Building a Libertarian World

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A difficult and perhaps insufficiently understood question concerning libertarianism is how libertarianism will be brought about in the world as we know it and, moreover, precisely what a libertarian world will look like. How can libertarians expect their theoretical understanding of their philosophy to emerge from this present world of seemingly perennial statism and how will the world be shaped once this libertarian world is accomplished? This essay will bring together a number of thoughts of this topic that have been addressed in previous essays, namely the relationship between libertarianism and wider morality, the nature and origin of law and concepts such as rights, obligations and property, and the importance of decentralisation and the relative size of state institutions, in order to try and create a unified picture of how libertarianism in theory can (or will) become libertarianism in practice.

Let us begin our examination, then, with an outline of libertarian theory and the place of libertarianism amongst wider political and moral theory. Libertarianism as a theory is concerned solely with the legitimacy of the initiation of physical force between rationally acting beings and either themselves or other physical matter of which the world is made (i.e. “resources”). Rationally acting beings are those beings who strive to attain their deliberately chosen ends through the utilisation of means, means that are scarce and can only be devoted to one individual’s end at the expense of everyone else’s. Libertarianism asks the question who may act physically in relation to a given piece of matter and who may not. It answers this question by stating that every rationally acting individual owns the physical matter that comprises his body (“self-ownership”) and all external, physical matter either of which he is the first user or of which he has received in trade voluntarily from a previous, legitimate owner (“property”). A violation of these principles – i.e. the uninvited, physical use of an individual’s person or property by another individual – is deemed to be an aggression, an unjust invasion of that which belongs to somebody else (for example, murder, assault and theft). Thus, from these core beliefs we derive the non-aggression principle to encapsulate the basic libertarian approach to all interpersonal conflicts born out of scarcity.

Therefore, libertarianism itself – to use the accepted parlance amongst libertarian scholars – is a “thin” rather than “thick” philosophy, addressing only the legitimate use of physical force. Another way of putting this is that, because everyone’s ends must be accomplished through physical actions which impact, physically, other matter in the real world, libertarianism concerns which persons may act and seek to fulfil their ends in relation to a given piece of matter, and which persons may not. Libertarianism does not, on the other hand, concern the contents of an individual’s ends or goals nor, once it is understood that an individual may act, does it have anything to do with whether or how he should act or which precise choices he should make. Libertarianism addresses neither the wisdom nor the foolishness, and neither the benefits nor the burdens that a given action may bring – merely that the choice to act in a certain way is the individual’s to make and further considerations about whether he should so act is the province of wider morality. A further way of putting this is that libertarianism deals with that which is legally permissible and may be done without response from the force of the law; it does not deal with that which is morally permissible i.e. with which behaviour is either morally accepted or morally questionable – all of which, in contrast to illegal behaviour, cannot be restrained or prevented by physical force, however odious or unpleasant. For example, I have the legal right to refuse to hold open the door for a lady; a SWAT team will not break burst in and arrest me for having refused to act in accordance with this social more. However, from a moral point of view, I have probably behaved quite rudely and in a socially unacceptable manner, meaning that such a choice was, most likely, not a good one to make. However, the choice is still mine to make and no one would have the legal right to use physical force to ensure that I hold the door open. In short libertarianism is about what I may choose to do whereas wider morality concerns what I should choose to do.

Overlooking or disregarding this important point is likely to cause a great deal of confusion. It is the mainstream view today that law and wider morality are not separate endeavours and that the law exists to enforce a positive, moral code. On the one hand the law is used to prevent us from making choices which are morally bad – past and present laws against vices such as drug and alcohol use and against various sexual preferences or adultery are a testament to that. On the other hand the law is also used to force us to act in ways which are morally good – such as the supposed charitableness, selflessness and altruism that is allegedly accomplished by the whole apparatus of the welfare state, which is funded, of course, through legally enforced tax contributions. Morally bad acts are outlawed because they are seen as bad choices to make from which bad consequences will follow and so nobody should be doing them. Morally good acts are forced because they are seen as good choices to make from which good consequences will follow and so everybody should be doing them. When a libertarian, however, then comes along and says that nobody should be legally prevented from injecting or ingesting whatever substances he wants in his body, that no one should be legally restrained from having consensual sex with whomever he wants, and that no one should be forcibly dispossessed of his lawfully earned money to be distributed to others, what he means is that people should be able to choose or to choose not to do these things – that he should have the choice to take drugs, or the choice to have consensual intercourse with a member of the same sex, or the choice to either keep or give away his own money. However, the casual observer, viewing these pronouncements through the prism of an intertwined legal and moral code, looks upon the libertarian desire to legalise acts such as drug taking as a moral endorsement of that act, and the libertarian desire to defund the welfare state as an admonishment of altruism or sacrifice while replacing it with selfishness. He overlooks or refuses to understand the fact that the libertarian is making neither a commendation nor a condemnation of these choices whatsoever – merely that the morality and wisdom of making these choices are no business of the law’s. Unfortunately, many libertarians serve to aggravate this misunderstanding by assuming that there is no further moral question concerning a particular act beyond its satisfaction of the non-aggression principle. Yes, a person should be able to, for example, say whatever words he wants on his own property without any interference from the law – but it does not follow from this fact that it is a good idea to say a particular thing at a particular time, nor does it follow that other people should not withdraw their support of you if they find what you have said objectionable. A person who takes a narcotic does not violate the non-aggression principle but it doesn’t follow from this fact that everything is okay and that there is nothing more to be said on the matter. Indeed, very bad consequences might follow for the drug taking individual and his family if he proceeds to do so and it would be ridiculous to suggest that these are irrelevant considerations. This does not mean to say, of course, that the non-aggression principle should not be primary concentration in building a just and peaceful society. Given that the violation of the non-aggression principle is so endemically legitimised by the institution that is responsible for nearly all of society’s woes – the state – it is, of course, entirely right that libertarians should persistently and consistently emphasise it. However, to view the non-aggression principle as the only worthwhile consideration would, if taken to its logical conclusion, amount to a travesty for the principle only concerns where one may act, not whether he should so act.  Shorn of all other reasons to act or not to act, those who wed themselves to the principle but to nothing else would be devoid of any impetus to make one choice over the other and would, in fact, never act at all! While it is true, therefore, that libertarians in their capacity as libertarian theorists are only concerned with the proper application of the initiation of violence in society, in their role as citizens in society they must also cultivate a positive, personal morality, a personal morality that will permit the libertarian to add value to moral debates far beyond the limits of libertarian theory – while keeping firmly within his sights that none of his views are anything to do with libertarian theory itself.

It cannot be emphasised enough how embracing or understanding the very limited scope of libertarian theory affords a tremendous degree of intellectual clarity for political and moral philosophy. Theories of interpersonal ethics concern how we, as rationally acting individuals, should behave towards each other – the choices we should make that affect our own lives and the lives of those around us. It might be a good thing for each of us to give to charity and to care for one’s elders, for example. However, if theories of interpersonal ethics concern the choices that people should make, then their starting point needs to be that an individual really does have a choice as to whether he should act one way or the other. A person behaves morally or immorally if he has moral responsibility for his actions – i.e. that what he did was born out of his own free will. He does not so behave if his action was forced or if he was otherwise acting as an automaton. This fact is frequently recognised with acts that are seen to be morally bad or evil. For example, if I am holding a knife and somebody grabs my hand and plunges the knife into the body of another person who subsequently dies, few people, if anyone, would agree that I was the murderer as opposed to the person who grabbed my hand. My action was not chosen by me; it was, rather, completely forced and out of my control and thus I do not bear moral responsibility for the ensuing stabbing. Similarly, the law recognises circumstances where an individual is placed under such a degree of duress that his moral responsibility is severely compromised if not totally eradicated. If, for example, someone holds a gun to my head and threatens to shoot me dead unless I stab another person then I am relieved of moral responsibility for the resulting injury or death, at least to a degree. This relief from moral responsibility is seldom, however, recognised with moral goods. If it is morally good for me to give some of my money to the poor then I can only be said to have behaved morally – i.e. to have done a good thing – if I have chosen that act. If, on the other hand, such an action is forced – that I am, Robin Hood-style, robbed of my money and it is then given to the poor – then I have not done anything good at all. I can neither be praised nor condemned for whatever result this action will bring because the choice was not mine – I had to give up that money regardless. It follows from this, therefore, that if giving to the poor is a good thing and is, further, the hallmark of a caring and compassionate society, it is ridiculous for this giving to take place through the forced mechanism of the welfare state. When people pay their taxes to fund the welfare state they don’t give voluntarily at all – rather, the money is forcibly taken from them. The original donors therefore did not behave in any way morally good or morally bad; indeed, strictly, they did not “act” in any way whatsoever. Because they were forced to give up their money, neither care nor compassion was ever shown on their part; in fact, it is more likely they will be extremely resentful. Moral theories that allow for the enforcement of their ends through violence are therefore not really theories of interpersonal ethics at all; rather, they are theories of how the enforcing party – i.e. usually the state’s officials and lackeys – should behave unilaterally, treating everybody else as little more than tools to be wielded towards whatever ends the specific theory so desires. That’s why all socialist and collectivist theories are completely contrary to the reality of human nature – they suppress the very real desires and choices of millions of ordinary people for the benefit of the ends sought or desired by a handful of political masters and bureaucrats. Libertarianism, however, preserves each individual as a moral agent with the ability to make the choices that he wants with the means that he lawfully owns; it forms a true foundation for wider moral theory by reminding such theories that seeking violent enforcement of their ends is no theory of moral behaviour at all, such behaviour requiring moral responsibility for one’s actions. Thus we can see the importance of the place of libertarianism in philosophy as a whole is as a thinly conceived theory concerning the legitimate use of force and violence between rational persons. It is not a complete moral philosophy but it serves as a firm basis for moral philosophy, and this important purpose would be severely impaired if libertarianism as a theory was, instead, conceived of as “thick” or demanding additional moral imperatives.

Beginning from this understanding of libertarianism in theory we can move on to discussing libertarianism in practice. How will a libertarian world be brought about and what will it look like? What kind of institutions will build and preserve this libertarian world? What is it that is preventing us from achieving a libertarian world today? What needs to be the focus of our efforts? In answering these questions we are going to set ourselves the somewhat ambitious task of attempting at least a degree of reconciliation between what are perceived as distinct “camps” within the libertarian movement. First, there are the “thin” libertarians and the “thick” libertarians mentioned just a moment ago; and second, there are the “anarchists” – those who believe that no state is justified at all – and the “minarchists” – those who believe that minimal state is justified for the prevention of aggression. What we will show is that, when it comes to the most likely and practical way that a libertarian society can be introduced, these largely theoretical differences may not be that important and that all libertarians can proceed towards one, common aim.

In beginning our task we first of all need to define precisely what a libertarian society in the real world will actually be. An uncontentious definition would be a society in which the non-aggression principle is adhered to so widely, through one way or another, that violations of it amount to little more than minor incursions and nuisances rather than endemic, perennial societal ills. Some violent invasions against the person or property of other people will always exist – there will always be, after all, criminals and those who are willing to do bad things. The important point, however, is that they do not approach the scale of systematic violence and destruction that our governments heap on us today.

If we accept this definition then there are three problems which we need to consider. The first problem is how to eradicate, from the mainstream consciousness, the legitimisation of the initiation of force or violence – in other words, how do we ensure that the non-aggression principle comes to be viewed as both true and just by almost everyone? How will all persons, regardless of their status or position, come to be subject to this same, basic prescription? The second problem, however, concerns how we will reduce actual violations of the non-aggression principle to a level far below that at which we languish today in order for a very real peace and prosperity to flourish. It would be no good if we achieved the first goal of educating everyone about the injustice of stealing and killing, for instance, yet we all happily stole and killed because the incentives and institutions required to deter such violent behaviour did not exist or, indeed, were impossible to bring about. If this was the case then libertarianism would simply be a theory without any practical application, a whimsical idea that would have no relevance to the real world. The third problem, which is the most difficult of the three to comprehend, is whether a libertarian world will be created from the top down or from the bottom up. Will it be sufficient, for example, for a small band of diehard libertarians to overthrow the existing rulers, install themselves as the supreme leaders and proceed to order everyone to adhere to the non-aggression principle? Or will a sustainable libertarian world be brought about some other way?

Happily, if we examine each of these problems in turn we will find that they point to a common way forward. Addressing the first problem of the legitimacy of force and violence in our world today, we can see that the primary vehicle for this legitimisation is, without a shadow of a doubt, the state – and the democratic state in particular. It is already acknowledged by almost everyone that individual, private citizens cannot steal, murder, thieve, etc. There is no general or widespread problem of people failing to recognise that I, as a private citizen, may not, for instance, steal from my neighbours to fund my business, nor may I use violence to get other people to do what I want with their property. I may not kill someone in the street or bomb houses because I believe there might be some threatening or nasty people inside of them. These acts are, quite rightfully, recognised as unjust and illegal. When it comes to the mechanism of the state, however, people’s attitudes are markedly different. It is, apparently, perfectly legitimate for the state to steal from its citizens in order to fund its business of welfare and warfare; it is legitimate for the state to use force to “regulate” what you do with your own person and property, even though what you may wish to do inflicts no violence or infringement against the person or property of anybody else; the state is allowed to drop bombs on houses if it believes there are nasty people it doesn’t like inside, writing off the innocents who were killed or maimed in the process as “collateral damage” (or at least the state can do this in faraway lands where its voters neither have to see nor think about it). Far from being a check on state power, democracy (the only form of government that is assumed, without argument, to be just by anyone who expects to be taken seriously) has served to increase the power of the state – and thus the extent of its violence – by providing it with a veneer of legitimacy. The only thing that can possibly be said in favour of democracy is that, once one realises that a majority will always get its way one way or another, it provides for a relatively peaceful and bloodless transition of political power from one majority to another. Today, however, democracy has been exalted to a level far removed from what it deserves for providing solely this simple benefit. Because people believe that they are “choosing” their leaders and “choosing” the policies that are implemented by casting their vote or “having their say” this, for some reason, means that it is alright for the state to go about its business of force and violence in almost any way it likes. The power of kings, emperors and those who otherwise claimed some kind of unique, divinely endowed right to rule was kept in its place by the fact that everyone else was shut out from either the use or benefit of state power; no king ever managed to create a world of paper money that could be printed and accepted as payment without limit to fund his warring ventures, nor could he build a redistributive welfare state; no king ever had an alphabet soup of departments and agencies managing your home, your family, your workplace, the products you buy, the services you use, and so on. However, because everyone in a democracy is apparently allowed to “have their say”, such a system not only allows everyone an opening to benefit or even direct the state’s immoral acts via the mechanism of government, but because such acts have been “chosen” by the “will of the people” they are transformed from provoking moral outrage to provoking moral celebration. Never mind, of course, that people do not actually have any meaningful say in a representative democracy – all they are allowed to do is vote, once every few years, between a tiny selection of carefully screened candidates who create the impression that they are bitterly divided yet agree perfectly on all of the fundamental features of the state which libertarians oppose. Only occasionally are the people allowed to come out of their corner to fight, as the British did with the recent referendum on EU membership and the Americans did with the election of Donald Trump as their President. What is important for the legitimisation of force of violence, however, is the fact that people believe that they are in control of the state. It follows, therefore, that delegitimising the state and weakening the power of the state would go a long way to delegitimising the use of force and violence everywhere.

This leads us onto our second problem which is how to minimise the actual incidence of force and violence in society. Unsurprisingly our answer points once again to the primary culprit, which is the state. As we just mentioned, a powerful driving force for the actual commission of violent and invasive acts is their perceived legitimisation under the aegis of the democratic state. After all, if it is okay to relabel theft and violence as taxation and regulation and to do these odious acts through the mechanism of the state, then obviously they are going to be done a lot more often. However, so many of the catastrophes and calamities for which the state is responsible result from the actual, physical wealth and power that many states have managed to accumulate, with that wealth and power concentrated in an ever dwindling number of specific people and institutions. As a result of this the ability for the state to expand its predatory effects has been left almost unchecked. The consolidation of state territories into unified governments has been particularly disastrous in this regard. The two most destructive conflicts in history – the two world wars – occurred after the unification of Germany and Italy, with the drain the Bismarkian welfare state inflicted on the economic prosperity of Germany leading to the drive towards autarky and the perceived need to conquer the largely agrarian lands to the East. The nuclear terror perpetuated by the Cold War was made possible only because such large and powerful states as the United States and the Soviet Union were able to fund the building of their nuclear arsenals. The United States, the only remaining superpower today, has caused havoc in Korea, Vietnam, the Balkans, Iraq, Afghanistan, Libya, Syria and God knows where else simply because it can do so relatively unopposed. Smaller states with smaller tax bases and access to fewer resources simply cannot do this. Yet, ironically, because the state is still viewed as the fountain of all goodness, it is further state expansion which is called for in order to prevent war and preserve peace – as if it is all of us barbarous citizens who are causing all of the strife rather than the political leaders with their armies, navies and air forces. Proponents of such expansion fail to understand the obvious fact that if you wish to minimise war and its effects then the last thing you want to do is to make belligerents bigger and stronger as opposed to smaller and weaker. Nor do they understand that if you wish to promote trade and prosperity then so too must the state be cut down to size. The original project of the European Union was designed to unify and pacify the old warring colonial powers, creating a trading block with tariff free borders through which goods and workers could pass unhindered. We can certainly agree that the aims are broadly correct – if you wish to achieve economic progress then you need to encourage capital accumulation, which can only be done through relatively strong private property rights, minimal taxation and minimal regulation. However, the path that was taken to achieve this was to consolidate and centralise Europe’s political institutions in Brussels and to, eventually, create some kind of European super state. This is the precise opposite of what you want to do if your aim is free trade and increasing prosperity. If Europe, instead, consisted of several hundred, or even up to a thousand small territories and independent cities the size of say, Monaco, Liechtenstein or Luxembourg then the lack of each state’s ability to access both natural and human resources, except through international trade, would be reduced to a minimum; thus such states could only introduce onerous tariffs and border controls at the expense of crippling themselves. Moreover, a small state cannot increase its internal taxes and regulations to levels which are too onerous otherwise residents will simply hop across the border (which, in a small state, is likely to be only be a few miles away) leaving the heavily taxing state drained of its productive population. Thus, what keeps taxes, regulations and border tariffs minimal to non-existent is the competition between many small states so that they can attract investment, talent and resources. In turn, production of these things is encouraged and wealth creation accelerates. However, in a vast super state covering thousands of square miles and controlling an array of natural resources and a population of millions, the taxing and regulating authorities are now left relatively unchecked. No longer do they have to attract resources and talent and neither can these things leave as easily – for they are already there within the territory of the large state and crossing a border that may be thousands of miles away is markedly more difficult. It is for this reason that the EU has become one of the most heavily regulating and interfering state institutions in the world, a fact which incites farcical hilarity, if not utter despair, when you consider that there are more than 12,000 EU regulations concerning milk. If all of these regulations are necessary it’s a wonder how previous generations ever managed to enjoy the stuff at all. It is true that there may be no internal tariffs and border restrictions within the EU and yes, goods and workers can move freely between, say France and Italy. Business leaders acclaim how great this is for commerce and enterprise, yet what these business leaders overlook is that the EU itself has become a burdensome engine of internal taxation and redistribution that far outweighs any gain achieved through the abolition of border tariffs. Indeed, each member state’s contribution to the EU budget effectively amounts to a tariff anyway – the only difference is that the burden of paying it is borne by the citizens of each state as a whole rather than individual industries or businesses which ship goods to the EU. Fortunately the EU does not have any direct, taxing power over the citizens of member states, yet it has been moving to nullify tax competition between states, the very element that is so important for keeping tax rates low and for attracting investment. And let us not forget, of course, that the EU is more than happy to charge onerous tariffs on imports from outside of the bloc. Super states, and prospective super states such as the EU, are not single markets promising trade, prosperity and the best conditions for enterprise – they are, instead, single bureaucracies of heavy taxation, crippling regulation and welfare parasitism.

In his astonishingly perceptive book, The Breakup of Nations, Leopold Kohr pointed out that almost every notable achievement of the human race – great art, great literature, great culture, great technology, great philosophy, and so on – is all but irrelevant to the preservation of peace and prosperity. The only relevant factor is the size, or, rather, the relative size of states. Big states prey on their citizens and their foreign counterparts not because they think they either should or that to do so is good (although they may believe these things), but simply because they can. Great power endows one with great temptation, a temptation which political leaders nearly always cave in to. The evidence for this is difficult to dismiss. Centuries of cultural refinement marked by some of the world’s finest achievements in art, literature and music did not prevent France and Germany from each having their turn at conquering the whole of Europe; the philosophy of freedom and liberty didn’t stop the British from building an empire; the economic and technological progress of the United States has not stopped her from interfering, disastrously, all over the world. Yet the era in recent history which supposedly (but not entirely accurately) marked the nadir of man’s cultural and economic achievement – the Dark Ages – was, by comparison, relatively tranquil, as it was also populated, for much of its history, by relatively smaller, weaker states. From all of this it is clear that the breakup of states into far smaller units – what we might call political decentralisation – should be a clear aim of libertarians.

It is on this note of decentralisation that we move onto our third and final issue which is whether a libertarian world will be brought about from the “top-down” or from the “bottom-up”. Would it be enough, for example, for a defiant band of libertarians to take over the state apparatus and to enforce a libertarian legal code? What we have just said about power and corruption should make our initial answer obvious. If libertarians take over the state won’t they simply become corrupted by its power and influence? Or, more likely, if the populace whom they now govern was not similarly enamoured with libertarian values, wouldn’t the leaders cave into the pressure to use the power of the state to “act” in order to correct some kind of perceived societal ill? A comparable occurrence of this nature in recent history is the American Revolution, which is popularly portrayed as the overthrow of a tyrannous, foreign king by the oppressed but passionate American people fighting for their freedom. Yet, in reality, what occurred was that a new elite simply served to replace the power vacuum that had been left with the departure of the British. Not only were the founding fathers far from unified on the question of precisely which type of government should replace the ejected monarchy, but very quickly aspects of the new United States began to resemble those of their previous colonial masters. We know today, of course, that the Constitution of the United States has utterly failed to constrain the power of the federal government. Yet even reading the original text alone should alert a critical reader to how un-libertarian it was in the first place. It does, after all, preserve the power to tax among a myriad of other horrors in Section Eight of Article One such as declaring war, raising armies and the infamous commerce clause. Within mere years of its adoption, the very same people who were victors over the repressive British provoked the whiskey rebellion, enacted the Alien and Sedition Acts, and even the great Thomas Jefferson found it difficult to constrain himself when, as President, he signed into law and draconically enforced the Embargo Act of 1807. If libertarians simply served to replace the despots they would very soon find themselves acting as the new despots. A genuine libertarian revolution will be impossible unless the power of the state is chopped from the bottom rather than simply given a haircut at the top.

The more important point, however, is revealed when we consider what it is that institutions such as property, rights, obligations and laws – the backbone of a libertarian society – are supposed to serve and how these institutions developed historically. The mainstream point of view in this regard is hopelessly confused, wallowing in a misunderstanding of the abilities and extent of human design and ingenuity. The results of such ingenuity are, of course, all around for us to see. We can easily marvel, for example, at the achievements of humans in the fields of science and engineering, at how we have transformed barren, dead matter into great structures such as buildings and bridges, how we have harnessed the power of electricity to provide us with heat and light, and how a device as small as a microchip can process information many times faster than the human brain. Every way we look we see the results of humans striving to shape the world in the way that we wish in order to meet our needs and improve the quality of our lives. Since the advent of Cartesian rationalism in philosophy, it has seemed almost obvious that if humans can shape the resources we have around us to do what we want them to do then so too can we apply this same engineering bent to society itself and to societal institutions. In other words, that we can deliberately shape society and design its institutions to do what we want them to do. If we can construct the Empire State Building then surely we can construct laws, regulations, rights, and obligations in order to make society a better place? That is the fundamental view of statists today – that society is something there to be managed, pushed in certain directions and squeezed into certain shapes by our political masters served by an army of elite intellectuals. The laws that are enforced are to be designed and enacted through legislation in order to push, from the top down, society onto a particular economic and moral path. Society, however, exists only because individual people perceive that social co-operation is essential for meeting their needs and for vastly improving their quality of life. In contrast to this, it would be quite possible for each person to be content to live an atomistic existence, finding his own food, building his own shelter and entertaining himself devoid of all social relations and interaction with anybody else. If this was the case then society, as such, would not exist. If the population of a territory consisted of 1,000 people yet each of those people lived such an isolated existence then that is all you would have – a piece of land with 1,000 people on it; you would not, however, have a society of 1,000 people. Because, as should be obvious, such an existence would result in the starkest and most brutal impoverishment, humans have, instead, decided to come together and co-operate. Such co-operation has developed from our existence as hunter gatherers, through the Neolithic Revolution and has reached its most advance form in the division of labour – the specialisation of each individual in a particular task which serves the needs of others. It is this social co-operation which is, in and of itself, society. Because the purpose of this co-operation is to further the needs of individuals it is the case also that the institutions that are required to facilitate this co-operation appeared because they made the pursuit of our individual needs and wellbeing easier. The great societal institutions – such as the family, the law, money, and morality – were never explicitly designed or “invented” by anybody. Rather, they were the product of centuries of evolution or of what we might call a “spontaneous order”, and the precise content of their makeup was determined by what facilitated the needs of individual people. The family, for example, developed during an era in which humans were pure consumers of what the Earth had to offer rather than producers – much like animals are. The availability of resources in a society which only consumes and never produces is heavily dependent upon the height of the population. As humans could keep on breeding merrily the population quickly rose to a level where the quantity of resources was insufficient and hence everybody suffered from a reduced standard of living. The family unit developed as a response to this problem in order to make fathers bear the cost of their own children. The more children they have then the more food and shelter they would have to provide for and so this furnished a powerful incentive to keep the population relatively in check. It is from this that our current code of sexual ethics has also developed – the requirement of sexual fidelity and the moral penalisation of sex out of wedlock, for example, all stem from the fact that such acts defeated, or could potentially defeat, the object of controlling the levels of population vis-à-vis resources. Money, which today is printed and controlled entirely by the state, was never explicitly designed by anyone but, rather, arose as a product of barter, whereby one or a handful of goods (usually, except for specific situations, precious metals) became more marketable than any other and hence came to be regarded as valuable not for whatever practical use they may serve but precisely because they could be exchanged. Nobody woke up one morning and, surveying the difficulty of trading individual goods directly, decided to say “I know! Let’s invent a good that we can all trade for everything else and call it money!” No wise leader started, out of the blue, to produce money or manufacture money, nor was the precise monetary commodity in a given situation explicitly chosen by anyone. Rather, given the immense power it afforded, the minting and issuing of money was usurped at a much later date – a usurpation which, of course, was only completed in 1971 when the US dollar’s last tie to gold was severed (and which may not be finally complete until states have succeeded in issuing a common, worldwide, paper currency). Law similarly evolved over centuries, or even millennia, out of interpersonal conflicts people ran in to over resources. The source of a legal case was the fact that two people each wanted to use the same resource to meet their own ends whereas, owing to the fact of scarcity, only one could do so. In other words the precise areas in which the law was concerned were decided by whether or not people could peacefully meet their needs in a given situation. If they could not then it was their perception of a conflict that gave rise to legal rules and principles. This is very important lesson that many libertarians, let alone everyone else, are yet to understand; the precise boundaries of aggression cannot be decided from on high by a wise and powerful leader because the elements of aggression – a physical invasion of another person’s property – are all dependent upon the parties’ perception of those physical transgressions as preventing them from fulfilling their needs with the resource in question. What is aggressive behaviour and what is not cannot be based upon what a political leader thinks is a conflict between two people (as all political leaders do when they enact legislation), nor can it be based upon some precise, scientific measurement of whether one body collided with another. If I shake a bed sheet and a piece of dust travels through the air and lands on your shoulder then, even though I have initiated an action which physically impacts on your person, this is not aggressive behaviour because such an action does not interfere with your ability to use your body to meet your ends. Indeed, most likely, you wouldn’t even be aware of the speck of dust at all. If, however, I threw the bedsheet over your head and wrestled you to the ground then this would probably be regarded as assault and the law would find me liable as such. Both actions concern a physical transgression of your person or property initiated by me, but only the one which interferes with your ability to use your person and property to meet your needs as perceived by you is the aggressive action. None of this should be taken to suggest, however, that the precise content of legal rules is purely subjective, nor should legal liability follow merely from somebody’s whim. Rather, objectively defined rules are drawn from typical experiences of what is and what is not aggressive, such typical situations arising before legal adjudicators again and again. Most people do not want to be killed by another person; most people do not want their belongings taken; most people do not want to be raped. So, for example, if one person kills another then it is presumed that the deceased did not so wish to be killed and the accused must adduce evidence to the contrary if he is to avoid liability. On the other hand, most people do not perceive that a speck of dust landing on their shoulder as a result of someone shaking a bedsheet is aggressive and invasive behaviour. So anyone who turned up before the court alleging that such an incident was aggressive would most likely be told that, even if, subjectively, this speck of dust prevented him from enjoying his person or property, he alone should bear the burden of protecting himself from this unusual sensitivity, rather than forcing everyone else to tiptoe around him. What we can see as a result of this, therefore, is that the precise boundaries of aggression which are expressed in precise laws are very much determined by the customary and conventional context. This is perhaps best illustrated when determining the requirements to enter contracts. If I sit down in a restaurant in Great Britain and order from the menu then that action is sufficient to make me liable to pay for the meal as that is how the situation is understood in this society. My refusal to do so on the grounds that I had not been told explicitly that I would have to pay would be laughed out of court. On the other hand, in another society, it might be the case that you are assumed to be a guest unless the proprietor of the establishment states that you must pay for your meal. If I raise my hand at an auction I might find myself liable to pay for one of the lots; if I do it outside in the street I am merely saying hello to someone. The action is the same but whether I am placing a bid or simply making a greeting has to be judged by the context. So the same thing can not only mean different things in different societies, with different consequences following, but so too might they mean different things in the same society depending upon the precise situation. Legal adjudicators have to assess what the actions of the parties meant and what they intended through their actions according to the social, customary and conventional context in order to determine the precise limits of legal liability. Because, as we said earlier, society is emphatically not something that is managed from on high but is, rather, motivated by individuals, this is an evolving rather than a static process. Such evolution can evolve only through case law, i.e. through law made or “discovered” through actual cases involving real people in real conflicts, rather than through legislation which involves only conflicts manufactured or perceived by politicians and bureaucrats. The importance of the customary and conventional context also applies to which beings may enjoy legal rights and which may not. Libertarians are often chided for their lack of agreement over the issues of abortion and the rights of children but, strictly speaking, these issues cannot be resolved theoretically. Libertarian theory will tell you which kinds of beings enjoy rights and which types of action are aggressive; it does not, however, tell you whether a specific being enjoys rights or whether a specific action is aggressive. The questions concerning the legal rights of foetuses and of children are of this latter category – do they qualify as the kind of beings to whom rights apply, i.e. are they rationally acting beings? And, if not, at which age or ages will a foetus or child be deemed, or at least presumed, to be a rationally acting being capable of enjoying rights? Is the fact that a foetus grows inside the mother an invasion of the mother’s body or has she demonstrated some kind of consent to the foetus’s growth? None of these questions are answered by libertarian theory but, rather, they concern the application of libertarian theory according to the customary, social and conventional context. To take a deliberately extreme example in order to illustrate this, early, primitive societies ascribed natural phenomena to the will of deities, and were unable to differentiate between inanimate phenomena (such as the sun or clouds) on the one hand and conscious beings on the other. Let us suggest that, in such a society, trees are perceived to possess personalities and to have rational thoughts and feelings which could, through some way, influence the course of events (in a similar vein, the present author, as a very young child, believed that trees shaking their branches were the cause of the wind, rather than vice versa). The legal system (or other social rules acting as a precursor to a legal system) of this society would recognise each tree as a legal person endowed with rights, and that to invade the tree’s physical presence would be an unlawful aggression against the tree’s person. Today, however, due to the advances of our scientific understanding, we have sufficient reason to believe that trees are not, in fact, rational beings nor do they possess the will or ability to alter the course of events. Although “living” they are not conscious and simply occupy the sphere of natural resources which can be owned by actual rational beings.

To re-emphasise, the important point about all of this is that, given that both the nature and the content of the elements that preserve societal order – such as rights, obligations, property – are determined by the needs of individual people, it follows that these elements can be neither determined nor shaped by groups of leaders or intellectuals acting from on high – in other words, by centralised, state institutions. Libertarians and free-market economists wax lyrical about how the state cannot hope to run and control specific industries productively in order to meet the needs of individual people and how the state has no rational method of directing resources in ways that best meet the needs of those people. Rather, such industries always end up succumbing to the priorities of the political leaders, the bureaucrats and the employees. Exactly the same is true of the institutions that concern societal governance. The entire state apparatus of legislatures, courts, bureaucracies, and their supporting police and military forces are designed not to give effect to and to prioritise the needs of individual people but, rather, to promote, enhance and push forward the visions of society held by liberal elites – visions of collectivism, equality, uniformity, and multiculturalism that destroy private, voluntary allegiances to localised institutions such as families, communities, and places of worship to direct it towards the glorification of the ever expanding state. The move towards greater state consolidation through supranational outfits such as the United Nations, the European Union, the IMF and so on is designed to concentrate decision making authority in an ever dwindling number of colossal institutions, centralising power and control in the handful of powerful oligarchs. A genuine libertarian society – a society distinguished by freedom for the individual – will therefore only come about through the destruction or dismemberment of the institutions which are diametrically opposed to this freedom. In practice this will mean halting and reversing the current trend towards state consolidation and inter-state co-operation, and seeking the breakup of individual states into as smaller territories as possible. This will scatter decision-making authority away from the centre and towards the individual as close as possible by achieving the increasing localisation of institutions which bear the responsibility for preserving order and governance.

The way forward for libertarians to bring about a libertarian world is therefore relatively clear – we must seek, emphatically, the de-legitimisation the state, the dilution of the power of the state, and the reduction of the size and territorial reach of each state. If, however, we needed to select just one of these elements – one call to action that could be regarded as the libertarian rallying cry – it appears that the third aim of reducing the size of each state is likely to have the greatest impact. Not only is it from this achievement that the other two are likely to follow but it is also the one which, at least after 2016, gives the appearance of being most likely to succeed and of being brought about in the right way from the bottom up rather from the top down. Ethno-nationalism and secessionism has returned to our world as a reaction against the forced centralisation of state institutions and metastasising of supra state bureaucracies; open borders, forced integration and globally managed trade are giving way to each state and smaller territories determining their own policies in this regard. Although our faith in the political process – the game that the statists want us to play – should be cautious, we have to hope that events such as the “Brexit” vote and the election of Donald Trump indicate only the beginning of this rebellion from the masses, a rebellion against the globalising, centralising and bureaucratising forces that will far eclipse the significance of those two events alone.

Moreover, this aim of seeking to reduce the territorial size of states and state institutions achieves also a degree of reconciliation between the distinct camps within the libertarian community we described earlier – between “thin” libertarians and “thick” libertarians on the one hand, and between “minarchists” and “anarchists” on the other. For libertarian “thickests”, we are fully conceding  that the move towards decentralisation and to smaller state territories to likely to be dependent upon the willingness of people to place their trust in more localised, informal, and voluntary institutions such as a common culture, a common language, common customs, a common morality and a common (or a common absence of) religion. It is these alternative elements which are required to shift people’s reliance away from the formal apparatus of the state for their feeling of identity, security and community, and also to generate a feeling of empathy and friendliness within each locale which is needed to grease the wheels of social co-operation. It is precisely because these common elements are the antithesis of statism and state growth that all socialising theorists and politicians have sought to denigrate and destroy them – as they are largely trying to do now through mass migration and the fostering of welfare dependency. By eradicating cultural, community, conventional, customary identities (as well as traditional morality) through its egalitarian, all-inclusive, non-discriminatory, socialising programmes, the state simply sows distrust, hatred, and envy which makes easier its task of theft, violence, and welfare statism. We as libertarians, therefore, should regard the promotion of these common elements and informal institutions as necessary for bringing about a libertarian world. For libertarian “thinnests”, however, we are also acknowledging that we, as libertarians qua libertarians, need not promote a particular culture, a particular language, particular customs, or a particular moral code. It is true that certain cultures, customs and moral codes may be more conducive to sustaining the non-aggression principle than others (and, as I have argued elsewhere, the requirement of non-aggression is, in and of itself, likely to promote and emphasise certain, broadly conceived values). However, it is not our job to determine from on high what these customs and cultures might be and to enforce them upon everyone else. Our focus, rather, is on breaking up the giant, behemoth states so that people can find their own way, building their own communities based upon their own values. Without the power of vast states to enforce and support them, the flourishing of these individual communities will undoubtedly depend upon them being able to adopt values which promote proper order, governance and social wellbeing. However, much of this is largely achieved by the fact of cultural harmony in the first place – that everyone in a community largely agrees on the same basic values and that everyone’s behaviour is broadly acceptable to everyone else. In short, that all members of a given society are basically kindred spirits. Determining precisely what these values will be is, for libertarians, a secondary task at best. Moving on to minarchists and anarchists, if we break up states into relatively smaller sizes then minarchists can be satisfied that each territory still has some official institutions that are responsible for law and order; anarchists, however, will be relieved to know that because such decentralisation and deconsolidation increases the relative power of the individual vis-à-vis the state then the practical distinction between the state as a compulsory association on the one hand and as a voluntary association on the other becomes much less clear. Indeed, at some degree it will be completely abolished. At the extreme end, a small commune on a few acres of land comprising merely tens of people will be heavily reliant upon gaining the continual trust and enthusiasm of each of those people if the commune is to survive. However, a vast commune such as the former Soviet Union can treat each individual person however it likes – stealing from them, forcing them to do what it wants, and, of course, murdering them. Moreover, the ability of a small state to launch any foreign wars – which, in the long run, is the source of the loss of most of our freedoms – is vastly reduced, if not eradicated.

This, then, should be the goal of all libertarians, lovers of freedom, and those who are passionate about free enterprise and free association – breaking up the state into as smaller territories as possible and rendering state power and influence as inert as possible. We can hold some hope that this may be the way in which the tide is turning and that we can finally bring to a close this chapter in human history that has been marked by socialisation, collectivism, statism, bureaucratism and endlessly destructive warfare built on a cushion of false prophets, false values, false money, and a false prosperity.


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Regulation

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It is accepted by the mainstream that state regulation of the free market is a necessary feature of the so-called “mixed economy”, the supposed halfway house that allows us to benefit from capitalism without succumbing to its alleged excesses while, at the same time, avoiding the catastrophe of all-out socialisation and state control. This essay will subject this view to a critique and will reveal that, in fact, regulation of markets does nothing more than substitute arbitrary government preferences for the preferences of freely acting individuals, is a cause of the very “excesses” (such as oversized firms) which are blamed on capitalism, and that the best regulator is, in fact, the free market itself.

In examining “regulation” we should first be clear about precisely what it means, which is that the state will use the force of law in order to, compel, prohibit, restrict or otherwise subject to control some targeted behaviour of its citizens. In other words, it is a violent, physical intervention into people’s lives in order to produce one outcome while preventing another. This seems perfectly justifiable in instances when the behaviour that is subject to regulation is neither peaceful nor voluntary and is in fact invasive and predatory – in other words the particular behaviour under consideration constitutes a crime, such as murder and theft. However much libertarians may dispute either the legitimacy or effectiveness of the state in preventing and/or responding to such acts, we can at least understand the need for this kind of regulation – to protect people from the violent, invasive and uninvited actions of others, actions which are, of course, unjustifiable in libertarian theory. But what do we mean by state regulation of the free market? The very phrase “free market” is an abstraction used deliberately by commentators to deflect attention away from what it actually is and to create, instead, the impression that it is some kind of self-aware, self-controlling entity that can indulge in all of its irrational flights of fancy while being subject to neither rule nor reason when it seemingly appears out of nowhere to inflict grave harm upon us in the same way that a criminal might. The free market, however, is nothing more than individual people and institutions trading goods and services voluntarily on terms which they agree amongst themselves. It is a diffuse, decentralised network of people striving to meet their own needs as they perceive them and to seek others to provide the wherewithal to better their lives. It is an entirely peaceful, voluntary operation and no one is forced to participate in any exchange with another individual if he does not believe that he will be better off as a result of the exchange. For the state to regulate the market, then, means that the state will use force in order to diminish, control or otherwise outlaw certain transactions which otherwise may have been undertaken voluntarily had the regulation not been present. For the state to regulate is to introduce a code of violent compulsion into otherwise peaceful and voluntary relationships.

There is something distinctly odd when state “protection” through regulation is extended beyond crimes into the arena of voluntary relations. For what is it that people are really being protected from here? Voluntary transactions do not come out of nowhere to surprise us like an armed robber might do. Rather, they must be chosen freely and consciously by each individual person. So if every transaction in the free market requires a voluntary choice then the only purpose of regulation must be to “protect” us from the results of our own choices and to prevent us from entering certain transactions which we may otherwise like to enter if the terms are attractive to us. People often think that those being regulated are unscrupulous vendors who may try to sell us some kind of snake oil solution to a problem we may have. It is true, of course, that crooked businessmen may try to sell us something that doesn’t really work, is a fake, or causes some kind of fire or damage. However, these instances constitute a fraud or a tort and are already governed by the area of the law that regulates involuntary or invasive acts. Regulation of the free market, on the other hand, is solely concerned with restricting the transactions that people may be happy to undertake voluntarily with no force or fraud. As it takes two to complete a transaction – the purchaser and the vendor – if businesses are prevented from choosing to sell then you are equally prevented from choosing to buy. Our choices are therefore constricted by state regulation as much as those of businesses selling to us are and it is us who are regulated as much as businesses are. It is for this reason that an excessively regulatory and bureaucratic jurisdiction is often nicknamed “the nanny state” – a persistent and seemingly omnipresent matriarch who never ceases to stop interfering in your life in order to make sure that you make the “right” choices, choices that it believes are better for your life regardless of the maturity and sophistication of your own decision-making process.

There are several mantras or excuses that the state uses to justify its regulation of voluntary transactions – the prevention of rash, impulsive or short sighted behaviour; imperfect or otherwise flawed knowledge on the part of one of the parties to the transaction; maintaining standards of quality; and finally, the great all-encompassing excuse that seems to validate the state’s wading into anything it pleases, which is maintaining standards of safety. Doubtless there are other categories of state regulation also (such as environmental regulation and control of so-called “essential” industries) but these four form the backbone of the state’s regulatory bodies. We will proceed now to examine each of them in turn and in doing so we will reveal the damaging effects of state regulation while demonstrating how, in fact, the free market itself is the best regulator.

First, then, is the prevention of rash, impulsive, or short sighted behaviour. The implication here is that people may enter a transaction which provides, or has a chance of providing, benefits in the short term while providing a high likelihood of burdens in the future – possibly severely detrimental burdens such as economic ruin, ill health or early mortality. So in other words, people may choose to use tobacco, alcohol or narcotic products to achieve an immediate sense of pleasure without considering the longer term effects, or they may choose to gamble, bet, or otherwise enter some kind of financial arrangement that promises untold wealth if it is successful, but may result in economic ruin if it is not. In economic jargon the complaint here is that people’s time preferences are too high and that the inducement towards the present good is so strong in people’s minds that they heavily discount the possibility of the future bad. People discard prudence, foresight, and good judgment in favour of emotional, impulsive and irrational motives, and so the state should step in, so the argument goes, in order to prevent people from falling victim to their own lack of patience. In the first place we might as well mention that, while it is true that some or, indeed, many decisions may be regretted after the fact, it is the case that all actions can result in consequences that are either detrimental or not as favourable as those that were intended. Prior to an action, costs and benefits are only hypothetical and it is always easy to judge an action with the benefit of a retrospective view. However, as it is also true that some actions are more likely or are guaranteed to produce a longer term detriment in spite of an immediate gain, the more important point is that people’s time preferences are no business of the state’s and it is dubious to assert that people should, in all instances, prefer the longer term to the shorter term – at least not to the extent that the force of law is used to compel such a preference. There is no reason, for instance, why someone should not value the immediate pleasure from a cigarette instead of a longer, healthier lifespan and it is quite possible for an individual to regard a longer life as duller if it is devoid of short term pleasantries. The regulation of an action may stop, restrict, or otherwise control the action but it does not stop the motivating desires behind the action itself which are imbedded wholly within people’s minds. The preferences that influenced them still exist and have not been eradicated, and people are, instead, forced to embrace an outcome which they do not regard as preferable. So in other words, while the individual may have to forego a benefit today, in his own mind the pain of having done so in order to wait for another benefit to come sometime in the future (such as a longer, healthier life) may be worse to that individual. That person, from his point of view, suffered a loss rather than a gain. Regulation doesn’t, therefore, make benefits appear and costs disappear; rather, it simply forces people to endure what are, in their minds, heavier costs.

However, even if we were to accept the premise that people should take the longer view, the irony here is that regulation and state interference into people’s lives is what causes high time preference and rash, impulsive behaviour in the first place, along with the eradication of any kind of prudence, patience, good foresight and self-responsibility. In particular, the existence of the regulatory state fosters the mind-set that if an action is dangerous, or has a high chance of producing an unfavourable outcome, then the state will ensure that it is banned or the dangerous elements are removed. In other words because an army of bureaucrats has gone through the decision-making process on your behalf you simply do not have to care or pay any attention to the possible negative results of your actions because the guiding hand of the state will ensure that only good things can flow from anything you do. Indeed, the regulatory state is little more than a giant, inflatable cushion for people to avoid having to take responsibility for the consequences of their own decisions. When, of course, a decision in an unregulated area turns sour the cry is always “why were they allowed to sell this awful thing to me!” whereas what they really mean is “why was I allowed to choose to buy this awful thing from them!” What results, therefore, is a vicious circle where the growing regulatory state induces less prudence, a lower standard of care and thus more bad decisions that need to be met by increased regulation. To make matters worse if the regulatory state fails and you do happen to suffer some negative consequences, then in comes the helping hand the welfare state to rescue you anyway. If you drink or smoke too much and fall sick then state provided healthcare will look after you; if you gamble away your life savings then state benefits will still keep you fed, watered and sheltered even if you haven’t achieved the riches that you might have had you been successful. The upside of all of these decisions remains intact – that lucky horse may still promise to pay out millions and the whiskey will taste as good – but the downside has been heavily reduced as the state has insulated you from having to realise, or pay for, the full extent of the natural penalties of your actions if they occur. Thus, these types of frivolous and imprudent actions have become more attractive rather than less, and so they will be taken more frequently rather than less, resulting in more negative consequences rather than fewer. The result of this is, of course, moral hazard – carelessness for your actions when you can preserve your gains while heaping your losses onto everyone else. And finally, of course, all of this takes place within the sphere of the state’s inducement of a high consumption, high time preference society through the illusion of prosperity brought about by the forced lowering of interest rates, monetary inflation and the smokescreen of paper wealth.

Obviously, in a society that is wholly unregulated by the state people would be responsible for their own actions, and a culture of better decision making and more prudential planning would be induced. This does not mean, however, that you are completely on your own in determining whether you should proceed with a decision – an allegation of those who believe that the free market leads to an atomistic existence. It is this aspect that we will now explore when we examine the next reason that is proffered for the supposed necessity of regulation – imperfect or otherwise flawed knowledge on the part of one of the parties to the transaction. It is usually the case, of course, that the sellers of everything we choose to buy are experts in that particular product or service they are selling. They developed the product; they know what it should be capable of; they know the science behind it; they know where its raw materials or ingredients came from, who put them all together and how; they spend all day studying and marketing to their target demographic. We, on the other hand, are not so expert in these products, of which we may buy tens or even hundreds in a given week. We do not have the time to sift through mountains of information in order to find out whether a particular product is suitable for us, or whether it is likely to end up being either a waste of money or the cause of a much steeper loss. Surely the state should step in and compel companies to provide more information about their products? Surely it is only because of state regulation that we have mandatory lists of ingredients and nutritional breakdowns on food products and surely it is only because of the mandatory inclusion of warning labels that we know not to iron clothes while we are wearing them?

The key to unlocking this is to realise that the provision of information is an end in itself, an end which consumes scarce resources. Therefore, the value of this information needs to exceed the cost of those resources. To take a ridiculous example, the time it takes to cook an egg on the sunlit body of a car is a piece of information. The vendor of the car would spend valuable resources, such as labour, eggs, a stopwatch, etc. in gathering and publishing this information. However, if this information is useless to prospective purchasers of the car – in other words, it would not affect their desire to purchase the car one way or the other – then the vendor has incurred a deadweight cost and has simply wasted resources that would have been better spent on something else. How much information should be provided is part of the market process and it is consumers themselves who will determine through their purchasing habits whether or not a given set of information is valuable and is a requirement of a purchase. If consumers happily purchase products without receiving certain information then it indicates that the provision of such information would be a waste; if they choose to abstain then it may indicate that the purchase, on its present terms, is too risky and they require extra resources to be spent on providing more information about what it is they would be buying. It is here, of course, where the market’s own key regulator – price – steps in. At a low enough price consumers may be happy to purchase the product without further information as the risk of loss is relatively low so that gathering extra information would not be worthwhile. If the price was relatively high, however, consumers may demand more information so that they are more equipped for making a better decision before committing a relatively larger sum of money. And, of course, products sold with less information will, all else being equal, usually be priced lower than products sold with more information anyway on account of the fact that the vendor of the former products has not had to incur an extra cost. The forced provision of information by the state, however, is markedly different. Because it is not subject to the profit and loss test there is no way of telling whether such information is valuable or not; it is simply an arbitrary decree that resources must be directed in a way other than that desired by consumers. Additional costs are then heaped onto suppliers which, of course, result in higher prices for products – the extra money being spent on something that consumers simply do not want. To take a another extreme example, the state could mandate that an information booklet the size of a telephone directory should be sold with every loaf of bread, detailing the precise ingredients, the transportation process used, a detailed schematic of the ovens used for baking, the life stories of the baker and the wheat farmer and so on. It is obvious that the provision of this useless information would increase enormously the cost of a loaf of bread and thus make consumers worse off than they were before. The principle remains the same when the state requires seemingly more “sensible” – but still useless for the consumer – information to be provided.

The principle is also the same for the next two reasons that the state has for increasing the scope of regulation – maintaining standards of quality and standards of safety. The quality of a product is also part of the market process and cannot be subject to arbitrary standards. At any one time a higher quality product will, all else being equal, cost more than a lower quality product – meaning that more resources must be devoted to producing the higher quality product than the lower quality product. If more resources are used in creating a higher quality product then fewer resources are left over to be devoted to other things. Consumers must choose whether they wish their resources to be spent on a few higher quality or many more lower quality products through their purchasing habits. If they prefer the latter yet the government mandates that higher quality products must be produced then consumers are made worse off than they otherwise would have been. The sustainable way to increase quality is to increase the number of resources available so that such quality can now be afforded. It is here where the free market’s own regulatory mechanisms step in. If consumers, as a result of an increase of available wealth, demand that vendors produce higher quality items then quality standards are likely to develop within each industry. If vendors have to demonstrate that their products have reached a certain standard of quality then it creates a market for reputable, third party certifiers to examine the product and declare that it has met the required standards of quality that are expected by consumers. If it does not then no such declaration is made and the business must go back to the drawing board. Such third parties will be interested in making honest and trustworthy appraisals as it is the trustworthiness of their appraisals that lead to more product sales and hence, more vendors seeking their services for quality certification. Increased quality is therefore achieved through increased wealth creation which makes more resources available for this quality to be achieved, as opposed to state regulation which simply redirects existing resources from places where they are already needed.

Exactly the same is true when it comes to product safety because increasing safety also consumes valuable resources and we as consumers must determine how many resources we wish to divert from providing for other ends towards providing for more safety. With the regulation of product safety, it is important again to emphasise that we are not talking about the regulation of actions which may be defined as crimes or torts. If someone loads a child’s toy with explosives and it detonates then clearly such an action would be unlawful. Rather, what we are talking about is the regulation of safety standards that are accepted by both parties as terms of the contract – in other words, where the standards of safety sold are part of the product’s features or definition. For example, all else being equal, a car built with a thicker chassis, or a chassis constructed out of a stronger material, is likely to have greater crashworthiness than a car with a thinner chassis or a chassis constructed out of weaker material. If the latter car is purchased then the lower crashworthiness – and the resulting lower protection of the vehicle’s occupants in the event of a collision – is an accepted part of the contract and an accepted feature of the vehicle. Once again, the market’s own regulator – price – is king in this regard. All else being equal, the less safe car will be less expensive than the safer car. If consumers choose to purchase the less safe car the resources which could be spent on making the car safer are better off, from their point of view, being used somewhere else. If, however, the state steps in and mandates that, in the name of increasing safety, only the more expensive car should be sold then this would clearly lead to impoverishment. Indeed, some people may not even be able to afford the super safe car at all. They previously chose to purchase the less safe car because the value of the transportation it provided was worth the risk of being more heavily injured in the event of a crash. If state mandated “safety” standards price them out of the market so that they cannot afford a car at all then they have clearly lost very heavily. There is no such thing as a “no brainer” safety requirement that is valid in all places at all time – there is only what can be afforded. Requirements only seemingly become “no-brainer” when they can be easily afforded. And, of course, the way to increase the affordability of safety is to increase wealth creation so that more resources are available to be devoted towards increasing product safety. Just as with the increase of quality, if consumers, as a result of an increase of available wealth, demand that vendors produce safer items then industrywide standards of product safety will develop. If vendors have to demonstrate that their products have reached a certain standard of safety then, once again, the market is opened for reputable, third party certifiers to determine whether a product has achieved the standard that is expected by consumers. Underwriters Laboratories is an example of such a private, third party solution. Increased safety, like increase quality, is therefore achieved through increased wealth creation which makes more resources available for safer products to be made, as opposed to state regulation which simply confiscates existing resources from other ends.

What we have learnt from all of this is that regulation itself consumes valuable resources and so the value it produces must also take place in the societal rank of values. It cannot stand apart from the market process but must, rather, be part of it. The allegation that the markets are never “self-regulating” simply amounts to stating that people are not making the correct choices with resources that they own whereas the budding critic does. If the market is not “self-regulating” then, as we explained earlier, it means that people are not self-regulating and must be forced into making choices other than the ones that they prefer.

Earlier we explained how one of the tragic ironies of regulation is that it creates the very need for its own existence by perpetuating rash and foolish purchasing choices as people come to believe that the state is there to protect them from any possible negative consequence. Unfortunately, such a perpetuation is present on the supply side of the market as well. An increasing regulatory code heaps onto the shoulders of vendors increasing costs of compliance with that code. As well as spending money on market research, developing their products and targeting their advertising, prospective entrepreneurs not only have to hire armies of lawyers to ensure that they are complying with the regulatory code but very often the regulatory code itself will require the business to make an additional outlay – such as the requirement to publish extra information. The costs of compliance with regulation are more easily borne by large, established businesses yet they may be devastating to small start-ups or entrepreneurs with limited capital. For example, in a report for the Office of Advocacy of the U.S. Small Business Administration, Nicole and Mark Crain of Lafayette University calculated that the per-employee cost of federal regulatory compliance was $10,585 for businesses with nineteen or fewer employees, but only $7,755 for companies with five hundred or more. It is for this reason why regulation is, in fact, favoured rather than opposed by large, established businesses – for it creates a cosy cartel between business and the state which shuts out most prospects of new competition while at the same time saving face when they duly comply with these regulations for the “benefit of the consumer”. However, such stifling of competition is what creates some of the very problems that regulations are supposed to solve – poor provision of information, poor quality, and poor safety features. The result, therefore, is that regulation needs to increase in order to produce standards of consumer service that the free market would have produced by itself – except now with the deduction of the enormous cost of passing, complying and monitoring the said regulations. All of the supposed pitfalls and excesses of capitalism are therefore not a product of the free market but are, in fact, spawned by the regulatory state – and the response is supposed to be more regulation and increased oversight by a growing state bureaucracy. The most complained about industries in the world today, such as utilities, public transport and healthcare, supposedly demonstrate the tragedy of allowing private actors to provide so-called “essential” goods and services. Yet it is those very industries that suffer from the heaviest state interference.

State regulation of the free market is, therefore, a truly self-perpetuating, self-growing monstrosity, creating the very problems it seeks to solve – lazy, careless, and thoughtless purchasing choices on the one hand, and an oligarchy of large, greedy, unscrupulous businesses on the other, stifling economic progress and innovation in favour of micromanagement by a faceless bureaucracy. It is also a symptom of the globalist elitist agenda to unify and harmonise state bureaucracies into international trade agreements and treaties so that the reach of control and top-down direction does not stop at the state border – an agenda that was recently rebuffed (although will probably not be solved) by both the Brexit vote and the election of Donald Trump as the next US President. If we wish to regain economic progress and win back our liberty then destroying the regulatory state must be a high priority.


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Capitalism and Consumerism

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The Christmas shopping period, beginning almost with a starter pistol on so-called “Black Friday” in November and culminating in the January sales, is one of the busiest in the year for the retail industry. The period of celebration, feasting and gift giving is critical to the annual revenue and profits of hundreds of consumer-facing industries, with the volume of spending increasing by more than 50% according to some estimates.

Against all of this is the charge that consumerism and capitalism has distorted and destroyed the older traditions and practices of the holiday season. What was once a period of religious observance and a time for more modest celebrations with one’s friends and family has mutated into a mass shopping frenzy where people care more about what they can buy rather than on the meaning and significance of Christmas. Greedy retailers encourage us to spend increasing amounts of money on clothes, furniture, electronics, and entertainment that most of us probably do not need. We merrily guzzle on tons of unhealthy sugary and fattening food and alcohol which simply expand our waistlines through a myriad of parties and get-togethers during the festive period. Once we have stuffed ourselves we then happily “invest” in our new year’s resolutions by forking out on so-called “detox” and exercise regimens, healthy foods and tight fitting clothes to the very same peddlers who made us fat in the first place.

Moreover, there can be little doubt that this “consumerism” has changed the traditions of the winter period in the past few generations, as retailers attempt to fill the long void between the end of summer and December 25th. Advent was previously a time of preparation and observance, during which the last of the harvest foods were brought in and preserved ready for the long winter ahead. Christmas, on the other hand, was the beginning of period of feasting and celebration that brought cheer and merriment to the cold, dark winter days which lasted until the arrival of Lent in mid to late February. With the evenings then growing lighter and the temperature warmer the inducement to “giving up” after the previous period of luxuriant consumption was altogether easier. Now, however, the period of celebration – parties, get-togethers and splashing out – has shifted to December and culminates, rather than commences, on Christmas Day. After that there is little more to look forward to other than new year’s celebrations, after which – at the darkest, deadest and least conducive period of the year – we are suddenly expected to start afresh by going to the gym and slimming down. It is for this reason that Christmas seems to come earlier every year. As so much is now packed into just three or four weeks of what is often still late Autumn weather all of the planning and preparation spills into the earlier months – sometimes, to the discontent of many traditionalists, as early as September when mince pies and Christmas crackers can be spotted in the supermarkets.

If we assume that this type of so-called consumerism is a bad thing and has, indeed, served to distort and ruin treasured seasonal traditions, advocates of the free market are faced with the charge that consumerism is a product of capitalism; that our greater ability to produce and raise the standard of living rather than live in a society characterised by mud huts and starvation has made us all slaves to materialism with no regard for anything deeper or more meaningful. (Never mind that capitalism, perversely, is also blamed for increasing the plight of the poor and benefiting only the rich. Critics of capitalism are seldom consistent in their indictments). The proper retort to such a charge is that capitalism is, in fact, the very opposite of consumerism, or rather that consumerism is the effect of a social order that is anti-capitalist. First, capitalism and the free market orders are distinguished by the fact that they involve the accumulation of capital – in other words a relatively high percentage of current income is saved and invested in capital goods that will only later yield a higher production of consumer goods. Consumerism, however, is distinguished by people not saving or investing, and instead deciding to spend a relatively greater proportion of their current incomes on consumer goods. In the lexicon of economics, a capitalist society is one of low time preference and wealth accumulation whereas a consumerist society is one of high time preference and wealth destruction. The worst case of consumerism, and one in which we partly live, is where people consume more than their current incomes on consumer goods by borrowing money. It is true, of course, that capitalism creates the wherewithal to produce a relatively greater number of consumer goods than any other social order and that those living in a capitalist society will, in fact, consume more than those living in a non-capitalist society. However, the charge of anti-consumerism is nothing to do with the absolute volume of consumer goods that are purchased. Rather, the problem is the obsession with and focus on consumption of whatever there is to consume at the expense of anything else. Consumerism, we might say, is a phenomenon of a previously capitalist-oriented society that has turned its efforts away from saving and capital accumulation and towards the consumption of everything that has thus far been produced – possibly even the consumption of accumulated capital.

From where does the inducement to this consumerism come? It is true, of course, that nothing about capitalism prevents people from turning towards desires for excessive consumption; but neither, too, does it encourage it. To the extent, therefore, that the phenomenon is widespread there must be some kind of systemic influence towards consumerism other than anything to do with capitalism itself. This systemic influence is the very opposite of capitalism, or rather, we might say, perversions of capitalist orders – the false economic theories and destructive economic practices of the state. These false economic theories, such as varieties of Keynesianism, promote consumption as the foundation of economic growth, whereas abstinence from consumption and saving are painted as cumulatively destructive practices. National accounting figures, which do little more than present the economy as one, giant number which, if rising, represents a good state of affairs and, if falling, represents a perilous state of affairs, have inbuilt consumption biases which give the illusion that consumption leads to prosperity. A large portion of so-called Gross Domestic Product (GDP) consists of consumption spending and government spending (the latter of which, by its nature, is also always consumption spending). Boost these figures and up goes the standard of living, so we are told. Moreover, the obsession with avoiding any kind of “double counting” means that a significant proportion of what is truly the gross annual product, such as investment in early stage capital goods, are simply discounted, further inflating the importance of consumption spending. Because of all this it is possible to have prosperous GDP figures, “moderate” interest rates and what appears to be relatively low price inflation that masks underlying economic distortions during a boom phase – such as was experienced in the period leading up to the 2008 financial crisis. And such financial crises are themselves, of course, the result of destructive economic practices induced by the state, such as the forced lowering of interest rates and the expansion of the volume of credit. Such acts do, of course, cause the ill-fated boom phase of the business cycle but they also encourage our main bugbear here which is consumerism. When people see their nominal wages and asset prices rising rapidly – something that would not happen in a genuine free market, which is distinguished by increasing real wages – they believe that they are wealthier than they actually are and thus they are duped into thinking that they have a greater proportion of their incomes available for consumption spending. If boosting their spending on consumer goods was not bad enough, however, they even begin to secure loans and borrowings against the rising value of their assets in order to further fuel increased consumption. In November of 2015, average debt per person in the UK stood at £28,877 – 113% of average earnings. Indeed, credit expansion anyway encourages a debt fuelled society – apart from actually creating the money to be loaned out, the accompanying price inflation makes debt-based finance more attractive than funding expenditure out of equity. The illusion that money is cheap, that everything can be bought now and that we do not need to be prudent and patient simply exacerbates the high time preference, consumerist society.

As we mentioned earlier, nothing about a free society will ever prevent people from becoming consumerist in the same was that it doesn’t stop people from becoming drug users or prostitutes or from engaging in other non-aggressive but otherwise illicit activities. However, we can make a case for saying that such acts are always likely to be more prevalent in the kind of high time preference society that the state encourages. A high incidence of drug use and prostitution, for example, indicates that people prefer a “quick fix” now and are not willing to wait for good feelings and pleasurable experiences to culminate as a result of longer or more difficult (but ultimately more rewarding) endeavours such as exercise and building strong relationships. And, as we have argued elsewhere, given that wealth in a free society accumulates to those who best serve the needs of consumers, more conservative virtues such as patience, prudence, trustworthiness, reliability, good taste and judgment, are likely to be the hallmarks of a capitalist society rather than substance abuse and casual sex.

If, therefore, consumerism is to be deplored we should focus our ire not at the capitalist system that simply permits us to enjoy the Christmas period however we want (and, moreover, creates the wherewithal for us to do so – plump roast turkeys on the table of almost every family on Christmas Day is a relatively new phenomenon). Instead, we should direct it at the state whose false prophets and destructive practices turn us from a society of wealth creators to one of wealth destroyers.

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“Capitalism – A Treatise on Economics” by George Reisman – A Review

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It is not often that the present author is moved to review any particular publication by a specific author, let alone one that was published nearly twenty years ago. However, Capitalism by George Reisman, at more than one thousand pages long, is the first major treatise that is at least related to the “Austrian” tradition since the publication of Murray N Rothbard’s Man, Economy and State in 1962.

Although Reisman is a contemporary of Rothbard and a fellow student of Ludwig von Mises, Reisman’s approach to economics is markedly different from either. Indeed, armed solely with knowledge of his pedigree one might be forgiven for wondering why more attention has not been directed towards to Reisman’s work from within “Austrian” circles. It is only after having read this treatise that one can see why. Although Reisman claims that Mises is his primary intellectual influence, there is very little of this treatise that could be regarded as distinctly Misesian. Rather, Reisman’s direct influences are the classical economists (especially Smith, Ricardo and J S Mill, upon whom he relies for support to an extent far beyond his reliance upon Mises) and Ayn Rand. Reisman specifically rejects the categorisation of economics as the science of human action, and prefers, instead, to regard it as “the science that studies the production of wealth under the division of labour”. He therefore willingly abandons any analysis of individual values, means, ends, and choices, and restores economic theory to the study of holistic aggregates; indeed we might say that his definition of economics, which views wealth as an entity possessing some kind of objectively determinable magnitude, demands such a restriction. Reisman positions the businessman, rather than the consumer, as the centre of the economic system, stating that consumers (as a whole) are largely dependent upon businessmen (as a whole) rather than vice versa. While, according to Reisman, consumers provide the direction of economic activity (i.e. the precise direction of resources to fulfilling specific industries), businessmen and capitalists are responsible for its extent, i.e. the limits of saving and capital investment. In other words, it is the decisions of capitalists that determine the extent of “economic progress” (a term Reisman prefers to “economic growth”) rather than those of consumers. A corollary of this is that production and producers are reinstated as the keystones of economic activity rather than consumption and consumers (there is at least an implication in parts of the treatise that production is good and proper whereas consumption is bad and wasteful, although this is much muted compared to the same in Reisman’s classical influences). Furthermore, it is clear that Reisman does not regard his approach to economics as a wertfrei science and, instead, believes his economic theory to be a rigorous promoter and defender of the capitalist system – an attitude that cannot be avoided by his definition of economics as the study of the accumulation of wealth under the division of labour, a division that he says is only possible under private ownership of the means of production. Thus, in Reisman’s world, a discussion of economics is a discussion of capitalism which, presumably, explains the book’s title.

What can we say about Reisman’s approach? Without beating about the bush we must state at the outset that Reisman, who is thoroughly acquainted with “Austrian” economics, has jettisoned a tremendous degree of sound theoretical understanding from the science. Although Reisman, who self-identifies as an “Austro-classical” economist, endeavours to restore to economics many of the (in his opinion) sound doctrines of the classical economists that were allegedly rejected following the discovery of the law of marginal utility and the backlash against Marxism, we must conclude that the result is something of a retrogression rather than a synthesis of two, hitherto quite disparate, schools of thought. In Reisman’s world, the achievement of all ends and their associated costs never advance deeper than the objective measurement of exchanges for money. He never advances any exposition of individual ends and subjective costs (indeed, he explicitly rejects the doctrine of opportunity cost). Hence the entire purpose of the economic system as serving the needs of individuals and the types of decisions that individuals must make in order to achieve these ends is missing, subsumed by the supposedly limitless need of man as a whole to accumulate “wealth” in perpetuity. In other words, Reisman’s restoration of the primacy of the production of “wealth” overlooks the fact that all production is ultimately aimed at providing for consumers and that it is the ends of consumers to which the economic system is geared. It is perfectly consistent to state, as does the wertfrei “Austrian” school, that the purpose of all economic endeavour is to provide for consumption while on the other hand remaining firm that the means of achieving this consumption can only be served by increased production. Therefore, while we can hold that the desire for consumption is the ultimate cause of economic progress, we can also state that production is the proximate cause. Thus, while Reisman’s categorisation of economic theories under the headings of either “productionism” or “consumptionism” – the former of which involves the promotion and encouragement of increased production as the means towards economic progress, the latter the promotion and encouragement of increased consumption – provides an instant and convincing cognitive aid, it obscures the clarity afforded by this insight of the “Austrian” school.

Furthermore, Reisman’s repositioning of the capitalist/businessman as the driver of economic progress relies upon capitalists providing the bulk of investment funds, i.e. that it is the consumption/saving decisions primarily of businessmen that determines the extent of economic progress. He argues that the wages of labourers do not provide a significant source of investment funds and are usually consumed either immediately or are saved in order to purchase durable consumer goods such as housing or automobiles. Any investment saving that labourers do happen to undertake is likely to be wholly disinvested at retirement, thus netting out the saving of younger generations. However, there is no reason for Reisman to think that this this must be the case. It is just as possible for investment funds to come from the savings of everyday individuals that are then lent to businessmen for them to deploy in their enterprises via a conduit such as bank savings accounts (and such a view would greatly undermine any opinion that capitalism keeps the masses in servitude as wage labour). The distinctive role of the businessman is that he provides entrepreneurial talent in order to generate economic progress by directing those saved funds to where they are most urgently desired by consumers. Yet Reisman’s treatise lacks any extensive theory of entrepreneurship and only passively recognises the need for superior decision-making in order to fulfil the ends of consumers. This lacuna in Reisman’s theory means that in order to position the businessman as the driver of economic progress he has to paint him as the primary provider of investment funds. This contrasts greatly with Reisman’s mentor, Mises, who makes entrepreneurship a hallmark of Human Action, thus giving us an insight into the economic significance of the businessman that extends far beyond the fact that he simply didn’t consume his wealth. (Some of Reisman’s views on what determines an individual’s consumption/investment preferences, which inform his theory here, are also incorrect and we will explore these below). In any case, however, Reisman seems to support his theory through a blurring of economic categories, such as labourers, consumers, capitalists, etc. (something which, irritatingly, is done all too frequently). In reality, all individual people in the economy participate in different categories at different times – a man is clearly a labourer when he goes to work, a consumer when he spends his wages in the shops, and a saver when he buys a corporate bond. However, when we are discussing, for the purposes of conceptual clarity, the roles of individuals in these economic categories, we isolate those specific roles from other categories and thus we always talk of labourers qua labourers and consumers qua consumers, etc. So even if it may happen be true that the particular people who are businessmen are responsible for the greater part of saving and investment, businessmen are consumers too and considering them as consumers qua consumers it is their decision to refuse to consume their wealth today in favour of accumulating greater wealth for consumption tomorrow that provides the source of investment funds. It is therefore true to state that it is the choices of consumers who determine both the direction and extent of economic progress. Moreover, as Mises also recognises, any consumer who is currently a wage earner can transform himself into a businessman, entrepreneur or capitalist by saving and investing his wages (while, equally and oppositely of course, any businessman who decides to consume his fortune may end up as a wage earner).

Finally, it is one thing to state that the preoccupation of the economic activity of any one (or even most) individuals may be with the accumulation and augmentation of their own wealth. But it does not follow from this that the science of economics itself concerns the accumulation of wealth. Animals preoccupy themselves with the need to attain food and shelter but this does not mean that the focus of zoology is with the achievement of these things.

Examining Reisman’s treatise on its own, non-wertfrei terms as a rigorous defence of the capitalist system, much of its earlier part is a detailed offence against the fallacies of socialism, collectivism, interventionism and environmentalism (and later, Keynesianism and inflationism). These devastating, if often heavy handed, critiques are likely to be viewed as by Austro-libertarians as Reisman’s greatest achievement in this work, even if some of it was previously published as The Government Against the Economy. A specific and lengthy chapter is possibly the most passionate assault against the ecology movement, a chapter that could easily be expanded and published as a separate treatise (Reisman’s stress of the anti-human zeal of environmentalism resonates with that of environmentalists, such as former Greenpeace Canada President Patrick Moore, who have become disillusioned with the movement). Reisman’s explanation of various forms of government intervention, such as price fixing, with reference to specific notable examples such as the oil recession of the 1970s, in which he traces out all of the effects (and effects of alternatives to) government meddling have rarely been matched. Yet much of the remainder of Reisman’s exposition does not in fact read as a promotion or a defence of the capitalist system; rather it is more akin to an aggregative, accountancy-laden explanation of what the capitalist system does, much like a description of some giant machine that swallows up inputs measured in numbers and churns out some kind of output, also measured in numbers. Reisman categorises an endeavour as productive according to its ability to earn money voluntarily through exchange. Hence all government functions, relying upon taxation, must necessarily be classified as consumption and not production. In other words, government can never produce and must always be a leech on the genuinely productive, capitalist system. Moreover, his excellent critique of socialism recognises that socialism must entail tyranny and a replacement of the ends sought by individuals with the ends sought by leaders. However, Reisman’s aggregative, accountancy approach never builds upon this insight. In the depths of the latter half of the treatise one almost forgets any connection between these accounting entries and how the capitalist economy serves the needs of individual people. One of Reisman’s stated aims in the treatise is to show how a proper understanding of the capitalist system should prevent one from feeling any kind of “alienation” from or subjugation by the capitalist system – something which Reisman comes closest to achieving through his analysis of the division of labour. Yet in the main it would appear that the Mises-Rothbard approach of detailing the economy as a network of bilateral, voluntary exchanges between individual people striving to meet their own needs through voluntary co-operation (and how these disparate and often conflicting goals and purposes nevertheless mesh into a harmonious, productive society) is much more conducive to achieving this than is Reisman’s aggregative, accountancy method. While it is true that the ability of capitalism to manifestly increase the standard of living and the degree of material wealth lends it a tremendous amount of moral weight, we can suggest here without too much elaboration that any rigorous defence of capitalism and, moreover, freedom can proceed only by focussing on the primacy of the needs of each individual person, not all of which can be measured or attained though objectively viewable exchanges for money. This omission in Reisman’s work also weakens the distinctly economic flavour of this treatise, as individual choices, desires, wants, decisions and actions do not seem to matter.

Turning now to some of Reisman’s theoretical contributions to the science of economics, there are two that stand out in particular. The first is his attempted demolition of the “conceptual framework” of the Marxist exploitation theory by asserting the primacy of profit rather than of wages. In Reisman’s view, critics of Marxism, including Böhm-Bawerk, have accepted the categorisation, originating with Adam Smith, of profits paid to capitalists as deductions from wages, and have sought explanations in order to justify this deduction. Reisman, however, asserts that wages, paid to labourers, are, in fact, a deduction from profits. If profits are calculated by subtracting business costs from business revenue, it is clear that if a person undertakes an enterprise to achieve, say, 100 units of revenue then every monetary outlay he expends in order to achieve that 100 units of revenue must count as a deduction from it. The fewer costs he has the more profit he is left with. Thus it is profits that represent the primary economic income, not wages. It is conceivable for the economic system to have profits but not wages in the event that every individual person operated as a sole trader and employed no other individuals. If, however, a businessman hires labourers to assist in his enterprise, the wages he must pay to these workers for their assistance are deducted from the ultimate sales revenues. Therefore, according to Reisman, wages only appear in the economic system on account of the help that other people provide to a businessman’s enterprise, and their help stakes a claim on his revenue. Thus it is wages that are deducted from profits, not vice-versa.

Whatever the merits of this view we must conclude that, to the dyed-in-the-wool Marxist, it is likely to be beside the point. The source of contention in the exploitation theory is that the businessman doesn’t do anything and simply leeches off the productivity of the worker; in other words by hiring labourers the businessman simply abdicates any participation in the act of production yet still gains an income. Reisman himself provides the answer to this by pointing out that labour is not the only source of productivity in a division-of-labour society and that it is, in fact, decision making, risk-taking, management and oversight that are also essential – in other words, entrepreneurship. And yet, as we noted, any extensive treatment of entrepreneurship is precisely what is missing from Reisman’s theory. Therefore, it must be submitted that an understanding of entrepreneurial profit and loss and the insulation of the labourer from business risk coupled with the time preference theory of interest provides a more effective demolition of Marxism than the primacy of profit theory which, if correct, provides only additional ammunition for it.

This brings us to Reisman’s next theoretical contribution which is his net-consumption/net-investment theory of aggregate profits, profits which he tries to explain in an environment of an unchanging supply and flow of money. The attempt to explain profit in terms of physical goods is relatively straightforward. Goods, of course, can increase or decrease and thus there can be absolutely more (profits) or fewer (losses) of them across society as a whole. We can also understand clearly, across the time structure of production, how the consumption of a smaller quantity of physical goods can be foregone today in order to produce a larger quantity of goods tomorrow. This is not so when it comes to accounting for profits and losses in terms of money which is assumed to be fixed in supply and flow. For every transfer of money that represents a credit to ones businessman’s income must show up as a corresponding debit to another businessman’s costs. Hence, while some individual businesses would earn profits and others would suffer losses, all profits and losses across the economy as a whole would net out and hence any question of aggregate profit would be impossible. The only method of solving this conundrum is to somehow, on the societal balance sheet, create a credit entry to income/equity without a corresponding debit entry to costs. It is the explanation of how this is possible that Reisman sets out to achieve.

The first element of aggregate profits – “net consumption” – derives from the fact that business revenues from consumption spending by labourers (and, as we noted, Reisman categorises all spending by labourers as consumption spending) shows up also as a business cost in the form of wage payments. Therefore, revenue and cost cancel each other out on the societal income statement. Similarly, business to business spending will be counted as both an equal and opposite revenue and cost and will net to zero. However, “the payment of dividends by corporations, the draw of funds by partners and proprietors from their firms, and the payment of interest by business firms” (which Reisman regards as “transfers”) to business owners, which provide the latter with a source of consumption spending, does not show up as a business cost yet does, once spent, show up as a business revenue. Thus the rate of profit is determined solely by the desire of the capitalists to consume. This element of profit has, Reisman claims, the ability of providing continued aggregate profits in an environment of unchanging money. For example, if the volume of spending is 1000 units of money each period, business costs could be 900 while business revenues could be 1000 and profits 100 in each and every period. (Reisman uses similar reasoning to explain how the rate of profit is increased by taxation as all taxation is consumption spending). The second element, “net investment”, derives from the fact that business spending on assets to produce business revenue are capitalised as assets and only later depreciated incrementally as a business cost. Thus, in an environment where the volume of spending is the same, business revenue exceeds business cost. For example, if 100 units of money are expended on capital assets, 800 units are spent on business costs, and there are 1000 units of business revenue, profits would be 200 as the 100 units spend on capital assets are not charged as a cost. Reisman believes that net investment provides a finite outlet for aggregate profit because, eventually, depreciation charges from assets previously capitalised will equal the value of new assets capitalised. For example, if 100 units of monetary spending on assets per year are capitalised and then depreciated at an uncompounded, annual rate of 10%, depreciation charges will be 10 units in year one, 20 units in year two, 30 units in year three, and so on until, in year 10, depreciation charges will exactly equal the 100 units of additional investment and so net-investment will provide no source of aggregate profit in that year. Thus, Reisman believes, only net consumption is capable of providing continuous, aggregate profits period after period. Net consumption and net investment are, however, joined at the hip. Reduced net consumption provides increasing funds for net investment to be capitalised on the balance sheet and charged as business costs only at increasingly remote points in the future.

What can we say about this theory? It should not be surprising to “Austrians” that Reisman’s theory is based upon net-consumption and net-investment as it those elements that are determined by the “Austrian” theory of time preference, which affects the rate of interest. (What Reisman refers to as “profit” is what most “Austrians” would refer to as “interest” – Reisman offers no explicit distinction between entrepreneurial profit and loss on the one hand and what “Austrians” would regard as interest on the other). Yet Reisman regards his theory as standing in opposition to the time preference theory and, moreover, the older productivity theory of interest. However, Reisman’s approach, characterised as simply a description of accountancy practices and the summation of money flows, does not challenge the time preference theory at all. The primary question of profit and interest that is answered by this latter theory is why do businessmen not impute the full value of the final product to the factors of production. In other words, why, even after businessmen are compensated for their managerial or oversight activities as a factor of production, is there always a further residual surplus that is not eliminated by competitive bidding amongst entrepreneurs? Why is there, to use Reisman’s terminology, a “going rate of profit” at all? The net-consumption/net-investment theory, while explaining that rises in net consumption will increase the rate of profit while reductions in them will lower it, only really explains how, from an accounting point of view, profits are possible. Reisman offers no extended treatment of the motivations of capitalists in paying (and of labourers in accepting) a sum lower than the total of business revenues and thus it is difficult to regard this as a distinctly economic theory. A more convincing explanation of his theory would detail how, with decreasing time preference, more funds are advanced to factors of production yielding revenue in the future, thus diminishing net consumption and the rate of profit, while these expenditures will be capitalised at increasingly higher amounts, depending on the time period when they come to fruition, relative to the ultimate business revenue that is earned. Thus Reisman’s accountancy-laden approach would, in this way, be fully reconciled with the “Austrian” approach to profit, or, rather, to what “Austrians” would call interest.

When Reisman does address the motivations that determine net-consumption and net-investment he does so erroneously. Reisman defines time preference as the determinant of “the proportions in which people devote their income and wealth to present consumption versus provision for the future.” It is Reisman’s link between this posited desire to provide for the future and net-investment that causes him to declare that net investment can provide only a limited contribution to net profit. To quote: “As capital and savings accumulate relative to income, the need and desire of people to increase their accumulated capital and savings still further relative to their income diminishes, while their desire to consume their income correspondingly increases”. In other words, the more saving and capital people possess the more they have provided for the future and thus productive expenditure will fall and consumption will rise, choking off net investment in the form of further additions to the asset side of the balance sheet. Thus depreciation charges begin to equalise new investments and aggregate profits from net-investment begin to fall. This view, however, is mistaken. Time preference has nothing to do with the desire of people to provide for the future. The need to provide for the future is always a present end just like any other and could be achieved by plain saving rather than investment. Time preference, rather, is the rate at which individuals prefer a larger quantity of goods available at some point in the future ahead of a smaller quantity of goods available today. It is perfectly possible for people to continue to invest sums of capital that will not produce consumer goods for well after they are deceased. Indeed, this is precisely why people have inheritances to bequeath. Many of the buildings, factories and infrastructure we have today were created not in our own lifetimes but were handed down to us from past generations. And it is further possible that capital accumulation and technological progress, which Reisman himself stresses enhances the ability to produce capital goods, will enable the production of capital goods that last further and further into the future. People would not even need to create capital goods that last so long with the purpose that they do so – in other words they could be perfectly limited in their own time horizons and yet still produce capital goods that yield a product well after the elapse of this time horizon. Let’s say, for example, that the current rate of time preference means that the produce from all assets appearing after thirty years hence is fully discounted to zero. In other words, only what the assets can produce in the next thirty years is valuable to present persons. If a capital good was created that could yield produce for sixty years, after the elapse of each year, another year’s discounted produce would be capitalised as this year is drawn into the thirty year time horizon. Therefore, such assets will provide a continued source of credits to business equity (and, thus, profits) without corresponding business costs. This is precisely the case with some of the most valuable patches of urban land which, for all intents and purposes, will go on producing well beyond the lifetimes and time horizons of any living person. Thus there is no reason for net-investment to be so limited in its contribution to aggregate profits in the environment of unchanging money. Moreover, we can see in this way how accumulating, aggregate profits that are capitalised for longer and longer periods is the hallmark of an economically progressing society – one where more and more capital is invested for longer – while the opposite, aggregate losses, represents retrogression through capital consumption.

Finally, as we noted above, there is no reason to discount saving by labourers a source of investment funds. This would divert spending from business revenue as the funds would be lent to businesses who would then spend it on “productive expenditure”. Without any corresponding business revenue the rate of profit would fall. (Thus we can see why increased funds that are made available for lending must be made at increasingly lower rates of interest).

There are one or two further disagreements we can cite here. First, “Austrian” business cycle theory, the jewel in the crown of “Austrianism”, is never explained at length and instead takes its place in a wider treatment of the effects of inflation. Second, his treatment of neoclassical price theory is too aggregative and does not explain how individual bidders and suppliers bring about a harmony between the quantity demanded and the quantity supplied. Third, as in his critique of the time preference theory of interest, Reisman often perceives differences or disagreements where there are none, such as that alleged between his productivity theory of wages and the marginal productivity theory of wages, the latter of which he describes incorrectly. And finally, in spite of having been the translator of Mises’ Epistemological Problems of Economics, Reisman has little to say concerning method – something which perhaps descends from his rejection of economics as the science of human action, which underpins Mises’ methodological dualism that divides economics from the natural sciences.

Overall, therefore, the question of whether Reisman’s approach to economics has successfully synthesised the “Austrian” and classical schools, and, moreover provided a progressive outlook for the science of economics must, regrettably, be answered in the negative. Rather, Reisman’s positive economic theory in this treatise comes across more as a restatement and re-polishing of classical economics (with some corrections to that school of thought), peppered with insights from neoclassicism and the “Austrian” school. Reisman’s rejection of the primacy of human action as the subject matter of economics has been at the expense of not only losing a great deal of theoretical understanding in the wertfrei science that this affords, but also weakening any positive promotion for capitalism and freedom.

Nevertheless, while this review has been mainly been critical of Reisman’s positive economic theory, we must end by celebrating the fact that our author has, in this treatise, many great things to say concerning socialism, environmentalism, interventionism, inflationism, Keynesianism and all other manner of false doctrines rejected by “Austrians” and libertarians alike. What Reisman has put to paper here are among the finest critical analyses of these areas ever written and, even if one cannot agree with Reisman’s specific, economic outlook, these contributions alone place Reisman in the top rank of economists whose work should be studied avidly.

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Capitalism – the Real “Third Way”

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Conventional understanding views economic history as some kind of big battle between unfettered capitalism on the one hand (as supposedly demonstrated by the late nineteenth to early twentieth century United States) and full blown socialism on the other (as the Soviet Union was supposed to have been). Allegedly, both extremes have their positive aspects but are, individually, weighed down by their supposed negative ones. So capitalism, for example, is able to raise the standard of living by several-fold in a person’s lifetime and showers us with more goods than we could possibly imagine. On the other hand, so this conventional belief goes, it promotes a consumerist, materialist and greedy “sink or swim” society that has no regard for the unfortunate and the least well off. Hence the vision of the US as the kind of place where you can buy whatever you want but if you happen to be poor or become afflicted with an illness then you are on your own. Socialism, however, stagnates and reverses the standard of living to the extent that nothing ever works and the population is mired in permanent poverty. On the other hand, so this conventional wisdom dictates, everyone is apparently more equal and the goods that they do manage to produce are distributed “fairly” across society. (Curiously this understanding of economic history seldom tends to acknowledge the tyrannous nature of socialism which, in the Soviet Union, resulted in the deaths of tens of millions of people – one might ask whether this negative feature is so off the scale that it would completely obliterate the chance of socialism being taken seriously as an ethical proposition at all?). Thus, in order to create the best society, we allegedly have to try and combine the economic growth of capitalism with the supposed equality and fairness of socialism, discarding the negative aspects of those two systems in order to arrive at we have today – a social democracy, the “third way”, an economic order that is “somewhere in the middle” between greed and need.

The first problem with this conventional thinking is that neither of the two polar opposites have ever really existed, or at least not in the manner that their proponents imagine them. Capitalism has never existed because government interference in the economy has always been present, simply in lesser or greater quantities at different points in history. Often the interferences at lesser points have provided the catalyst for more intense government activity in later periods, such as the booms and busts and the stop-start flirtation with centralised banking in the last half of the nineteenth century paving the way for the Federal Reserve System that dawned in 1913 just in time to print enough money to pay for World War One. Socialism has never existed because, as Ludwig von Mises so convincingly told us nearly one hundred years ago, it is, quite literally, impossible to build a socialist commonwealth without economic calculation. The Soviet Union survived to a large extent because it could refer to international markets for prices for the factors of production which enabled it to provide at least some kind of functioning economy, albeit at a vastly reduced rate of output compared to the rest of the world.

The real polar opposites that we have endured in the post-Renaissance era are not unfettered capitalism and unfettered socialism at all, but, rather, state corporatism and state socialism. State corporatism, the alignment between government and business, has its epitome in fascist economies such as Nazi Germany and Fascist Italy, but it describes also the imperialism of nineteenth century Britain and the evolution of the United States, which received corporatist boosts during the War between the States, World War I and the New Deal, the latter of which, modelled on Fascist Italy, has successfully sealed the fate of the US as a permanent “corp-tocracy”. State socialism, on the other hand, is not the ownership and use of the productive assets by all for the benefit of all. Rather, it is their ownership by the government and the bureaucracy with productive capacity devoted to their ends, such as missile parades in Red Square, rather than the ends desired by the people, with the people themselves treated as expendable public slaves whose disobedience warrants a one way trip to the gulag.

Second, the blend that has actually been achieved in modern government is not between capitalism on the one hand and socialism on the other. Rather, it is between state corporatism and a democratised form of state socialism. On the state corporatist side, we have central banks printing massive quantities of money, dishing it out to Wall Street which expands credit, creating artificial booms and busts and lining the pockets of the financiers. At the same time large swathes of industry are subject to government patronage and privilege to the extent that in sectors such as energy, transportation, finance, healthcare, and so on there is no genuine free competition. To top it all off, armaments manufacturers profit from the continued proliferation of invented and unjustified foreign wars. On the state socialist side, however, we have politicians bribing voters with other people’s money, and demands for social justice, fairness and equality, anti-discrimination are met through the forced redistribution of wealth and income.

The fissure between these two extremes has not produced any kind of successful mixed economy that selects the best aspects of each system at all. Rather, it has resulted in some kind of bifurcated system that is based on antagonism and resentment. Those clamouring for state corporatism, fake privatisations and government support for business simply want to line their pockets while leaving everyone else to foot the bill. Those wanting state socialism, noting that state corporatism seems to do nothing except make the rich richer and the poor poorer, want to end the anti-democratic structure of state corporatism and return key industries to “public ownership”.

Third, if the two dominant social systems have been state corporatism and state socialism and the postulated “third way” of blending the two has failed, then what, we might ask, is the real third way? There are only three possibilities. First, unfettered socialism; second, unfettered capitalism; and third, a mixed economy of genuine socialism and genuine capitalism (what we might call “interventionism”).

The first option, socialism, is clearly a non-starter as its inability to perform economic calculations means that it is suitable only for bringing chaos out of order. A socialist economic order is no order at all; it is a disaster that would quickly relegate the human race to the Stone Age. The third option, interventionism, is also a non-starter as it produces distortions that must either lead to further interventions or to a complete abandonment of the intervention altogether. For example, if the government intervenes to set a price ceiling on a certain good that is below the market price the result, all else being equal, will clearly be a shortage of that good. The government therefore has one of two options in order to restore supply – to intervene further and take over the supply chain; or to abandon the price control. If it takes the first option, this requires further interventions in other industries which will create similar distortions and disarrays which will breed further interventions all the way until there is full government control over everything – i.e. socialism. Socialism, however, is impossible as so will collapse almost immediately. If it takes the second option, then capitalism is simply restored. In the opinion of the present author we are now reaching the apex of the so-called mixed economy where this decision will have to be made. Decades of excessive money printing and perpetuated malinvestment through the resulting credit expansion has driven financial markets to a zombie-like existence bathing in a sea of insolvency. We are now close to the point where governments will either have to completely socialise financial markets or abandon their policy of cheap credit and restore sound money and credit.

This leaves, then, only capitalism, the genuine free market, as the only prospective and sustainable economic order. Only capitalism, based upon voluntary trade resulting from each individual peacefully pursuing his purposes, is able to avoid the pitfalls of socialism, of the pseudo-capitalism in state corporatism, and of the pseudo equality and fairness of state socialism, all of which are based on force, fraud and antagonism. As we discussed before, all of the alleged pitfalls of capitalism – inequality, greed, selfishness, and so on – are not part of the capitalist system at all and are more appropriately assigned to one of the other systems where everyone attempts to live at the expense of everyone else. Only the restoration of a genuine free market capitalism can therefore lead to a peaceful and prosperous society.

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The Myth of Overpopulation

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Overpopulation, either locally or globally, is often blamed on a number of apparent problems from the shortage of particular (usually “essential”) resources all the way up to the outright poverty of entire continents. Although few governments, most notably the Chinese, have enacted any strict policies in order to control their populations (except with regards to immigration), factoids such as the allegation that, if every single human wanted to enjoy a Western lifestyle we would need something like a dozen earths, attempt to create an unwarranted degree of hysteria.

The myth of overpopulation rests on the belief that humanity is akin to some kind of cancer which, as it grows exponentially, devours a fixed or arithmetically growing pool of resources that must be shared between everyone who has been unfortunate enough to have been born. This would have been the case in a hand-to-mouth society that preceded capitalism and the division of labour. There was effectively no production and the birth of each individual person constituted merely another mouth to feed. In other words, an increase in population led to an increase in demand for consumption without any corresponding increase in production, thus putting pressure on the existing stock of resources that had to be shared by everyone. Nevertheless, when it comes to shortages of goods in local markets today we can surmise that even if there was a fixed or otherwise relatively limited pool of resources that everyone had to share we couldn’t pin the blame for shortages on such a fact. In a free society, a particular good might be very expensive but it should never be the case that we cannot find anything. As the population increases the price of resources would rise and thus choke off demand for the least valuable uses. Shortages, rather, are always the result of government price controls that try to create the illusion of abundance without the reality, decimating the current supply and obliterating any incentive to produce more. That aside, however, the blatant reality for a capitalist society marked by the division of labour is that there is not a fixed or arithmetically growing pool of wealth and resources, and that the whole purpose of such a society is to grow, exponentially, the amount of wealth that is available. Indeed, as we shall see, humanity has succeeded in this endeavour to only a fraction of its capacity.

When the first human being trod the virgin soil of the earth, he found himself in a situation of almost unrelenting poverty. Mother Nature, as anyone trapped for an extended period of time in the wilderness has discovered, is far from a kind host, providing very little (except air to breathe and fruit on wild trees) by way of resources that can be consumed immediately for very little effort. Yet all of the matter contained in every resource that we enjoy today – buildings, cars, refrigerators, televisions, computers, clothing, medicines, and so – was, give or take a little, right there at the beginning of the world’s existence. Strictly speaking, no human being has ever created anything – rather he has merely transformed matter from one thing into another. So why, if all this matter was there from the very start, weren’t these wonderful things available to our first human? The reason is, of course, that a human must apply his labour in order to change the matter available in the world into useful resources that fulfil his ends. Yet the work of one man with his unaided body alone was not sufficient to create all of the wonderful things that we enjoy today. Indeed, it might take a single human being an entire day to hunt or catch enough fish for just one meal before the process must be repeated the following day. How can this be limitation be overcome?

The first answer is quite simply the very bugbear that is complained about – an increased population. A greater number of humans can together lift and carry a far greater amount than one man alone. Several or many men building a house would accomplish the task in a far shorter time than one man alone. More importantly, however, the widening of the division of labour as the population grows ensures that production stays ahead of population growth. Additional humans constitute an additional demand for consumption – ten humans may require ten houses whereas one human would require only one. But the fact that these men are also producers means that each can now fill his day by specialising in a particular task. One man, devoid of the ability to specialise, may take a year to build one house and he would have to undertake every single activity related to the building work on his own. With ten men, however, two may specialise in lumber felling, another two in transport, some in building, and the task of one the men may be solely to produce food and other supplies for the men doing direct work on the houses. The result of this is a greater degree and concentration of knowledge and an increased perfection of technique and expertise in each task. The resulting time saving means that, whereas one man would take one year to build one house, ten men would less than one year to build ten houses. Thus the rate of house building overtakes the rate of the increase in population. We therefore see that the quantity of labour has a marked effect on the accumulation of wealth and the transformation of matter into useful economic resources, provided that a society is distinguished by capitalism and the division of labour. To further emphasise this point, it is the twin effect of the consumption demand of the additional people coupled with the fact that these people are also producers that makes an ever increasing widening of the division of labour possible. If ten houses have to be produced then it might not be possible for one man to concentrate on any single task in order to fill his day; he might have to work in installing the wiring, the plumbing and the wallpaper. If one hundred houses have to be built then he might be able to concentrate on plumbing alone. If one thousand houses are built then he might be able to specialise on plumbing just bathrooms whereas someone else works on plumbing kitchens, for instance. The ever increasing volume of demand from an increasing population therefore begats an ever increasing division of labour when that population is put to work, and with it come all the benefits of specialisation and expertise.

Second, although it is flexible, the human body is a relatively weak and feeble creature, capable of moving and lifting only a tiny amount of matter at any one time. Regardless, therefore, of the quantity of labour available we can see that fifty men carrying sacks on their back would fail to transport as many goods in as short a space of time as, say, a railway locomotive hauling some wagons. The power of labour is therefore a further limiting factor on the number of resources that can be enjoyed. This power can only be increased by accumulating ever greater amounts of capital. All such goods – machines, tools, vehicles, and so on – are, fundamentally, merely extensions of the human body that enable its labour to accomplish more than it otherwise would. A man with an axe can fell a greater a number of trees than a man whose body is unaided by this implement. For centuries, humans could not labour to extract oil from the ground and refine it into petroleum. Yet with the capital available to construct drilling apparatus, oil rigs and refineries this is no longer the case. Indeed, most direct labour today is not concerned with the production of consumption goods at all. Rather, it is devoted to the production, augmentation and improvement of capital goods. In short, it is directed towards increasing the power of labour.

What we begin to see, therefore, is that it is not necessarily the scarcity of resources burdened by an ever increasing population that is the real obstacle to the growth of wealth and economic progress; rather, it is the scarcity of labour and the power of that labour as represented by the stock of capital goods which serve to enhance it. Goods are, to be sure, the original source of scarcity. We apply our labour only because the available quantity of a given resource exists in insufficient supply relative to the ends to which it could be devoted. Yet the power of our labour is a significant compounding factor on the degree of scarcity that we must endure. My body may only have enough capability in order to fetch a few buckets of water from a nearby stream – yet more than three quarters of the globe is covered in water. It is because the power of my labour is relatively weak that most of this water is either too far away or of insufficient quality to serve me any practical end. Only be improving the power of my labour – by being able to move greater distances, lift heavier volumes and develop processes of purification – could I hope to enjoy more water.

Such a circumstance is not limited to such a clearly abundant resource such as water. The entire world, right from the depths of the core of the Earth all the way up to the stratosphere is densely packed with matter. Our labour has only ever been able to harness a mere fraction of these resources, mostly skimmed from the Earth’s crust. As time goes on however, as population increases and with it capital accumulation and the widening of the division of labour, we harness the ability to tap into more and more of these resources. Hence, mines and oil fields that were once too costly to drill are now drilled (and, indeed, are more productive than the most productive fields of yesteryear); such mines could eventually reach depths of miles rather feet; and valuable elements can now be extracted from more complex ores. There is no reason to believe that this process cannot continue. Even today, the sea contains traces of elements such as gold which, in their totality, amount to a far greater quantity than all of that ever mined from beneath the land – 20 million tons compared to 175,000 tons respectively. Yet our labour is insufficient to take advantage of this fact. Indeed the sea remains one of the greatest untapped resources available to us. Unlike private land settlement which led to a prosperous agriculture and exploitation of the land, government has pretty much closed off areas of the sea to the possibility of settlement, preventing the development of a full-fledged aquaculture and robbing us of the ability to exploit this wonderful gift of nature.

It is for this reason – the increasing power of labour – that all predictions of resource depletion as a result of overpopulation (not to mention the ridiculousness of disingenuous “facts” such as the allegation that twelve earths are required to give everyone a Western lifestyle) – have failed. In the well known Ehrlich-Simon wager, for instance, economist Julian Simon made a bet in 1980 with biologist Paul Ehrlich that the price of five metals of Ehrlich’s choosing would have declined in price ten years later – indicating increasing availability of resources rather than increasing scarcity. Simon won the bet outright, in spite of a population increase of 800 million during that decade. Other peddlers of the overpopulation thesis, such as Albert Allen Bartlett, have labelled the views presented here as “cornucopian” or “the new flat earth” – mythical, whimsical and not based on any serious scientific understanding. What these people share in common is that they simply do not account for the future economic viability of production from what are currently viewed as uneconomic resources. For the clear result is that as population has increased we have been able to apply more labour with a greater power of that labour to a greater number of the world’s resources in ways that we were not able to do before. The ultimate goal, needless to say, would be something akin to molecular engineering – the ability to transform worthless matter such as dirt, trash or even air – into valuable resources. The futuristic “replicators” on TV shows such as Star Trek can apparently conjure goods such as a fully cooked meal out of thin air; yet the science behind would not be too difficult to imagine. We have already harnessed the ability to transform matter into energy through processes such as combustion. We can envisage that one day we could do the reverse and transform energy into matter. An inedible sack of coal could end up as a fabulous meal on your dining table.

Overpopulation does, however, give the appearance of being a problem as a result of government interference. Above we noted above, additional consumption demand represented by an increasing population serves in increase wealth provided that the additional population are also producers and therefore will act so as to widen the division of labour and the accumulation of capital. Yet the actions of government serve to swell consumption while choking off production. Pressure on resources and industries therefore arises from government control of these things. Britain’s decrepit healthcare, energy and transport systems are bursting at the seams as a result of demand and increasing costs, a direct result of inefficiency combined with prices that are too low which serve to swell consumption demand in these industries. Government pays its citizens to produce babies and thus increase the population, while an increasing immigrant population today is induced not by the freedom to pursue one’s own goals and to better one’s own life for oneself through hard work and productivity, but, rather, by generous welfare states. All of this causes a rising population that contributes to consumption but very little by way of production. In other words, if you set up the economic system to make consumption as care free as possible and production as costly as it could be then the excess of consumption and a deficit of production will give the illusion of overpopulation. Government therefore begins to look on its citizens as pests and parasites, wanton consumers of precious resources that are desperately running out. Yet the problem is not with resources; rather the problem is with the ability of the government to swell the ranks of consumers and its inability to increase the power of labour, together with its incessant stifling of anyone else who tries to do so. Every additional person who is born in the world is another mouth to feed, another person who will demand the consumption of resources. Yet that person could also be a producer who will widen the division of labour and help to grow the capital stock. Government succeeds only in breeding the consumer in a man while totally destroying in him the producer.

Turning to a related aspect, the fact that whole continents, such as Africa, are mired in poverty has nothing to do with the allegation that the richer countries refuse to “share” their wealth. If the richer countries did not have their wealth, it would not mean that poorer countries would have more – the wealth simply would not have been produced, period. Indeed, whatever wealth that does exist in poor places is often the result of Western enterprise or outright gift. These places do not lack resources; rather, they lack the institutions of private property and voluntary exchange that enable capitalism and the division of labour to flourish, and with them a greater command of labour over resources. Indeed, many of these countries are proceeding down the wrong path by setting up welfare states, trade unions and Keynesian economic (mis)management overseen by democratic institutions which are, of course, the very things that are destroying the standard of living in the West. The West achieved its greatest accomplishments in a pre-democratic, pre-welfare state and pre-union age before Marxism and socialism succeeded in leading the onslaught against capitalism and private property.

What we can see, therefore, is that overpopulation is not a fundamental economic problem. It is only an apparent problem in a society that is hampered by government intervention and the stifling of private property rights, the division of labour and capital accumulation. However, even if population started to put pressure on resources when, in a capitalist society, we reached the (unlikely) point where we were regularly turning over all of the matter in existence to meet our ends – we would still conclude that this would not be a problem worthy of any serious attention. Or at the very least, it would certainly not be a problem that merited any centralised, government control. For as population increases relative to the supply of resources, the latter become more expensive. The cost of raising a child therefore itself becomes prohibitively more expense and people would need to choose between devoting ever more valuable resources to themselves or to their children. Indeed one of the first of such resources to exert this pressure may well be land, assuming we have not, by then, invented the ability to produce more of it artificially. We could, of course, build upwards and end up living in skyscrapers but people may prefer to breed less and have more land available to themselves rather than to their children. Such choices may serve to relieve, naturally, any exponential growth in population figures. Even if, though, people desired to keep on having more children it would only indicate that they prefer the company of children to enjoying more resources for themselves. There is no objective standard by which to complain about the result of such a choice. Nevertheless, even when it comes to the question of land, humanity is currently so far from this point that we hardly need to bother mentioning it, except to try and concede to the overpopulation thesis its best possible case.

The illusion of overpopulation is exacerbated today by a fundamentally antagonistic attitude from what Murray Rothbard called the “professional foes of humanity”, the environmentalist movement1. Apart from this movement’s interference in one the most crucial markets for capital accumulation – the production of energy – the fundamentals of their philosophy view the earth as inherently beautiful and sacred, and any of humanity’s attempts to exploit it as sacrilege. Such a view is radically anti-human and can only hold that the problem with the Earth is that there are too many of these stupid, dirty, polluting, and wantonly consuming human beings. Given the influence that this movement holds it is no small wonder that such thinking permeates into more mainstream views. That aside, however, we can conclude from what we have learnt here that humans need not fear increases in population. What they should fear, however, is their government turning additional people into spoon fed eaters with shackled hands – consumers who cannot produce. It is this fact that puts a very real pressure of resources. It is therefore not overpopulation that is the real problem but, rather, “over-government”.

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1Murray N Rothbard, Government and Hurricane Hugo: A Deadly Combination, Llewellyn H Rockwell Jr, (ed.), The Economics of Liberty, pp 136-40.

Utilitarian Arguments for Liberty

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Utilitarianism or some form of consequentialism has underpinned the ethical worldview of many libertarians past and present. Within the “Austrian” School we may cite Ludwig von Mises, F A Hayek and Henry Hazlitt as proponents of this approach, contrasting with the more rule-based or deontological approaches of, say, Murray N Rothbard and Hans Hermann Hoppe, and the objectivism of Ayn Rand.

This essay will seek to examine some utilitarian and consequentialist arguments in favour of liberty. In doing so we must bear in mind two aspects. First, not all utilitarian arguments are of the same ilk and vary from simple approaches of judging outputs resulting from a posited situation with interpersonal utility comparisons, all the way to more general and sophisticated treatments such as that of Mises and that of Rothbard in his noted article “Towards a Reconstruction of Utility and Welfare Economics”1. Here, therefore, we will compare these two utilitarian approaches towards liberty. Second, the adequacy of utilitarianism can be examined from the point of view of providing a moral bulwark for a world of liberty on the one hand and from the point of view of promoting such a world on the other; our treatment of it may be different in each circumstance because that which may be suitable to form the moral foundations of liberty may be not be the key aspect that we can emphasise when persuading the populace of the virtues of a libertarian society. Hence we must examine any utilitarian argument from both points of view.

We will begin, then, with the basic forms of consequentialism that look to measure the output of individual scenarios. Such an approach will often posit an emotive and hypothetical situation where one individual owns property and another individual will succumb to some kind of malady such as hunger, illness and ultimately death unless he gets his hands on that same property. A typical example is of a lost man wandering in the woods, cold, malnourished and in immediate need of food and shelter. He comes across a log cabin, of which someone else is clearly the first user/occupier. By peering through the window our lost man can see that it is full of food. Would it be ethical for him to break in to the cabin, use it as shelter, and/or eat some of the food without the permission of the first user?2

The rule-based approach to libertarianism would state that the lost man does not have a right to break into the cabin, use it as shelter and eat the food without the permission of the cabin’s first user (hereafter, the “owner”) as it is a clear breach of the non-aggression principle. However, a utilitarian or consequentialist may argue that while the cabin owner has a prima facie right to the ownership of the cabin and its contents the question should be answered by taking the approach that avoids the most harmful consequences – or, conversely, promotes the best consequences. In this particular situation, the loss of the food or shelter to the cabin’s owner would, apparently, not be a remarkable cost. Yet the denial of it to the lost man, starving and shivering in the open, would be tremendous, may be even as much as his life. We may warrant, therefore, that the starving man should be able to break into the cabin.

Is it possible for such a view to form a) the moral backbone for libertarianism and b) a persuasive argument in promoting a libertarian society? In answer to the first question, we must decide firmly in the negative. First, all of these scenarios, such as the starving man in the woods, are purely hypothetical situations to which we are expected to give hypothetical responses. However, ethical dilemmas do not arise in hypothetical situations; they arise in real situations where there are genuine conflicts over scarcity. Although such hypothetical situations could one day come about, the danger of entertaining them is that it can be worded in such a way as to provoke the answer most desirable to its proponent. Thus the die is already loaded in favour of the latter’s political philosophy. Walter Block comments on such an example provided by Harold Demsetz of the Law and Economics movement (which is basically a utilitarian approach to legal rights). Demsetz’s scenario is that of “Austrian Pure Snow Trees”, which are owned by a religious sect. An ingredient from these trees happens to be the only cure for cancer, but the religious sect will not allow them to be used for that purpose, reserving them instead for religious worship. Demsetz challenges whether it is really “evil and vicious” to override the private property rights of the religious sect so that cancer sufferers can benefit from the trees’ curative ingredient. Block responds at length:

Given [Demsetz’s] highly emotional example, it is indeed hard to resist the notion that it would be preferable if the trees were used as a cancer cure.

Emotionalism can be a double edged sword, however. As long as our intuitive imagination has been unleashed by Demsetz in this creative way, why not push the envelope a bit? Consider, then, the case where the views of this religious sect are absolutely correct! That is, if the trees are torn down for so idolatrous and unimportant a purpose as curing cancer, then we’ll all be consigned to Hell forever. Wouldn’t it then be “intuitively appealing” to allow the islanders to continue their ownership of these trees?

Demsetz, in taking the opposite position, is acting as if the cult is erroneous in its religious beliefs. But assume for the moment the “cultists” to be correct in their world view. It would then be justified – according to Demsetz – not only to protect them from the onslaught of the cancer victims, but to seize the assets of the latter if this would in any way help the former. Suppose, that is, that there was a cancer cure, owned, now, by the victims of this dread disease, but that for some reason the worshippers determined that this material would help them in their efforts to contact the Deity. Then, according to the logic established by Demsetz, it would be appropriate public policy to forcibly transfer the cure to the control of the religious ”fanatics.” Surely Demsetz knows nothing-for certain that would render such a conclusion invalid.

[…]

Let us extend the Demsetzian argument in yet another dimension. Suppose that it was not the islanders’ trees that could cure cancer, but rather their hearts. That is, the only way to save the sufferers from this disease would be to kill, not the Austrian Pure Snow Trees, but their owners, the members of this religious sect, and then to take their hearts, chop them up, and feed them to cancer victims. Would Demsetz (“emotionally”) support this “modest proposal” to do just that?

[…]

Ultimately, there are only two ways of settling such problems. All others are merely combinations and permutations of these two. On the one hand, there is a provisional or instrumental property rights system. Here, holdings are secure only as long as no one can come up with a plausible reason for taking them away by force. Under this system, either dictators or majorities (or dictatorial majorities) hold the key to property rights. The difficulty is that there are no moral principles which can be adduced to derive any decisions. Presumably, utility or wealth or income maximization is the goal; but due to the utter impossibility of interpersonal comparisons of utility, this criterion reduces to arbitrariness. On the other hand is a thoroughgoing and secure property rights system. Here, one owns one’s possessions “for keeps.” The only problem here is the temptation to overthrow the system in order to achieve some vast gain, such as the cure for cancer. Demsetz’s example is so forceful by virtue of the fact that he expects his readers will consider a cure for cancer to be more valuable than a pagan rite – he knows it is likely they will engage in interpersonal comparisons of utility. But these temptations are easily resisted as they are inevitably imaginary and artificially constructed. We have yet to be presented with a real world example where there is a clear cut case for massive property rights violations.

[…]

Hypothetical arguments have their undoubted philosophical use. [However], the point being made here[…]is that [deontological] libertarian rules are only inconsistent with broad based utilitarian concerns in the imagination, not in reality.

Note how far from reality Demsetz must remove himself in order to manufacture an example that is intuitively consonant with his support for what in any other context would be considered murder (hearts) or theft (trees) or slavery-kidnapping (draft).

[…]

In very sharp contrast indeed, resort need not be made of fanciful examples to defend the libertarian vision.3

Imaginary scenarios, then, are always worded so that the listener is encouraged to empathise emotionally with the economically deprived while completely ignoring the point of view of the property owner, or at least making the latter look frivolous and capricious. Such a rhetorical trick applies not only to specific scenarios but also to entire political treatises. How much, for example, do the imaginary, hypothetical situations of the original position and the veil of ignorance in John Rawls A Theory of Justice – which do not exist in the real world – demand the very answer that the author desires?

Second, the purpose of ethics is to resolve or otherwise avoid conflicts that arise from the result of physical scarcity. Rule-based approaches to liberty that provide physical demarcations to denote property rights permit this to a high degree of certainty in any given situation as the boundaries of permissible action are constructed objectively. Because all valuations through action result in physical changes to physical goods, objective evidence of these changes – i.e. homesteading, production, etc. – give an immediate cue to indicate to a latecomer that the property may not be touched4. Consequentialist approaches, however, cannot rely on objective, physical demarcations to denote property rights; rather, they rely upon the measurement of competing subjective values. This renders the resolution of conflicts and conflict avoidance much more difficult. The question the lost man faces is what am I permitted to do right now? If moral boundaries are based upon hypothetical and changing values and tastes then this question cannot be answered. He may assume that the cabin owner values the cabin and its stock of food less than he does, but he has neither evidence nor proof of this. Indeed the cabin owner isn’t even there to ask. And whether the cabin owner values it less may change from day to day. Yesterday, the cabin owner might not have valued these resources very highly at all; today, however, what if the cabin owner has himself suffered an accident and requires the shelter and food, which he believes to be in secure possession, and is now under threat from the wanton consumption by the lost man? What if the cabin owner’s life is threatened by the loss of food and shelter? Indeed, what if he had purchased the cabin as insurance against that very possibility? There is, therefore, no way of making a rational decision ex ante.

Third, if ethical determinations cannot be made ex ante then it follows that a decision must be made ex post. In other words, the lost man could take a chance by breaking into the shelter and then battle out the question of whether he was right to have done so later through litigation or a settlement process. It is for this reason that utilitarian forms of libertarianism tend to be minarchical rather than anarchical. Hence, this basic form of utilitarianism provokes the very monolithic state apparatus that libertarians should be opposing, and puts in its hands a tool – interpersonal utility comparisons – with which to make its decisions, a tool that is ridiculously uncertain and malleable5. To be sure, it might be possible for individuals to form an empathetic judgment based on interpersonal utility comparisons in an individual situation. But it does not follow from that possibility that a government or a court could make a rigorous determination when passing legislation or enunciating judgments that affect the lives of millions of people in multitudes of different situations6.

Fourth, at the heart of many consequentialist approaches is a fundamental misunderstanding as to what the concepts of “liberty” and “freedom” actually mean. If one views them as meaning freedom from want, from hunger, from the elements and so on then one is naturally led to a consequentialist approach. However, properly considered, liberty is a sociological concept that applies to the relationship between each individual human being. A person is free if he can live his life without the physical interference of his person and property by others. Whether he is hungry, cold, or naked, on the other hand, concerns his relationship not with other human beings but, rather, with nature. This can only resolved not by extending his “freedom” forcibly into the territory of others but by gaining power over nature – in short, by productivity. Any number of theoreticians can spill oceans of ink in trying to determine whether or how the wealth of the cabin owner should be distributed to the lost man in the woods. Yet wouldn’t it be so much better if society was so wealthy that the lost man possessed the wherewithal to prevent himself from being in such a wandering state in the first place? What if the man had an inexpensive GPS system; compacted supplies of food in pill/tablet form that could sustain him for weeks or months; emergency communication devices that would alert a private protection agency to his whereabouts? Yet it is precisely such productivity that is threatened by consequentialist determinations of property rights. Strong private property rights that remain certain following original appropriation or voluntary transfer promote economic growth by encouraging saving, long term planning and low time preference. Uncertain or vague private property rights do the exact opposite. If it is possible that your property will be snaffled in an instant by someone who allegedly “values” it more than you do then the attractiveness of using the good for saving and investment is lowered. You will be willing to take fewer risks and will work less hard with the good if you know that the fruit of your efforts might be confiscated in the blinking of an eye. At worst, such weak property rights encourage immediate consumption as soon as you get your hands on any good at all. That way, in most cases it will no longer exist for someone to take it away again at a later date.

Turning now to our next question, would such basic consequentialism serve in any way to persuade people of the virtues of a libertarian society? Again we have to answer firmly in the negative. We must remember that the primary preoccupation of libertarianism is with the evil and oppressive monolith known as the state. This is the entity that truly destroys freedom; it confiscates our income to fund its profligate spending; forces us to use its worthless paper money that it prints incessantly to fuel its endless foreign wars; destroys families and fuels poverty and dependency with the massive welfare state; regulates what we can do with our bodies, what we can say with our own mouths, where we can set up business, whom we may employ in that business and on what terms. Government is estimated to have killed approximately 262 million people outside of warfare during the twentieth century; private affronts to liberty – even such horrendous crimes such as murder and rape – pale in comparison to this. The US government’s so-called war on terror, at a cost of several trillion dollars, has killed an estimated 1.3m Iraqis, Afghanistanians and Pakistanis in its first ten years, even though more Americans are killed by falling televisions than by terrorist attacks. The greatest insult has to be that it is this miniscule private crime that supposedly constitutes the very justification for the state and its monopolisation of security and litigation. Although there is no shortage of nobility in striving to apply justice in every individual case, libertarians must fry the biggest fish and not spend their time debating whether a lost man breaking into a cabin is or is not an affront to liberty. When attempting to promote liberty, let us confront the very real ogre of the state rather than dwelling in imaginary scenarios that will make no practical difference to people’s everyday lives. Furthermore, as we mentioned above, if justice depends on interpersonal utility comparisons in individual cases, then it craves for the existence of a compulsory referee in the form of the state, the very thing that destroys liberty entirely. We must conclude then that this basic form of utilitarianism, which seeks to evaluate outputs from specific situations, must fail on all accounts as an argument in favour of liberty.

Let us now turn towards a second conception of utilitarianism, the more sophisticated approach adopted by such eminent theoreticians as Ludwig von Mises. The tenor of this approach is that voluntary exchange under the division of labour – i.e. the market – is essential for the survival and flourishing of every individual human being; every human is so interdependent upon every other that to plump for anything else would result in the rapid disintegration of the standard of living or, at worst, certain death. Hence this form of utilitarianism concentrates on the virtues of the market itself rather than looking to the justice of individual situations. Mises, and others who follow this approach, therefore avoid any complications arising by way of interpersonal utility comparisons.

It is important to realise that this argument is predicated upon a few other important Misesian insights. First is that when pondering the economic organisation of society only two extremes are possible – the free market or total socialism. As Mises so effectively argued, any “interventionist” point or “mixed economy” approach in between these two extremes will cause effects that must either lead to abandonment of the intervention on the one hand or to total control on the other. One must therefore choose between one or the other and cannot favour anything in between. By demonstrating the economic impossibility and the catastrophic consequences of full socialism Mises demonstrates the complete lack of basis for making a choice that favours full government control. The only rational option, therefore, is the unfettered free market. Second, and related to this theme, Mises was of the view that “society” is synonymous with social co-operation under the division of labour. As he says in Human Action:

A society that chooses between capitalism and socialism does not choose between two social systems; it chooses between social cooperation and the disintegration of society. Socialism is not an alternative to capitalism; it is an alternative to any system under which men can live as human beings.7

Following this line of thinking, questions such as “how to organise society” strike one as absurd when society itself is already a form of organisation. We do not have the choice of “picking” from an array of options when it comes to forming a society. Either there is social co-operation under the division of labour and society exists; or there is an atomistic hand-to-mouth existence and society does not exist. Any person, therefore, who genuinely wishes to promote a theory of society cannot rationally opt for any kind of socialism and, a fortiori, any kind of interventionism8.

How useful is this approach for forming a moral backbone for libertarianism? At first, this approach seems remarkably more plausible than the basic form of consequentialism that we just discussed. By looking at the general consequences of the market we do not get caught up in traps such as interpersonal utility comparisons and we have a strong counter-argument against anyone who proposes a collectivist theory of social organisation. Moreover, the fact that the marketplace serves to improve the material wellbeing of every individual human being lends it a heavy degree of moral weight. If the free market was to spread misery and discontent through perpetuating a lower standard of living we would surely be willing to lend it less moral credence. Unfortunately, however, this utilitarian approach lacks the very thing to which the basic form of consequentialism was far too devoted – a rigorous passion for the justice rather than simply for the utility of private property rights.

First, although it provides a rhetorical defence against those who profess their collectivist aspirations to be for the benefit of society, it will never provide a defence against megalomaniacs who are content to milk everyone else for all they are worth. In other words, it will never provide an answer to those who believe society exists to serve them alone and that they are entitled to use other people in any way they see fit. The existence of such megalomania should not be dismissed lightly. Simply because we associate it more with caligulan monarchs and despots of times gone by does not mean to say that our democratic structures are impervious to it. Many libertarians are vocal opponents of what they see as “US exceptionalism” – the idea that the US government can pretty much do whatever it pleases in foreign affairs and standards that apply to a foreign government do not apply to the US. How can this be described as anything except megalomania?

Second, the logical effects of the socialisation of society – the total collapse of the division of labour and the complete decimation of the standard of living – can be gut wrenchingly long run effects. Society currently has plenty of capital that can be consumed and afford a comfortable, even luxurious living to any one individual. The Soviet Union took an agonising seventy years to die, a span of time that exceeds that of most individual’s adult lives. An advocate of socialism and socialisation is therefore not necessarily advocating his own certain death or relegation to poverty. He may be content to live like a king for the duration of his life and not care a whit if society became deeply impoverished long after he has dropped off of his mortal coil. Arguably this was the attitude inherent in Keynes’ oft-quoted quip “in the long run we are all dead”. As Murray Rothbard is supposed to have retorted, “Keynes died and we were left with the long run”. But such an attitude is provoked and enflamed by the fact that democratic government is a revolving door with officeholders required to endure repeated elections, endowing them a very short time in which to accomplish their goals. Every politician yearns for his day in the sun when he is lauded and praised as a great statesman, but he has to achieve this now, in the short run, before he loses an election. As long as he can reap the headlines and rewards during his tenure and, possibly, for the remainder of his life, who cares if his policies are ultimately destructive after he is long gone? It is for this reason that democratic governments are suffering from ever increasing and crippling debt as each generation of politicians seeks to shower its electorate with free goodies that only have to be paid for years after they have left office (or have died) and it is somebody else’s problem9. So too, could we suggest, that endless war has become the norm as each successive leader tries to demonstrate his Churchillian qualities and to elevate himself to the legendary, almost Godlike realms of the great warrior-statesman such as Lincoln and Roosevelt. Never mind that war ultimately is destructive; never mind that it destroys entire cities and societies; never mind that it kills, maims and otherwise ruins the lives of millions of innocent civilians. As long as the commander-in-chief can claim to have vanquished a cherry-picked foe in some distant country then his place as a saviour of civilisation is assured, at least in the meantime. So too do the manufacturers and profiteers of armaments display the same attitude. They know how evil and destructive war ultimately is; there is no shortage of literature espousing this fact. But they get to reap heavy profits now and to enhance their own lifestyles now. Why should they care about what happens in the long run?

Third, by resting its case on the general virtues of the market this kind of utilitarianism suggests that if some form of social organisation, other than the market, however unlikely, becomes feasible then private property rights could be legitimately overridden. In other words if some form of collectivism could sustain the division of labour and a standard of living equal to or exceeding that of the free market would the force behind government taxation, theft, murder then become legitimate? However, surely if such a world was to come about we would still argue that people have the right to self-ownership and the right to the ownership of goods in their possession as first user or through voluntary transfer? Of course, a person might choose to submit to the yoke of government planning if it affords him a higher standard of living than that of the free market, but this is a different kettle of fish as the submission is then purely voluntary. On its own, however, any ability of a system other than the free market to sustain a society is insufficient as a justification to override private property rights.

Fourth, this brand of utilitarianism may convey a sense of prospective justice – that which should happen concerning property rights in the future – but what does it have to say about retrospective justice? In short, how does utilitarianism know whether the existing structure of property rights is just? After all, the existing structure of ownership benefits a lot of thieves and plunderers that would need to be dealt with in the transition from a statist to a libertarian society. A libertarian steeped in natural law and Lockean homesteading theory would answer this question rather straightforwardly. Any current owner would have to demonstrate that his title derives either from original appropriation or through voluntary transfers in title. If it is not and someone who claims such a title comes forward then ownership must be yielded to the latter. A utilitarian, however, has a bit of a problem as his philosophy generally focuses on the benefit changes to the existing array of property titles to the current market participants. He could argue that, like the natural lawyer, all existing titles to property could be examined against competing claims and then either endorsed or rectified accordingly. However, because his theory is based on the efficacy of the market in developing the division of labour his case for requiring this is demonstrably weakened. Certainly theft and plunder disrupted the efficiency of the market in the past. However, wouldn’t a mass of re-appropriations to rectify ancient crimes undermine the efficacy of the market today, at least temporarily? Would it not be easier, from the point of view of efficiency, to just preserve all existing titles then let everyone go forward? Why compound a past disruption to the market with a new one? It is upon this basis that this brand of utilitarianism is criticised for preserving the status quo, for permitting, in the transmission to a libertarian world, the bureaucratic class to keep their hands on the loot, much like the oligarchy did in Eastern Europe after the collapse of the Soviet Union. To be sure, this argument against utilitarianism is not, in the view of the present author, as strong as some libertarians make it out to be. Nevertheless, utilitarianism does open itself up to the charge that there comes a point where stolen property should remain in the hands of the thieves (or their heirs) simply because the act of unwinding the theft would cause more disruption to the market than to not to do so, particularly if the property is heavily invested in an enterprise that provides substantial employment and is apparently productive. Moreover, while it is straightforward enough to justify voluntary trade in the marketplace as promoting the division of labour and the standard of living, we have to wonder whether the utilitarian can provide much of a justification for original appropriation – that is, for the first user of a good to retain it – with his utilitarian arguments alone. Original appropriation is of course the genesis of voluntary trade – we appropriate virgin goods with the intent to produce with them and trade them away for things we want in exchange, thus helping to overcome the fact that the world’s resources are not evenly distributed amongst different geographic regions. However, such a justification can only stand if one can also demonstrate that the originally appropriated property is previously ownerless and unvalued by other people, and is only recognised as scarce and valuable by the first user. The only possible such demonstration is that the first user was the one to “mix his labour with it”, whereas the actions of everyone else demonstrated no preference for that property. Hence all utilitarian arguments in favour of the free market, fundamentally, collapse into the Lockean homesteading theory anyway.

Having addressed the question of whether this form of utilitarianism can be a useful moral underpinning for libertarianism, let us turn now to whether it is useful as a persuasive tool for espousing the virtues of a free society. In this sphere, utilitarianism certainly fares much better. The heaviest gun in the arsenal of the utilitarian libertarian is the fact that living in an unfettered free society where government exists, at most, as a “night watchman”, limited to protecting private property rights of the individual, will produce manifold increases in the standard of living through a rise in real wage rates. It also has the virtue, in contrast to the basic form of consequentialism, of concentrating its focus on the very institution that is an anathema to freedom – the government – instead of getting bogged down in the minutiae of individual cases. Squarely, it is government that needs to withdraw itself from the marketplace and it is government that needs to stop meddling in economic affairs in order to bring about these wonderful consequences. Furthermore, every government minister promotes his programmes on the basis that they will serve to help at least some sector of society, if not everybody. The utilitarian, however, armed with a thorough understanding of economics, can easily demonstrate why the results must always be the very opposite of those intended and why the government interference will always, necessarily, create more harm than good when examined under the terms of its own justification. While, therefore, a given politician or promoter may have ulterior motives in proposing any programme – such as to benefit lobbyists, donors or other special interests – his public justification for the programme can be shown as shambolic. There may, of course, be some difficulty in disabusing people of the notion that the free market is a “sink-or-swim” society and there is also added problem of those who steadfastly refuse to try their hand in the marketplace for what might seem like a distant reward and prefer instead to yield to the siren song of government redistribution. To this, only a passionate plea for the justice of the market place can provide an answer.

Conclusion

George Reisman explains how an understanding of the consequences of free market economics has “powerful implications for ethics”:

It demonstrates exhaustively that in a division-of-labor, capitalist society, one man’s gain is not another man’s loss, that, indeed, it is actually other men’s gain — especially in the case of the building of great fortunes. In sum, economics demonstrates that the rational self-interests of all men are harmonious. In so doing, economics raises a leading voice against the traditional ethics of altruism and self-sacrifice. It presents society — a division-of-labor, capitalist society — not as an entity over and above the individual, to which he must sacrifice his interests, but as an indispensable means within which the individual can fulfill the ultimate ends of his own personal life and happiness.

A knowledge of economics is indispensable for anyone who seeks to understand his own place in the modern world and that of others. It is a powerful antidote to unfounded feelings of being the victim or perpetrator of “exploitation” and to all feelings of “alienation” based on the belief that the economic world is immoral, purposeless, or chaotic. Such unfounded feelings rest on an ignorance of economics.10

While, therefore, we must conclude that no form of utilitarianism provides an adequate, watertight moral backbone for libertarianism, which can only be furnished by demonstrating the justice inherent in private property rights and free exchange, we must also agree that we can never ignore the manifold benefits to every individual and the harmonious society that they create. Indeed, few people, publically, ever attempt to propose an ethical theory that does not create a society of peace and harmony. Thus a through understanding of the effects of the free market can provide a framework with which to refute competing theories on their own terms. Furthermore, few deontological libertarians omit to pepper their theories with demonstrations of the beneficial consequences of the marketplace. While, therefore, this essay has been generally critical of utilitarianism it is likely that it will always have a central place in libertarian theory.

1Reprinted in “Economic Controversies”, pp. 289-333. Rothbard is, however, keen to note that his reconstruction does not provide any plea for an ethical system, merely “conclusions to the framer of ethical judgments as part of the data for his ethical system”.

2Another example is the so-called runaway train that will hit five people if diverted onto one track or only one if diverted onto the second. Should the signalman switch the points to the second track to ensure that only the one person is killed?

3Walter Block, Ethics, Efficiency, Coasian Property Rights and Psychic Income: A Reply To Demsetz, The Review of Austrian Economics, Vol.8, No. 2 (1995) 61-125, at 76-84 (emphasis added, some footnotes omitted.

4Libertarian jurisprudence does, of course, have to determine precisely which physical acts result in which property rights. However, any difficulty is likely to remain only in borderline cases or cases where evidence of prior ownership is fleeting or difficult to apprehend and, in general, all persons should be able to determine in the majority of situations whether property is subject to a prior right and a third party referee would not be required to determine this.

5As a result it is also the case that consequentialists vary in their particular views concerning the justice of taxation, eminent domain, intellectual property, etc. on to a greater degree than rule-based libertarians.

6Ironically, the same argument based on interpersonal utility comparisons – that the wealthy value what they have less than the poor and that the latter “need” this wealth more than the rich do – is used by proponents of government welfare and redistribution. It is difficult to understand how an argument that can be used against a world of liberty can be used in favour of it.

7Ludwig von Mises, Human Action: A Treatise on Economics, p.676.

8It is upon this foundation that Mises’ examination of concrete economic policies, where he moves from the wertfrei into the world of value judgments – the effectiveness of the policies themselves from the point of view of those who promote them – is  based.

9Because the incessant tendency is now reaching a chronic level the ability to postpone the day of reckoning has become ever more difficult and most of the more recent glory-seekers are now living to reap what they sow. Former Federal Reserve Chairman Alan Greenspan is a pertinent example.

10George Reisman, Capitalism: A Treatise on Economics, p. 17.

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