Political Economy, 30(3), 427-450.

Kestenbaum, D. & Goldstein, J. (2012, January). The Secret Document That Transformed China. Retrieved on June 20, 2012, fromhttp://www.npr.org/blogs/money/2012/01/20/145360447/the-secret-document-that-transformed-china

Locke, J. (1764). Two Treatises of Government, ed. Thomas Hollis (London: A. Millar et al., 1764). Accessed from http://oll.libertyfund.org/title/222 on 2012-06-04

Mises, Ludwig von. (1981) Socialism: An Economic and Sociological Analysis. J. Kahane, trans. 1981. Library of Economics and Liberty. Retrieved June 21, 2012 from the World Wide Web: http://www.econlib.org/library/Mises/msS.htm

Smith, Adam. An Inquiry into the Nature and Causes of the Wealth of Nations. Edwin Cannan, ed. 1904. Library of Economics and Liberty. Retrieved June 20, 2012 from the World Wide Web: http://www.econlib.org/library/Smith/smWN.html

Strauss, L., & Cropsey J. (Eds.).  (1997). History of political philosophy (3rd Ed.).  Chicago: University of Chicago Press. ISBN: 0-226-77710-3.

Unofficial eponymous Laws and phrases of Political Economy

Horwitz’s First Law of Political Economy:

“No one hates capitalism more than capitalists.”

Horwitz's favorite phrase of Political Economy:

"It's a feature, not a bug."

Explanation: "Libertarians... argue that corporate influence over the State is not a “bug” in the political process that can be fixed by better people or restrictions, but rather a feature of that process, in the sense that one of the purposes of the State is to serve the interests of those with the most to spend and the most to gain from intervention."

Woods's Law #1:

"Whenever the private sector introduces an innovation that makes the poor better off than they would have been without it, or that offers benefits or terms that no one else is prepared to offer them, someone—in the name of helping the poor—will call for curbing or abolishing it."

Woods' Law #2:

"The 'progressive' Left always prefers a neoconservative to an antiwar libertarian."

Rothbard's law:

"People tend to specialize in what they are worst at. Henry George, for example, is great on everything but land, so therefore he writes about land 90% of the time. Friedman is great except on money, so he concentrates on money. Mises, however, and Kirzner too, always did what they were best at."

Hayek's Law: (as coined by Mark Skousen)

"Hayek's Law states that the economy takes a long time to recover after an unsustainable boom (1995-99). The excesses of the previous boom create an investment structure that cannot be easily dismantled and transferred to new uses." (also see more insight from Rothbard's wisdom)

Laws by Unknown people

Scott's law:

"Individuals generally attack most vehemently the ideas they themselves once held."

Foxxcon: Another Look

I have not been following this story too closely but I am aware that Public radio's This American Life episode about abuses at the Foxconn factories that make Apple products has been retracted on the grounds of the "significant fabrications" it apparently contained.


The problem is a lack of context.

A couple of things that I found interesting about the this story is that "the number of deaths and suicides that have been reported in Foxconn’s factories indicate rates that may be lower than at other places in China—and in the U.S." The salaries are also substantially higher on average for workers at Foxconn than other opportunities in China.

On the 30th of January, thousands of hopefuls stood for hours outside a labor agency located in the Chinese city of Zhengzhou, the largest city of Henan province in north-central China.

In addition, Tim Culpan, who's covered Foxconn factories extensively, writes 

"The biggest gripe, which surprised us somewhat, is that they don’t get enough overtime. They wanted to work more, to get more money." (emphasis mine)

"There are also things happening at Foxconn that just aren’t sexy to talk about: the cheap accommodation and subsidized food for workers, the Foxconn-run health centers right on campus, the salary that’s well above the government minimum and other companies, the continuous stream of young workers who still want to work there.

In reality, Foxconn is actually raising the bar for working conditions and worker salaries in China. Almost all the people in China were far worse off prior to China opening up free trade. Since these companies opened up factories, it has since helped raised the living standards for the workers significantly. Improving a regions average standard of living doesn't happen overnight. While they have lower living standards relative to our own in the US, their absolute level has risen dramatically over the years. 

(H/T Matt Yglesias)

Additional reading on foreign factories or "sweatshops":

Sweatshops and Third World Living Standards"Are the Jobs Worth the Sweat? by Powell & Skarbek
The Ethical and Economic Case Against Sweatshop Labor:A Critical Assessment by Powell
Structural Exploitation by Matt Zwolinski


Answering the Left-Libertarian Critique of Sweatshops
Sweatshops, Exploitation, and Neglect
Shouldn’t Sweatshops Do More?

Venting after the Iowa Caucus Results

So conservatives pick Romney and Santorum? I just cannot get over the fact that there was a Tea Party movement that wanted reduced government and these guys win in Iowa?


Santorum:
In his last Congress (2005-2006), he had one of the biggest spending agendas of any Republican -- sponsoring more spending increases than Republicans Lisa Murkowski, Lincoln Chafee and Thad Cochran or Democrats Herb Kohl, Evan Bayh and Ron Wyden.

Writes David Boaz at the Cato @ Liberty blog:

[Santorum] declared himself against individualism, against libertarianism, against “this whole idea of personal autonomy, . . . this idea that people should be left alone.” And in this 2005 TV interview, you can hear these classic hits: “This is the mantra of the left: I have a right to do what I want to do” and “We have a whole culture that is focused on immediate gratification and the pursuit of happiness . . . and it is harming America.”

“One of the criticisms I make is to what I refer to as more of a Libertarianish right,” Santorum said. “They have this idea that people should be left alone, be able to do whatever they want to do, government should keep our taxes down and keep our regulations low, that we shouldn’t get involved in the bedroom, we shouldn’t get involved in cultural issues. That is not how traditional conservatives view the world.”





He concluded, “there is no such society that I am aware of, where we’ve had radical individualism and that it succeeds as a culture.”


 Romney:

I would like to make this longer but I am disgusted and dont want to waste any more time on this today. These guys are for big government and militarism/world policing. Those who claim to be "conservatives," yet support neocons are right-wing progressives (and hypocrites).