Economic Myths #1 – Rising Prices = Recovering Market

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One of the positive indicators of our so-called economic recovery bandied about not only in the media but also by our monetary lords and masters at the head of central banks is the idea that rising prices (particularly in the housing market) are a sign of economic recovery. This mistaken belief is part of a wider myth that views the economy as a big number, a number which, if going up, means things are good and getting better, and if going down means the situation is bad and getting worse.

Theoretically the market price for any good is never “good” or “bad”. It simply a function of supply and demand for that good. However, if anything, relatively high prices indicate a scarcity of goods relative to the money used to buy them rather than an abundance. This situation may be a localised boon to those who are in the business of selling the scarce good, but for those of us on the other side of the transaction having to pay more hardly suggests a general increase in our prosperity. For if society is getting wealthier and producing more goods we should find that we are be able to buy more with the same amount of money rather than less – hence, prices should decline and not rise.

What is of course meant by the “recovery” of rising prices is precisely a localised recovery and improvement for a select group of people – those who borrowed cheap money heavily during the boom (mostly the politically connected big banks and investment houses) and ploughed it into assets. They can now breathe a sigh of relief as the prices of those assets once again begin to rise with the new round of monetary inflation. The rest of us, on the other hand, have to sit by and watch the purchasing power of our wages drop, unable to continue to afford to buy things because the “recovering” prices put them out of our reach.

A general recovery is not based upon rising asset prices buoyed up by paper money. It is created by a sound monetary order that allows entrepreneurs to allocate resources to where they are most urgently desired by consumers. The result should be a gradual secular price deflation, so that the money in the hand of the lowest earners gradually increases in value, enabling everyone and not just the super rich to grow wealthier and more prosperous.

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Libertarianism, Morality and Religion


A current recurring debate within the libertarian movement is that between so-called “thin” and “thick” libertarianism, the belief that libertarianism concerns only self-ownership and private property (or at least their derivative non-aggression) on the one hand (“thin”) or whether there are certain other moral imperatives or ends that are, at the very least, part of the libertarian spirit and serve to strengthen its message or, at most, are necessary for its cause (“thick”). In providing a contribution to this debate it is important to understand the place of libertarianism within two things; first, within the wider category of moral philosophy; and second, within the place of the personal ethics of individual libertarians.

Libertarianism and Moral Philosophy

Addressing the first question, it will be argued here that any concept of “thick” libertarianism misunderstands the fact that the purpose of libertarianism is not to espouse a positive theory of interpersonal morality; rather it is to preserve the character of individuals as moral agents to ensure that such theories are possible in the first place.

Questions of morality arise because humans face the constant and ceaseless condition of scarcity. Humans must prioritise the ends that they seek to fulfil as they lack sufficient means with which to satisfy all of them together. Moral considerations arise to inform this prioritisation and would be absent if it was not necessary. If every fulfilment could be achieved without the need of choice then morality would serve no purpose as every possible end would instantaneously be gratified. The necessity of choice, however, requires a means for informing that choice, a way to determine the best outcome that can be achieved with the means available. The result of any choice is an action that has a real physical effect upon the condition of the means, the matter which is the object of the action. A part of the universe is changed physically from serving one end to serving another.

We can think of morality as consisting of two parts or categories. The first part is unilateral or intra-personal and arises where you have a single, desiring, choosing and acting human surrounded only by dead and unconscious matter. Any choice that the human makes will result in an action that will have a physical effect upon at least part of this unconscious matter, for example an apple that is eaten or a piece of wood that is used for a fire or to build a house. Morality, in this instance, will inform the acting human how he should best serve his ends with the means available but there is no reciprocal relationship that arises between the human and the matter around him. Possessing no desire, choice, or action of their own and with their entire condition and motion subject solely to the laws of physics and chemistry, these external entities cannot be described as moral agents and are owed no moral obligation, nor do they possess any moral rights. Moral imperatives may serve to create boundaries upon that which you may do with a certain piece of unconscious matter, but this will entail no reciprocal moral burdens and benefits vis-à-vis that matter1. The second part of morality is bilateral or inter-personal and arises between two or many desiring, choosing and acting beings, all of whom may run into conflicts of scarcity as they seek to fulfil their individually valued ends with the means available, including their own bodies. Not only is someone else’s body inhabited by a conscious and end-seeking being, but the dead and unconscious matter around us may now also be claimed by someone else in order to fulfil that person’s ends and not ours. Hence we have moral rights and obligations that spring up between the acting beings in order to avoid or otherwise resolve these conflicts. There are two sub-divisions to this morality. First is the realm of physical enforcement of moral ends – what we might call violent enforcement. One human being may bring about his end by subjecting another to force or violence. The result of this is that one human’s ends are gained at the expense of another’s. This subdivision is the primary preoccupation of political philosophy – which moral norms may be enforced physically and what are the boundaries of that enforcement? The second sub-division is the realm of non-physical or non-violent enforcement of moral ends – those norms that may only be enforced by persuasion, cajoling, association or non-association, and so on. Furthermore, morality is used to serve as a benchmark or a standard of judgment of moral beings. We apply certain moral codes to other people’s behaviour in order to judge whether they have behaved morally or are, indeed, good and moral persons or evil scoundrels. This straddles both of the categories of morality we just outlined – we make judgments of people’s behaviour both in regard to unconscious matter (i.e. what they might do when alone, in their own home etc.) and of their behaviour towards other people. We may then modify our own behaviour in response to what we see in them – either embracing or befriending them if they are morally good or otherwise attempting to enforce our moral code if we believe them to be morally bad.

Libertarianism, thinly conceived, perfectly preserves these categories in order to provide a foundation for wider moral theory. The critical aspect of all moral agency is that an individual moral being retains the freedom to choose and to act upon his choice. Any physical restraint results in that person not being able to bring about his chosen ends, and any action of his that is compelled by force is not one that he has chosen. In other words the individual would cease to remain as a moral being at all. Libertarianism places only the rights to self-ownership and private property over unconscious matter that is previously unowned (or voluntarily transferred) within the realm of violently enforced inter-personal morality. Any person may repel any invasion of his body or property physically in order to preserve his character as a moral agent. Libertarianism’s sole preoccupation with this fact ensures that this bedrock is firmly established so that we can then go on to develop further theories of intrapersonal and interpersonal morality, to make prescriptions about people should behave, and to make judgments about the behaviour that they do make.

Let us consider, as an example, a proposition of interpersonal morality – that a person should give some of his earnings to the poor. A libertarian would state that this moral proposition would not be violently enforceable and the person would have to choose to donate his money. Such a moral proposition only makes sense when you apply the libertarian foundation of self-ownership and private property, preserving the individual’s character as a moral agent. The proposition concerns how the individual should freely choose to behave in relation to others, and having so behaved we can then make judgments about his moral character. If, on the other hand, it is proposed that the person should be forced to donate his earnings to the poor then this proposition ceases to concern the choice of the individual at all. By enforcing the imperative violently the individual ceases to have any input into the action and is treated simply like a piece of dead matter, such as a hammer or plank of wood – an unconscious tool for the furtherance of other people’s ends. However, the subtle intellectual change that has occurred is that the proposition is no longer a proposition of interpersonal morality. It is, rather, a proposition of intrapersonal morality directed at the enforcing agent, such as the tax collector or bureaucrat. It is not in any way instructing the taxed individual how to behave at all; rather it is instructing his enforcer to take money from him and do X, Y or Z with it. We cannot in any way judge the behaviour of the taxed individual as being “moral” or “immoral”; having no participation in the decision we cannot say that he is a better or worse being as a result. The only person we can judge is the enforcer and whether he behaved morally or immorally by taking the money. What we realise therefore is that any theory of interpersonal morality that enforces its decrees by violence is not a theory of interpersonal theory in any way at all. It simply a theory of intrapersonal morality for the rulers, concerning only how those in positions of power should act unilaterally, treating all other human beings as dead, unconscious tools to be exploited for whatever ends the theory sees fit. Such a theory can never be a theory of society; it preserves only the moral agency of the leader or the controller, degrading all other humans to the level of expendable resources.  Indeed, many moral propositions in public and political discourse today are not directed at the individuals in society but are, rather, are directed at government: “Government should do more to help the poor; government should build more houses; government should do more to curb fossil fuel use; government should provide a better education for my children, etc.” Only the rulers are required to make moral decisions and moral choices while the rest of us are reduced to the level of pets, to be worked, fed and watered but otherwise absolved from any responsibility for what we do. Moreover none of this changes simply because the rulers are democratically elected or, from time to time, the previous minority becomes the majority and the previous rulers may switch places with some of the previously ruled. It simply means that the propositions are directed at functional positions (Prime Minister, President, Congressman, etc.) rather than at specific, unchanging individuals.

It should be equally clear that nothing about such theories relying on force and the propositions that derive from them can make a more “moral” or “good” society for we can only judge a person’s behaviour when he is free to act. When he is forced to act or to not act then we can make no moral judgment of his action whatsoever, just as we cannot say whether a tree is behaving morally or immorally when it shakes in the wind. Indeed, as history has demonstrated amply, the more likely result is a moral degradation of the populace – laziness and lack of motivation caused by the bitterness and resentment at being forced to achieve someone else’s ends, and corruption and black marketing when there are any attempts to circumvent them.

It is this crucial recognition that libertarianism, thinly conceived, has to offer, and why it is becoming so attractive as the failure of government and forced rule becomes more obvious each and every day. Thin libertarianism may have nothing to say whatsoever on any positive moral and political theories. Rather, when those theories advocate violent enforcement, libertarianism, in effect, says “Stop!” Slow down, back track, and understand that for any coherent theory of interpersonal morality you need to preserve self-ownership and private property. Given that this recognition is so desperately lacking, any positive ends that are built upon libertarianism as a superstructure through any “thickening” of its concept is likely to distract from its vital core. In the short term this is likely to dilute the distinction between libertarianism and all other political theories (whether they be conservative or progressive) that has made it so successful – possibly leading to the subsuming of libertarianism as a branch of those political traditions. In the long term, there is the danger that any moral superstructure that is built on top of the foundation of non-aggression will come to jettison the crucial foundation itself. This is arguably what happened to classical liberalism, resulting in its transformation into the statist liberalism we know today2. However, our argument here does not simply concern strategy – that which is necessary for preserving libertarianism, or that which may be best in persuading people of the virtues of a free society and attracting them to the libertarian cause. Rather, the recognition of the preservation of individuals’ moral agency before any further positive, interpersonal moral theory is developed is absolutely essential for conceptual clarity and libertarianism’s place as the bedrock of interpersonal moral theory is required intellectually and not just practically.

We might also point out that there appear to be no positive ends and values that flow self-evidently from self-ownership and private property, or from their derivative, the non-aggression principle. Rather, any such ends and values that are advanced by the individual “thick” libertarian tend to concern that individual’s own personal philosophical preoccupations, such individuals including those with very strong libertarian and scholarly credentials3. It is difficult to see how such varying ends and values flow self-evidently from the same principle. More likely the individual “thickest” identifies the state as the roadblock towards the achievement of his own personal, societal ideals and so he advocates freedom. But he then makes the mistaken leap of tying those ideals – that which he wishes to accomplish through freedom – to freedom itself. We do not mean to suggest, of course, that there is no purpose or importance in debating which values and ends are likely to prevail in a free society, or over those which may assist the libertarian cause (as we shall proceed to do below). But such a debate has nothing per se to do with libertarianism’s place in the sphere of moral and political theory.

Libertarianism and Personal Morality

Addressing now the second aspect of libertarianism – that of its place within the moral outlook of the individual libertarian – it is sufficient, for a person in his capacity as a libertarian, to recognise only private property and self-ownership and to not develop any further moral superstructure upon those foundations. But in his capacity as a human being who must take his place in society we have to stress that such a limitation is woefully inadequate. Libertarianism only states that each and every person should be able to act free from physical incursion. It does not go on to say how he should choose to act, which decisions he should make in allocating the scarce means at his disposal. The consistent libertarian who claimed that self-ownership and private property are the only moral considerations would, in fact, never act at all as he would possess no ends to strive for and no values of which he would seek fulfilment. Rather we all as human beings have values, choices that we believe are right and choices that we believe are wrong, and we all seek to make the right choices and criticise those who do not. Libertarians can probably be forgiven for not having, thus far, emphasised their personal moral theories alongside their libertarian credentials. The violence and destruction wrought by the state has given us plenty to concentrate on. Nevertheless, such a development and espousal of a personal moral theory is critical from both a strategic as well as an intellectual point of view. Not only is it possible for someone who abides strictly by the non-aggression principle to be a thoroughly rotten and unpleasant individual, but the greatest danger lies in the fact that libertarians, by refusing to interfere violently in certain peaceful but morally repugnant ends, may be misinterpreted as going further and actively condoning and praising such behaviour. Simply because we collectively, in our capacity as libertarians, have nothing to say about non-violent actions and choices may result in us appearing as the “anything goes” crowd, failing to address the genuine and heartfelt moral concerns of people we hope to persuade of the virtues of a free society. It is often not sufficient for people to hear that loose abstractions such as “the market” or “private charity” will, for example, suffice to take care of the poor, even if we demonstrate their superiority in doing so. Rather, with any moral issue we are presented, we must be prepared to take a personal moral stance. Our only difference is that we would not violently enforce that stance but would, rather, seek to promote it non-violently and to persuade people to make what we think would be the right choice. It is, therefore, perfectly commendable to state, for example, that people should not be forced to give to the poor but that it would be a good thing for them to choose to do so; or to state that no one should violently stop another person from taking drugs but that to do so would be a morally bad choice and that we would not wish to associate with those people; or to state that you can’t stop a person from making racist comments but you would think that such a person is an ignorant and repugnant bigot. Or, of course, you might conclude the opposite if you can persuasively argue your case. What is important is that you engage with the issue and do not stop short at merely analysing an action or end as non-violent and then having nothing more to say. But the views that you espouse will not be made in your capacity as a libertarian – libertarianism only forming the bedrock of your moral outlook – but as a choosing, desiring, valuing and acting human being who takes his place in society. Nevertheless, the more you build your personal moral views upon a libertarian bedrock, the stronger that bedrock becomes by demonstrating conclusively that libertarians as human beings are not morally vacuous but can, indeed, hold a flourishing and well-developed positive moral theory that addresses the moral concerns of everyone else in society. Indeed, summing up what we have concluded in this section, we might say that a “thick” conception of libertarianism would serve to undermine and destroy it both intellectually and practically; whereas libertarians possessing an otherwise “thick” and engaging supra-libertarian moral outlook separate from but compatible with libertarianism, would very much promote it.

Morality and Religion in a Free Society

One of our conclusions above was that even though a debate concerning which values and ends are likely to prevail in a free society has nothing to do with libertarianism’s place in the sphere of moral and political theory, there is still some purpose and merit in venturing to speculate upon whether, in a world that was completely free from government force and compulsion and which was founded upon the institutions of self-ownership and private property, these facts in and of themselves would encourage a general supra-libertarian morality in a particular direction. For example, if left to their own devices, would that very fact cause people be more likely to create a world of inclusion, non-discrimination based upon race, gender, sexual orientation, etc., would it be secular or religious, multi-cultural or strictly divided, and so on? Would it be a world in which drugs and recreational substance use is widespread or is it more likely to encourage restraint and conservatism in such use? Would it be a world of close connections of family and friendship or would there be more “free love” and sexual experimentation? Even though as a matter of pure logic, libertarianism is compatible with any moral theory so long as the ends posited by that theory do not invade the private property of anyone else, it is submitted that, in practice, it is not likely to work out that way and that we can expect at least a certain kind of supra-libertarian moral order to exist by virtue of the fact that a society is founded upon the institution of private property. What follows is the author’s speculation upon what kind of order this will be.

The foundation of this speculation is the observation that wherever human freedom has been unshackled and free enterprise has been allowed to pursue whatever ends it chooses with relatively less molestation, individuals have chosen to engage in processes that increase their material prosperity ahead of simply sitting around day dreaming and enjoying endless leisure time. The capacity for energy and enterprise has increased, the division of labour has widened and the material standard of living has risen. This may partly be implied in the logic of action itself as increased freedom leads to greater or more successful action and is therefore, likely to result in more actions and more improvement. It is also the case that fulfilment of more ethereal needs such as spirituality, rejuvenation, relaxation, meditation, and so on can only come about once material needs have been satisfied so that even if one was to pursue the former the latter would have to be conquered first. Nevertheless, it is an empirical observation and there has never been any strict requirement for individuals to choose to engage in production rather than simply extending their leisure time4. It is therefore reasonable to assume that the creation of a free society would lead to expansion of the division of labour, the accumulation of capital, an increase in production, and of the material standard of living.

What we can note about this fact is that those who, in a free society, accumulate income and wealth and hence possess a greater ability to direct economic resources are those who serve the needs of consumers. At the level of the capitalist-entrepreneurs, therefore, this will require a number of different qualities: the patience and low time preference to accumulate capital; good judgment, foresight and prudence in directing that capital to where it is most needed; empathy and understanding of one’s customers; and the sociability and communicability required to engage and motivate contractors, colleagues, and employees. The capitalist-entrepreneurs in turn will look for employees who are hard-working, educated, reliable, trustworthy and the employees will therefore seek to spend their money on consumers’ goods that will nurture, within them, these qualities. In other words serving the needs of others and the qualities and characteristics required to do so are ends that would be encouraged by the adoption of a free society. Resources therefore will accumulate in the hands of those who display these qualities and would disappear from the hands of those who do not; qualities and characteristics that harm or otherwise interfere with one’s ability to serve others – laziness, high time preference, a lack of empathetic understanding, unreliability, and on so – will be discouraged and are likely to diminish.  While, therefore, it is possible for persons to engage in endless leisure time and spend their entire day indulging in activities such as drinking, drug-taking and having sex, the resources available for them to do so will be limited and they are likely to be excluded from all prospects of increasing those resources as the habits in which they indulge are antithetical to any method of doing so (i.e. serving others) on the free market.

Second, is a free society likely to be non-discriminatory, and inclusive of all genders, races, religious beliefs, sexual orientations, and so on, or will it be highly segregated and exclusive? We can speculate that there will be two outcomes to this question rather than one. First, in the impersonal and arm’s length dealings of the marketplace, it is likely that all factors that are not relevant to one’s ability to serve the needs of others will be excluded from consideration. If I buy a sweater from a shop it is not likely to make any difference to me whether it was made by a man or a woman, by a white or a black, by a gay or a straight, by a pious Christian or a devil-worshipper. I am so far removed from the complex chain of production that any prejudice or preference I might have in this sweater being made by someone of a particular creed or colour is likely to recede drastically. If consumers do not care about a worker’s personal qualities other than his/her ability to serve the consumer’s ends then neither may capitalist-entrepreneurs do so in the chain of production as they are forced to adhere to their customers’ wishes. If I am looking to hire an employee for my enterprise, the costs of excluding the best person for the job based on some discriminatory ground will mean that I fail to keep up with my competition and will lose money faster. It is true that certain industries will serve different types of people and that certain personal qualities are likely to make one more adept at serving the needs of people who are similar to you. Christians may be better at investing in, producing, marketing and serving specific goods that are desired by other Christians; gay men may be the best people to do the same for gay men, and so on. And people of certain genders, races or cultures may be attracted to certain types of employment ahead of others. It might also be true that a person feels more comfortable if the precise person who serves them at the front line is someone of their ilk – the familiarity of a similar person perhaps helping to grease the wheels of commerce if empathy, advice or understanding is needed to assist a person with his purchase. But all of this only produces an outcome that better serves the needs of consumers and is not based on race, gender, or sexual orientation per se. If a pious, heterosexual woman could develop, market and serve products to gay men better than other gay men could then she would receive their custom and gay male vendors would not. Furthermore, in the vast array of production of goods that are common to all or most of us and are not produced for a specific category of person, any kind of discrimination in the chain of production is likely to diminish as we will always go to the people who can provide those goods at the lowest cost. Freedom under the division of labour does not require everyone to like or love everyone else, or for everyone to be liked or loved; it only requires you to serve them and the skills that each person can offer in this regard are likely to trump any other factors when it comes to the question of inclusion or exclusion. Our second possible outcome, however, might be slightly different. In the area of personal or familiar relations – as opposed to the arm’s length and impersonal relations of the marketplace – discrimination and exclusion may become more, rather than less intense. Although it is possible for the inclusion of the marketplace to encourage and foster a blending of different people – after all, if you work in the same factory, shop or office as someone of a different race or culture, there is the possibility or even the likelihood, that you will become friends simply through the opportunity of contact – on the whole, people tend to prefer the comfort of familiarity, similarity and uniformity. Individual residential areas and communities, therefore, might be internally homogenous and will cater only to the needs of the type of person living there, even though those communities will be happy to trade with others of a different type in the marketplace. This is not to imply, of course, that each different community will actively hate any other and can only barely stand to engage in mutual trade. Rather, it is likely to be a cordial, peaceful and even friendly co-existence. All we are suggesting is that when it comes to a matter of highest preference people are likely to opt for those who are similar to them in their personal and family relationships – such a preference not requiring you to hate anyone who is not similar. In any case, this entire speculation may be wrong and perhaps people will choose to mix more in their personal relationships as well as in their professional. The beauty of the market is that as we do not force anyone to adhere to a certain set of principles then we do not know the precise outcome; all we know is that that which results is the outcome that will satisfy everybody as far as possible.

The third consideration is related to the previous two. As there is no welfare state in a free society and nobody will have the right to violently wrestle resources from anyone else in the event of unemployment or need, the cultivation of personal relationships becomes relatively more important as there may come a day when we will need to rely upon those relationships if we are in dire need. We can speculate, therefore, that the institutions of family and friendship will strengthen in a free society. Such institutions will seek to include those who are trustworthy, reliable, sociable and responsible and will exclude those who are deceitful, unreliable, unfriendly and selfish. There is also likely to be less “free love” and sexual promiscuity in favour of longer term relationships and marriage that produce children, the latter being those upon whom you can rely when you reach old age and infirmity. Furthermore, as there will be no state-supported child rearing in a free society, only those who accumulate enough wealth by serving the needs of others will be able to afford to raise children. Although some of the qualities necessary for serving the needs of others that are inherent in the parent may be passed on genetically (so that people lacking those qualities will simply cease to be born in significant numbers), even if they are not then the parents are likely to foster the qualities in their children that made them, the parents, successful. Moreover, given that the parents will one day die and wish to leave their wealth to their children they are likely to require the reassurance that the fruits of their life’s work is being left to decent, responsible hands. They are not likely to be content to leave their wealth to a lazy, ill-educated drug addict.

What we have hypothesised, therefore, is that a free society, in which everyone must possess the ability to serve the needs of consumers in order to attract income and wealth, is likely to result in a cultivation of the qualities necessary for doing so, such a cultivation producing a relatively “conservative” (with a small “c”) society. This society will discriminate less on the bases of gender, race, colour, etc. but rather upon the specifically chosen behaviour of free individuals. Those who behave in accordance with ways that serve the needs of consumer and develop the characteristics necessary for doing so will be included. Those who do not are likely to be excluded. We must emphasise, however, that nothing of what we have said requires an individual libertarian to support or promote these ends. Only if people turn down the path of increasing their material welfare and expanding the division of labour would qualities and values necessary for serving others become prominent and our speculation is based only upon the fact that this is the choice that has been made in the past. It is possible for the individual libertarian to advocate a different choice and for free individuals to make it.

One final interesting question concerns the place of religion and religious worship in a free society. Religion has always fundamentally concerned three questions – why we are here; how we got here; and what we should do now that we are here. The pondering of these questions and the result of a shared belief as to their answers among individuals is, of course, logically compatible with libertarianism so long as its practice is peaceful and voluntary. However, the inability of early thought to separate phenomena from purposeful intent resulted in the fact that these questions have not been addressed with mutual exclusivity. Why we are here has been ascribed to the purposeful desire of one or more deities; how we got here was a result of that deity’s action; and it followed, therefore, that what we should do while we are here was to bow to that deity’s commands. Therefore, given the deep-seated need in the human psyche to fill the void that is left by these problems and the resulting imperatives that may be dispensed, whoever has been able to provide the gateway to these answers has enjoyed an immense amount of power – tell people where they came from and how it was done then you can tell people what they should do. Religion has therefore always attracted to its ranks the greedy and the power hungry and it is no accident that it has, throughout much of history, been aligned with the state – limited not just to established churches, but to the extent that the king or emperor himself was elevated to the rank of a God. Although early Christianity and the Thomist emphasis on the natural law diminished this welding for a time, the Protestant Reformation and the rejection, by John Calvin and Martin Luther, of reasoned ethics served to make religion once more a tool of, rather than a controlling force over, absolute rulers. Furthermore, religious wars and crusades have often been wars of power and control rather than strictly over the question of belief. Much of the history of religion has therefore been distinctly anti-libertarian. These days, of course, the development of scientific knowledge has stepped in to answer the puzzle of how we got here, which has served, for many people, to sever any connection between the cause of the universe and any moral imperatives they may face in their daily lives. However, there are two severe limitations to this. First, a knowledge of the natural sciences itself posits no moral theory and, other than agreeing that the pursuit of truth is a good and valuable thing, scientists can offer no moral guidance. They might be able to tell you what will happen when a man has sexual intercourse with a woman, and they could describe the shock you would get if you were to put your fingers into a power socket; but they will not, as a result of their discipline alone, be able to tell you why you should or should not do these things. Rather than replacing religious imperatives, the secularity encouraged by science has, rather, left an empty vacuum. Indeed, knowledge derived from scientific research has been used for some horrendously evil ends as well as good. Secondly the purpose of science is to trace the effects of phenomena back to their ultimate cause; yet the human mind is not able, in the physical and logical dimension it inhabits, to comprehend the concept of an ultimate cause. Every cause that we discover in turn becomes another effect whose existence and characteristics must be ascribed to some further cause that must be investigated. The concept of God is an attempt to deal with this teleological problem; we ascribe to God abilities and characteristics that defy normal explanation, yet our image of him – as a distinct consciousness, a father-figure, etc. – couches these characteristics in a manner that we can understand. Indeed, one of the frequent objections to the existence of God pronounced by atheists – “why are there so many Gods and which one is the right God?” – is perhaps not as interesting as the question as to why they are all so similar. Nearly always they are paternalistic humanoids, they are responsible for all creation and all life and they are the dispensers – if not always the practitioners – of morality. Rather than there being many different Gods, different cultures and traditions have ascribed broadly similar characteristics, varying only in their own cultural idiosyncrasies, to what is roughly the same being in order to create a giant metaphor for things that we do not and perhaps cannot ever understand. Science, or anything else, has not yet provided a sufficient alternative answer to this problem. Indeed, the existence of God is not viewed by believers as a strictly scientific problem like any other. The tools of science – the laws of physics and the laws of logic – are themselves part of the very phenomenon under investigation – creation – and are subject to God’s will. As tools for explaining their creator they therefore appear hopelessly blunt, if not, completely inadequate. None of this, of course, is meant to condone belief and condemn non-belief, or vice versa. Rather it is an attempt to explain why people hold the beliefs that they do.

Having said all of this, what can we conclude about religion and libertarianism? It is difficult to say whether a free society will encourage or discourage religious practice. What we can be certain of, however, is that it will continue to be a very strong force in the world, probably for a long time. There is clearly a need somewhere in the human psyche, possessed by a great many individuals, to ponder the origins of the universe, not just the how, where and the when but the why. Given our inability to meet these needs we can be sure that a libertarian world will have to find some way to deal with religion. Whether this will be mere accommodation, opposition, or embracing will be dependent upon whether religion in turn neutrally respects, is opposed to, or actively supports libertarian principles. There are one or two arguable reasons for at least an accommodation. First, there are many libertarian imperatives, rules, parables and examples in religious texts. The Ten Commandments and the Sermon on the Mount, for instance, contain some strong libertarian imperatives and the remainder is not avowedly unlibertarian. There is no reason why, in a libertarian world, religions should not emphasise a more libertarian bedrock for their further moral teachings. Secondly, religion would be expected to dissolve its historical marriage to power and the state, a dissolution that may not occur easily. Yet so too will everyone else have to do the same – bureaucrats, politicians, favoured corporations, and so on. Nobody will be able to latch onto and use the mantle of the state to pursue their ends. There is no reason why religious people should find this more difficult than anyone else. Given that a libertarian world is unlikely to appear unless a majority of the citizenry come to believe in the justice of libertarianism, congregations themselves should already have embraced the libertarian mind-set. Finally, we may consider the problem of so-called religious extremism, the sort of extremism that wishes to destroy or violently repress anything contrary to its teachings. Particularly, at this time, we might as well mention the dominant issue of Islamic fundamentalism that fuels terrorism. Whatever political system is adopted and whatever the view of the majority of people with regards to their rights and obligations towards others, there will always be fundamentalists, radicals, extremists, zealots and revolutionaries in just the same way as there will always be murderers, rapists, thieves and fraudsters. Many of these will, from any common standard, be lunatics, nutcases or simply deluded fools. Left to their own devices, as they would be in a libertarian world, these people would simply be a bare minority of loners who are unable to spread their views, with any violent attempt to accomplish their aims simply being classified as criminal behaviour like any other. The only reason that Islamic religious extremists who encourage terrorism and violence gain any traction whatsoever is because the foreign policy of the United States and its allies pours fuel onto the fire of what they are saying. The behaviour of Western governments – bombing civilians, invading sovereign countries, spreading a secular democracy – lends plausibility to religious extremism as both an explanation of and a solution for a very real and unwanted foreign incursion. With State power eliminated in a libertarian world, this problem would not exist and such religious extremism would be without a vehicle for motivation.


Summing up everything we have said, libertarianism, thinly conceived, is necessary to form the foundation of wider moral theory. Libertarianism is, therefore, not “thick”. Libertarians, themselves, however, must, in their capacity as human beings have a “thick” moral outlook, that outlook not being a part of libertarianism per se but built upon its firm foundations of self-ownership and private property and seeking to strengthen those foundations through non-violent enforcement. We can, though, speculate that a certain moral order may unfold in a society based upon self-ownership and private property if free individuals choose to expand their material well-being and widen the division of labour. That order is likely to emphasise roughly “conservative” values and while it is not possible to say whether religion is encouraged or discouraged by such an order we can conclude that it is likely to occupy a prominent place.

1Moral considerations may, of course, arise out of concerns for the welfare of the matter – for example, whether the act of a human being may legitimately cause an animal (a non-actor) pain and suffering. But such considerations only concern whether it is good for the human to be the initiator of the animal’s experience of pain and do not create any reciprocal moral rights in the animal.

2Llewellyn H Rockwell Jr., The Future of Libertarianism,, May 1st 2014.

3Walter Block identifies a number of prominent libertarians who draw either right wing or left wing conclusions from libertarian foundations. See Walter Block, Libertarianism is unique; it belongs neither to the right nor the left: a critique of the views of Long, Holcombe, and Baden on the left, Hoppe, Feser and Paul on the right” Journal of Libertarian Studies; Vol. 22: 127–70.

4Those who hark back to the pre-industrial era seem to assume that this is how blissful and care-free life used to be, overlooking the fact that the need to provide enough food alone necessitated back breaking amounts of work.

Executive Pay

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Within the firing line of public vitriol, particularly since the 2008 financial crisis, is the issue of executive remuneration, the rewards and incentives paid to executives and directors of large corporations in return for their productivity. Specifically, of course, we mean remuneration that is deemed to be excessively high in relation to the resulting output that these rewarded executives create. Needless to say the level of remuneration in the financial services sector – the proximate cause of the seemingly endless depression we are enduring currently – has been singled out for its apparent injustice. Why should executives, motivated by their greed and lust for riches, get to walk off with pots of gold when they are responsible for so much entrepreneurial failure while the rest of us are left to suffer job losses, redundancies and unemployment? Indeed there is even the accusation that executive remuneration is the primary cause of the financial crisis, fuelling the fire of so-called “irrational exuberance”.

There are many typical free-market responses to this sort of criticism – that high levels of remuneration are simply a function of supply and demand; that talented bosses would just go elsewhere if a firm did not offer competitive remuneration, and so on. Indeed, many of the same responses are made to criticisms of egregiously low pay in developing countries and the call is always to leave things alone and let “the market” determine the figures. While this is all true, it is only so in a genuine free market and not in the heavily managed and distorted economy with which we are cursed today. It is only by analysing and understanding the influences on wage rates in the economy as it actually exists that we can propose any solution, should one be needed. To simply dismiss the problem leaves it vulnerable to alternative (and false) explanations that lead to the danger of equally false solutions. Indeed, one of these current incorrect analyses is that there is a natural (rather than a deliberately engineered) tendency for the rich to get richer while the poor get poorer, with all economic development fundamentally being a struggle of rich against poor. As libertarians and “Austrian” economists we must examine the root causes of social phenomena and not assume that everything is alright simply because the proximate social relations appear to be voluntary. Let us, therefore, proceed with this task.

Theoretically, executive remuneration is no different from the remuneration of every other type of employee – all workers, from bosses to bin men, earn their marginal revenue product. Bonus payments, an aspect of executive remuneration that seems to particularly grate in the public mind, can even save a firm money in a given year. A firm might agree to pay an executive a £1m bonus if and only if he achieves £1m or more worth of productivity; if he delivers £0-£999K worth then he gets nothing; if he delivers £2m worth then the firm is paying only £1m for double that amount in net income. In both cases the firm receives a level of productivity without having to make a corresponding pay out. However, this idyllic description is not the situation in the economy where the government distorts price signals, causing the delivery of false income during the boom years only to have it all come crashing down at the bust. The basic problem with executive pay lies in understanding the influence of government credit expansion on the economy, and particularly on the financial services sector.

The starting point of the business cycle, as understood by “Austrians”, is the expansion of credit and the lowering of the rate of interest. Not only does this falsely incentivise all firms to enter longer term investment projects but, crucially, this new money enters through the financial system. It is, therefore, the firms most closely connected to the source of new money – large banking and investment operations – that will experience the largest distortionary gains first. Hence, remuneration in these firms will rise fastest and strongest, in line with the false profits made from all of the doomed loans and investments that they happily make in blissful ignorance. Everything at this point looks fine, executive remuneration for apparently successful operations going without mainstream criticism. Yet, once the taps are turned off and the flow of new money dries up, the bust sets in and it is exactly those same firms that benefitted the most in the boom – those closest to the source of new money and ploughed it into unsustainable assets – that have the most to lose. Indeed it is no exaggeration to say that the entire financial system would have collapsed in 2008 had central banks not intervened to prop up asset prices and hence keep financial firms nominally solvent. Executive pay, therefore, is not a cause but merely a symptom of a deeper, underlying problem that is caused by governments and central banks. Anticipation of higher profits does not appear because executives are paid more; rather, it is the false anticipation of future profits caused by the distortions of credit expansion that leads to rising executive pay.

This is not the end of the matter however. For the very same problem – credit expansion – produces an endemic and seemingly endless price inflation, price inflation we are told is the natural consequence of growing economies. Indeed central banks even maintain price inflation targets (the Bank of England’s being 2%) as a result of the false (or perhaps dishonest) impression that price inflation is required for economic growth. The result of this is that anyone who holds cash for an extended period of time can watch the real value of their wealth diminish. This has several important impacts upon the financial services sector. First, companies opt to switch from equity financing to debt financing as it is cheaper, in real terms, to fuel growth through servicing a loan rather than from revenue reserves. Secondly, the need to hold appreciating assets rather than depreciating cash has meant that the average saver – i.e. someone who wishes to put money away for retirement – now has to invest in stocks or bonds rather than simply save cash. Indeed it was once possible to fund one’s retirement simply by hoarding gold coins, the coins appreciating in real value through a gradual price deflation caused by increased productivity. Now, however, everyone has to entrust their hard earned savings to money managers and speculators who, having taken a fat percentage cut, will probably be barely able to keep up with price inflation anyway. Both of these aspects cause a vast swelling of the demand for financial services and, consequently, an increase in executive pay in that sector.

The latter aspect, however – that of investing in order to fund one’s retirement – also has another important consequence. Executives serve their shareholders and are employed to meet the needs of those shareholders by “executing” the purpose for which the shareholders formed the enterprise. They are the delegates, the servants of the shareholders and their scope of activity and their remuneration for the same is bound by that which the shareholders desire. Taking a part ownership of an enterprise as a shareholder, therefore, is an important and active responsibility, one that requires the focus of one’s attention and is not a mere hobby or pastime. It was once the case that most companies and corporations were privately owned by a handful of active investors rather than publically traded on stock exchanges like they are today. Yet, because of the necessity to invest one’s money to keep a pace with inflation, we are now in the position where the majority of beneficial owners of businesses are passive investors, merely entrusting their money to a fund manager who will spread it across a vast array of businesses – probably following an index of shares such as the Dow or S&P 500. The result of this is that there is no one keeping an active eye on executives, or at the very least the capacity for doing so is greatly diminshed. Indeed, the most popular base index for tracker funds in the UK – the FTSE All-Share Index – is comprised of around one thousandcompanies. No single beneficial owner of the companies in that fund can hope to maintain a keen interest in even a significant minority of those organisations. With executives left alone to run the shop entirely, their ends begin to take precedence over the ends of shareholders. The primary preoccupation of the latter is to grow, sustainably, the capital value of the business, investing assets in productive services that meet the needs of consumers. Executives, however, are mere “caretakers” of those assets who can derive a gain from the enterprise only so long as they are in charge. Not only, therefore, will they have the incentive to increase present income as fast as possible at the expense of long term capital growth, but they will attempt to milk the business as much as possible for all they can get during their tenure – the primary method of doing this being through their remuneration packages. This incentive is always present in any business of course, but the lack of shareholder oversight presents an enhanced opportunity for it to be fulfilled. Indeed, most boards – who, nominally regulate the activities of the executive on behalf of the shareholders – are usually made up of other executives in the same or related industries and will, therefore, largely defer to and be empathetic towards the management rather than the shareholders. This is not to imply that executives are only looting businesses for all they can get. There are, of course, many brilliant and competent managers who richly deserve their rewards for growing, sustainably, complex and important operations that serve the needs of consumers. However where all other outcomes are equal and it comes to a basic choice between maximising long term growth on the one hand and increasing present income on the other we can see quite clearly that executives will plump for the latter. Some attempt has been made to rectify the situation by paying bonuses in shares or options and creating longer-term incentive plans – in other words, turning bosses into part-owners – but it does not remove the fundamental problem which is the lack of keen oversight from the beneficial owners.

What we have learned therefore is that excessive executive remuneration, especially in the swollen financial services sector, is not a cause of financial collapse but merely another unhappy consequence of underlying problems – that of government and central bank interference in the economy through meddling with the rate of interest and expanding the volume of credit. If we want to return to executive pay that accurately reflects the creation of long term growth in sustainable businesses then we need to do away entirely with government interference and establish a genuine free market economy.

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