On Writing Requiem

The first section of the book is finished except for the last chapter. That work can be seen on our website: http://www.badgerhillpress.com/ This begins the third section. The book divides into: history, metaphysics, liberty. The following will be about chapter 14.

Chapter 14. Hazlitt

"The theory seems to be that as long as man is a failure he is one of God's children, but that as soon as he succeeds he is taken over by the Devil." --Henry Louis Mencken

Henry Hazlitt was born November 28, 1894 and died July 8, 1993. He died at age ninety-eight, having continued writing well into his eighties (there is hope). In childhood his family finances were modest, his father having passed away when Henry was an infant. Hazlitt attended one year at City College of New York but left to pursue life as a journalist. He was uncredentialed, self-taught, and is credited for introducing Austrian economics to the English-speaking world.

His interests were journalism, literature and economics. Much of his editorial work was literary criticism, but his books involved mainly economics. The literary work improved his skills as a writer, while his skills as a writer improved his presentation of economics. Unlike many economists he is a joy to read.

Hazlitt began his career as a journalist for the Wall Street Journal at age twenty and wrote his first book at age 21. He made his reputation as the literary editor for The Nation in the 1930’s, but Roosevelt’s New Deal ended that. The magazine supported the New Deal, while Hazlitt did not, so he left to work at the American Mercury from where he moved to editorial writer at the New York Times. During that period he became connected to the Austrian economic school and from his editorial position introduced it to America.

His economic beliefs found a home with the Austrian school, and when The New York Times supported the Breton-Woods agreement (the financial order we follow today) Hazlitt could not support the agreement and left to work at The National Review and then at Newsweek. We can see that principles guided his life. Given his background I am not surprised that he favored a meritocracy rather than an aristocracy. Family connections did not get him into Yale or Harvard.

Hazlitt is unusual among economic writers for his literary skills. His writing comes alive, and the economics tags along for free. Economics in One Lesson might be the most popular economic text ever written. But his economics are as sound as his writing. Being self-taught he was not as subject to fallacies of crowd psychology, which can be indoctrinated through the educational system. His first book, Thinking as a Science, served him well and gave him a foundation from which to critique Keynesianism. Keynesianism is the mass economic delusion that permeates the world today. Hazlitt saw right through it, which he might not have been able to do had he grown up in the system.

We read Hazlitt here for his criticism of Keynes, which he does in The Failure of the New Economics. We also look at Economics in One Lesson, which really is one lesson, albeit with multiple examples. His point in that book is that no one gets something for nothing. Since human beings have such trouble with that idea we have all the more reason to remember it. We sometimes fail to learn not so much because we can not grasp certain ideas, but that we understand them too well and cannot accept the consequences to which logic inexorably leads us.

Hazlitt wrote twenty-three other books. I intend to review many of them for any natural laws we can bring to bear on our purpose. We need all the wisdom we can gather, although without losing ourselves in the mere gathering. Eventually we must take our precepts out into the world. We need to bring all that is necessary, but not more. Hazlitt will help us.



Economics in One Lesson

Through reading we try to uncover natural laws of human behavior. We intend to use them to formulate a theory of survival and prosperity. Some might ask why survival and prosperity should be our foundation, why not devotion and duty, or service and sacrifice? The answer is that you have to start somewhere. One simply chooses because otherwise such questioning can chase its tail forever. One guesses on the basis of observation and experience. It seems that living things at bottom try to stay alive. That appears to be more basic than service and sacrifice. So I am picking it. Perhaps this disposition to continue living is due to chance. Perhaps it comes through design. But either way it appears best for us to get in line with it. It is hard to argue with the idea that living creatures prefer to remain alive. I can hang an aphorism on that.

Natural laws in the behavioral world are different from those in the physical world. Physical events can be observed and measured. Behavioral events can be observed but not measured. The subjective component of behavior can neither be observed nor measured. Yet the subjective is the most important part. All sensation, thought, emotion, memory, intent, and judgment is subjective. It lies outside of evidence based systems, i.e. subject to objective verification. We live our lives from a subjective perspective and know infinitely more about ourselves through experience than from double-blind studies and observational comparisons. Yet while this dichotomy happens to be huge in the realm of therapy, we are going to skip over it here other than to say that laws of human behavior are not as crisp as those of physics. But we cannot negotiate life well without them. Quantum mechanics might be more accurate, but we can fly to the moon with Newtonian physics. So is it with natural laws of human behavior. They are close enough to offer invaluable guidance in our effort to save ourselves and the planet. We seek natural laws of human behavior in our reading. We need them to rise above trial and error which offers too little trial and too much error. Economics in One Lesson is exactly what it says, but the lesson is critical. Human behavior does not present an infinite number of problems. It just presents some that appear infinitely difficult. This book touches one of them.

The literal lesson, cast in terms of economics, is that, “A bad economist looks only at one group and short term effects, while a good economist looks at all of society and long term effects.” This can be abstracted to a more general proposition that for everything there is a cost—that nobody gets something for nothing.

Hazlitt states the lesson in the first chapter, but in an abstract form. He then spends the rest of the book showing how this works out in real situations. We shall follow some of his thought here. It was possible to start this section of my book anywhere, but I begin with Hazlitt because his message is basic, and he eases us into economics. The bad actor in this narrative is typically the State. It is the only agency powerful enough to ruin everything. People feel the State generates money in some fourth dimension. Frederic Bastiat stated in 1850, “The State is the great fiction by which everybody tries to live at the expense of everybody else.” Other concepts are basic as well, but this one is never far away. Government is power and power corrupts. Few people are as blind to the big picture as those empowered to run the world. They put out fire after fire only to run the well dry.

And we make the same mistakes, again and again. Hazlitt shows us how, with his own literary style. I shall try to include some of his craft in reviewing his chapters. So we need to recognize that we support bad economics in its myriad disguises, and also to question why common sense runs down our legs when we deal with such issues. Then again, perhaps that metaphor gives us a clue.

The Broken Window:

Bastiat also introduced the parable of the Broken Window. A hoodlum throws a brick through the baker’s window. One of the town folk, Mr. Brightside perhaps, considers a silver lining:


“It will make business for some glazier (‘Hazlitt’ continues). As they begin to think of this they elaborate upon it. How much does a new plate glass window cost? Fifty dollars! That will be quite a sum. After all, if windows were never broken what would happen to the glass business? Then, of course, the thing is endless. The glazier will have $50 more to spend with other merchants, and these in turn will have $50 more to spend with still other merchants, and so ad infinitum. The smashed window will go on providing money and employment in ever widening circles. The logical conclusion from all this would be, if the crowd drew it, that the little hoodlum who threw the brick, far from being a public menace, was a public benefactor.

Now let us take another look. The crowd is at least right in its first conclusion. The little act of vandalism will in the first instance mean more business for some glazier. The glazier will be no more unhappy to learn of the incident than an undertaker to hear of a death. But the shopkeeper will be out $50 that he was planning to spend for a new suit. Because he has had to replace a window, he will have to go without the suit (or some equivalent need or luxury). Instead of having a window and $50 he now has merely a window. Or, as he was planning to buy the suit that very afternoon, instead of having both a window and a suit he must be content with the window and no suit. If we think of him as part of the community, the community has lost a new suit that might otherwise have come into being, and is just that much poorer.

The glazier’s gain of business, in short, is merely the tailor’s loss of business. No new “employment” has been added. The people in the crowd were thinking only of two parties to the transaction, the baker and the glazier. They had forgotten the potential third party involved, the tailor. They forgot him precisely because he will not now enter the scene. They will see the new window in the next day or two. They will never see the extra suit, precisely because it will never be made. They see only what is immediately visible to the eye.”


The Blessing of Destruction:

The idea that a replacement economy generates wealth gets examined further by Hazlitt in this chapter. He expands the context to war, which should not be surprising considering his book was written in 1946. Conventional knowledge stated that World War II brought an end to the Great Depression. Not so, says Hazlit. War does nothing for the economy. It simply destroys wealth. Destruction replacement is not economic growth.

“Though some of them would disdain to say that there are net benefits in small acts of destruction, they see almost endless benefits in enormous acts of destruction. They tell us how much better off economically we all are in war than in peace. They see ‘miracles of production’ which it requires a war to achieve. And they see a postwar world made certainly prosperous by an enormous “accumulated” or “backed-up” demand. In Europe they joyously count the houses, the whole cities that have been leveled to the ground and that ‘will have to be replaced.’ In America they count the houses that could not be built during the war, the nylon stockings that could not be supplied, the worn-out automobiles and tires, the obsolescent radios and refrigerators. They bring together formidable totals.

But this is merely our old friend, the broken-window fallacy, in new clothing and grown fat beyond recognition. It confuses need with demand. But need is not demand. Effective economic demand requires not merely need but corresponding purchasing power. Here is a chance for another fallacy and the broken-window crowd usually grab it. They think of ‘purchasing power’ merely in terms of money. Now money can be run off by the printing press. As this is being written, in fact, printing money is the world’s biggest industry—if the product is measured in monetary terms. But the more money is turned out in this way, the more the value of any given unit of money falls. The falling value can be measured in rising prices of commodities. But as most people are so firmly in the habit of thinking of their wealth and income in terms of money, they consider themselves better of as these monetary totals rise, in spite of the fact that in terms of things they may have less and buy less. Most of the “good” economic results which people attribute to war are really owing to wartime inflation. They could be produced just as well by an equivalent peacetime inflation.

The war, in short, will change the postwar direction of effort; it will change the balance of industries; it will change the structure of industry. And this in time will also have its consequences There will be another distribution of demand when accumulated needs for houses and durable goods have been made up Then these temporarily favored industries will, relatively, have to shrink again, to allow other industries filling other needs to grow.

This is inevitable when we consider that demand and supply are merely two sides of the same coin. They are the same thing looked at from different directions. Supply creates demand because at bottom it is demand. The supply of a thing they make is all that people have, in fact, to offer in exchange for the things they want. In this sense the farmers’ supply of wheat constitutes their demand for automobiles and other goods. The supply of motor cars constitutes the demand of the people in the automobile industry for wheat and other goods. All this is inherent in the modern division of labor and in an exchange economy.” (The answer is in the math.)

Cash for Clunkers is a contemporary version of the broken window. Old cars are destroyed and replaced with new ones. Dealers, by law, must inject sodium silicate into the engines to kill them. Could the government think of nothing better to do with those vehicles? These vehicles are all big; they could haul something. Although that is just part of the problem.

There is short term gain in automobile sales but at a long term cost to society. Taxpayers pay for the rebates, program administration, disposal, and loan defaults. Consumer debt becomes increased at a time when most citizens are trying to pay it down. Money spent on unneeded cars can no longer be spent on more essential items. And new car sales collapse when the program ends. The automobile industry is supported immediately, while everyone else pays later. If this is such a good idea why not continue it with refrigerators, washing machines, and houses? Wampum for Washers! Help for Houses! Loans for lawnmowers! (In fact they are doing it with appliances. What next, heirlooms and antiques?)

The government presents it all as a plan to save energy, but that is just an excuse. If they want to save energy they could stop using the strategic oil reserve to keep gasoline prices down. Rising prices reduce sales. The government really wants to increase the money supply. They cannot get commercial banks to lend. So they add bad monetary policy to bad production decisions. The country is already bloated with debt and cannot service the interest as it is. Borrowing to pay off debt is like trying to lose weight by the energy expended in eating more. You can’t fool the quarks. And calories still count.


Tariffs:

Hazlitt is hardly a fan of tariffs. He begins:

“A mere recital of the economic policies of governments all over the world is calculated to cause any serous student of economics to throw up his hands in despair. What possible point can there be, he is likely to ask, in discussing refinements and advances in economic theory, when popular thought and the actual policies of governments, certainly in everything connected with international relations, have not yet caught up with Adam Smith? For present-day tariff and trade policies are not only as bad as those in the seventeenth and eighteenth centuries, but incomparably worse. The real reasons for those tariffs and other trade barriers are the same, and the pretended reasons are also the same.

In the century and three-quarters since The Wealth of Nations appeared, the case for free trade has been stated thousands of times, but perhaps never with more direct simplicity and force that it was stated in that volume. In general Smith rested his case on one fundamental proposition: “In every country it always is and must be the interest of the great body of the people to buy whatever they want of those who sell it the cheapest.” “The proposition is so very manifest,” Smith continued, “that it seems ridiculous to take any pains to prove it; nor could it ever have been called in question, had not the sophistry of merchants and manufacturers confounded the common sense of mankind.”


The effects of tariffs appear to have been designed to prove the point of his book. Domestic manufacturers cannot compete with foreign so the government raises the price of foreign goods with a tariff. Piggybacked on the government, the domestic industry can sell its goods. They gain and the effect is seen immediately. But customers now pay more for the product, and that money can no longer be spent on something else or invested in capital equipment. Production suffers because inefficient producers are supported at the expense of efficient ones. Foreign nations can no longer sell their product here and hence they have fewer dollars with which to buy our exports. He gives a nice example which is easier to follow than the abstraction I give here, but the bottom line is that the protected industry benefits at the expense of everyone else and total production in the country declines.

So what is the appeal? Why do we handle international trade worse now than we did two hundred years ago? The answer again is that nobody gets something for nothing in this life, but government always suggests how they can try. And government appears to be right in the short term, which people can see; but they are wrong in the long term, which is less apparent. Government can only give what it first takes away. As Margaret Thatcher said, “The problem with socialism is that you eventually run out of other people’s money to spend.”

Whatever social system exists, from anarchy to totalitarianism, there has to be a way to handle the existential realities that “things fade and alternatives exclude.” The horse and buggy was a fine way to get around in the nineteenth century, but it had to step aside to make way for motorized vehicles. If the government subsidized horse drawn carriages we would all be complaining about oat prices today. There is no way to live without dying, love without losing, or progress without replacing. Somewhere in there lies the problem human beings can’t handle. We are not the captains of our ships; we largely go along for the ride. We get the ride, and can enjoy the view, but are allowed only one trip. In itself that is not so bad. But when we compare it to the infinite trips that perhaps could be available it becomes unacceptable. There are limits to life on this planet, and our inability to accept these limits lies at the base of most of our disasters.

We enact tariffs because we want no one to suffer. We buy domestic because we fail to see the effects 4000 miles away. And we can ignore the fact that government has to take from someone to give to someone else. Life is like The Price is Right; we can bid up to what is real, but if we ask for too much we lose.

Two issues are getting intertwined here. One is tariffs. They are pretty easy. Tariffs are a classic story of the lesson of Hazlitt’s book. There is nothing conceptually difficult about seeing that. But why do people not see it? That is the more difficult part and what I am hoping to at least offer a hypothesis about. People cannot deal with limits, loss, and death. So we accept any fantasy that helps us avoid those issues. But since no one gets something for nothing we pay a price for this escape. War, famine, poverty, and barbarism are all end products of failing to confront existential limits. We cannot change the limits, but we can reduce the compensatory struggle against them that occurs at the bottom of disaster. Perhaps if we do not hurt so much we might not have to struggle so hard. It is fine to reach high for a goal that is possible, but attempting the impossible leads to frustration which leads to repetition. We can accept failure if we see progress. But attempting the impossible produces no progress. The effort is all wasted, which is much harder to accept. So we do not. We repeat. That is where we fail to learn from history.

There is nothing heroic about attempting the impossible. One Pyrrhic victory is one too many. We may not be able to achieve Nirvana, but we can make falling short much more comfortable. We need to know when not to try. Nothing comes free. The cost for our failure to confront the limits of our existence in this life might be too much for the world to survive. We do not need the cavalry here. We need common sense.

I shall not apologize for this exegesis. Our hope is not to recite more quickly the rules of international trade. We need to understand why nations never apply them. The problem is emotional not cognitive. In group therapy the problem is not seeing that the past gets in the way. Everyone concedes that. The problem is the pain of saying goodbye to the past. Like dieting, the difficulty is not in making the calculations. The problem is what happens when 1200 calories runs into 5:30 pm. We need to grieve for the losses we incur in life every day, not put them on credit to be addressed at some indeterminate future. Finances are generally best handled on a cash basis, and so are loses. Do not run a tab. Eventually that leads to emotional bankruptcy, and from then on one can only play the lottery. At that point agency is lost and with it goes hope.

But back to the more specific. I hear less about tariffs than about “buy American”. People think that is a great idea, although the only difference between buying American and tariffs is whether the demand comes from citizens or government. General Motors and Chrysler overpaid labor until they could not compete and went broke. GM sold most of their cars at a loss before the government bought the company. But today we are supposed to continue to buy American cars so that union workers can be paid 95% of their wages for a year if unemployed. Citizens are asked (someday forced?) to spend an extra $2000 for a domestic brand, which means $2000 less to spend on something else. That something else might have been investment in capital goods which would make America more productive. Instead, we pay American workers more than everyone else in the world because they feel they deserve it. And those who work for less are considered slave labor. Apparently there is no market price for labor in Korea, just capitalistic abuse. Supply and demand must not determine wages in China where obviously supply is high. But economic law does not disappear just because it favors the competition. Further, of course, not buying foreign goods results in other countries having no foreign exchange with which to buy our exports (if we had any). So the least efficient auto workers are subsidized and the most efficient penalized all in order to meet someone’s idea of a fair wage. When wages are set by authority rather than the free market the system is no longer capitalism. It is socialism. That is fine if people want socialism. But then they will get the results as well. So they better prepare for shortages and learn to live on promises.

The point of the free market is that everyone votes with their spending. Production and prices are not determined by special people who are made of better stuff than their peers. If we do not let the market work, government will take its place. Something has to. We know how that turns out. No one went to East Berlin to buy stereos. No one goes to North Korea to buy automobiles. Capitalism, a system where private property, sound money, and personal liberty combine to allow citizens to determine price and production, results in an increase of material wealth. Socialism lets the State make the important decisions, which results in fewer goods of poorer quality. Again, just look at East Berlin/West Berlin, North Korea/South Korea, the ex Soviet Union and the Western World. There is no doubt how this goes.

Capitalism is not perfect, but it is the best system we have. And it is the only society in which one can be free—meaning able to individually determine the course of his/her life. Each person is free to make his own decisions but responsible for them as well. (No one gets something for nothing.) Since people have different talents and make difference choices they will produce different results. Their income will reflect their production. The market is impersonal. It rewards those who satisfy demand. Demand comes from each and every member of society. People are left as free as possible to become what they might as long as they do not interfere with the opportunity of others to do the same. They choose what to do rather than being told what to do. To assume that people do not know what is best for their lives is to presume judgment from a loftier perch. The people in a free society act for themselves. Those in a socialistic society let government (the “experts”) act for them. Guess who reaches the finish line first.

If we” buy American”, we disavow the free market. And there can be no free market for one country only. Open means free. Closed means controlled. We cannot get bauxite in Iowa. China cannot grow corn in Xinchang. The whole world must be involved. It is this working together, with a mutual appreciation of the power of division of labor, that makes it productive and which, just as importantly, constitutes the social bond that ties people together. Warm feelings of social connection do not simply flow from brain chemistry or some altruistic fifth dimension. Social bonds are a result of appreciating that we are all in this together and that without each other we will not survive. It is said that if goods do not cross borders, armies will. Socialism is called the welfare/warfare state. People do not just make this up. The point of the free market is to maximize production and facilitate cooperation. Maybe nothing was in short supply before Eve ate the apple. But it is now, and life is a struggle. It makes no sense to have Canada grow bananas, China to grow corn, and the United States to assemble weed eaters. The free market rewards the efficient, and all of society benefits, not just entrepreneurs. Our choice is inequality and abundance or equality and poverty. Pick one. Your life depends on it.

There is another choice here. One can either have capitalism and liberty or socialism and subservience. The pairs are inexorably linked—it’s in the math. And they are mutually exclusive. Liberty means individuals determine the course their own lives, and assume the responsibility as well. The individual is seen as supreme. As a system that is called individualism. Capitalism is simply the social system built on this principle. It offers freedom.

Compliance, on the other hand, means that one does as instructed. The government chooses for the people and assumes responsibility for them as well. The State is the important unit. As a system it’s called collectivism. Its variants include socialism, communism, fascism, dictatorship, and monarchy. It offers ease and promises utopia. The distinction between these two systems rests largely on who assumes the responsibility, individuals or State. Somehow nothing gets done without work. Everything costs something. And it appears that when those who sew the effort reap the rewards they work harder than if their production is given away to those who merely watch it all happen.

People will profess that they can offer the best of both worlds, but they are selling perpetual motion machines on the side. Yet, unfortunately, people believe them. Free lunches are easy to sell. But freedom and socialism are mutually exclusive. George Bush once said, “I’ve abandoned free market principles in order to save the free market system.” If that makes sense to you, take a break. But that is exactly what “buy American” asks you to do.



Prices:

We are a thankless lot. Replete with iPhones, heat pumps, and high-speed Internet we complain about scarcity and distribution. Enough is never enough. That is fine; the world does not just drop out of a tree for us, and we need to strive. But we can too easily ignore what we have while grasping for what do not, and we tend to operate under the presumption that perpetual motion exists and entropy does not. Again, we want more, and there is always someone to promise it free of cost—for a fee.

We live in a world of unparalleled abundance because of the free market system. It is a system, not a non-entity. The world itself is a system. The earth goes around the sun for a reason. That reason may be that some higher power liked symmetry, or gravity happens. But either way events have grown up around this system of which we are neither independent nor the author. Our major point here will be repetitious, but so is Hazlitt’s book. He says everything on the first page—i.e., that no one gets something for nothing. And our problem is we want things for free. Social planners feel that people who do not work should be supported by those who do, apparently simply by having the workers pick up the coconuts that drop everywhere from the trees. We have plasma screen televisions in every home, but some screens are larger than others. And the issue with price is that there should be none. Everything should simply flow out of the abundance of the Earth and everyone receive their fair share (decided by them) from the great bounty.

But economics is about scarcity. The most important commodity on the planet is oxygen, yet it costs nothing (shipping can be a problem depending on how much higher or lower you want to go beyond sea level). But few things exist in unlimited quantities. Therefore most things have to be used economically, meaning ranked and ordered in relation to other goods that are both needed and limited.

The free market ranks and orders these supplies on the basis of the choice of each member of society. And that choice is not merely politically correct. It is backed up by actions measured in the purchases they make. In other words the sum total of supply meets the sum total of demand (demand being defined as need combined with purchasing power, and purchasing power as measured in terms of money but not defined by it). Some good or service is always traded for some other good or service, but never for money itself. Money is simply the means of exchange and a common denominator in which to mathematically calculate price. This is an important issue because newly created fiat money, which is not a reflection of new goods or services having been added to society, is merely a fraud perpetrated on the purchasing power of the currency.

So in a free market system price is the voice of the people. In a collectivist system price is the arbitrary judgment of a bureaucrat. We can dreamily pretend that some concept like society itself or “the people” collectively make a determination, but society, being an abstraction, can do nothing by itself. Someone always decides for society. The point being that no matter how one might conceive of it, there is no objective access to anything that transcends human judgment. One can say it comes for God, and even be right about it. But no one has been able to show in an evidence based system that anything higher than individual people becomes involved. We can wish, hope, or decree that there is, but that does not make it so.

The bottom line is that the world is limited, choices have to be made, and these choices can be made either through the free market or through socialistic authority. The free market gets everyone involved and monitors itself impartially. Socialism relies on the possibility that someone more skilled or informed will make the decisions to which everyone else then complies. This is like having a choice of a team with one superstar who carries the load for everyone versus having less talented players who contribute collectively. Either system can win or lose, but they function differently and do not mix well.

The free market generates energy, coordinates behavior through an automatic, impartial system, and wins by teamwork and effort. Socialism, if it triumphs at all, does so by expertise and discipline. Neither program comes with a guarantee. The free market can house tree sloths, and socialism can place idiots in authority. Unfortunately, today we might have a combination of citizens who do not care and experts who do not know. I would not bet on that horse.

Let me try stressing the bottom line here again. The free market gets everyone involved and through action not just words. It is a product of the renaissance, with its focus on the sanctity of the individual. So it is relatively new in the world. England and the United States have been in the forefront of this approach for the past two hundred years. It has out produced any other system and does so by recognizing realities of the external world. Businesses need to fail. Success needs to connect with reward. Talent and effort are not all equal. Everything costs something. Capitalism can provide extra lunches, but it also permits fewer excuses.

Collectivism allegedly selects those most likely to successful administrators and typically inserts a perpetual motion machine into their theory. It points out where capitalism falls short and offers a program that drops coconuts from trees. Everyone shall have more products and less work. There are no exceptions to this beneficence, and collectivism always looks good because of its false promises. Essentially it assigns agency to mental rather than physical entities. The free energy comes from taping into that powerful world of dualism—that thinking in itself is an agent, capable of driving engines and moving mountains. If they are right about this, we are home free. If they are wrong, we are dead wrong. This is about metaphysics. There either is a real world out there that we must walk around, not over or through, or we are free and anything is possible. Dare to dream is the motto if thoughts are boundless energy. For example, “A man is but the product of his thoughts. What he thinks, he becomes.”—Mahatma Ghandi

Roosevelt was a collectivist. People loved his claim that, “The only thing we have to fear is fear itself.” Don’t worry about nuclear winter, social collapse, or ethnic cleansing. Roosevelt does leave one thing to fear—fear. So look the other way when worried about anything else and chastise those who do not. Materialists, as opposed to the dualists, notice the world out there and see agency in the physical rather than the mental. There are in fact two philosophical systems of the world: materialists who see everything based in the physical (including thought), and idealists who see everything as derived from mental. Again, you have to pick one. Roosevelt cares only how you think because he believes how you think changes the world. Jefferson was a materialist, “Those who control your supplies control your future.” Does courage come from sandbags and extra ammo, or extra ammo and sandbags come from courage. It is a chicken or egg thing. They interface. The question becomes to which to we assign agency. Is mental contingent on physical or the other way around? And how does one decide?

I have had the opportunity to get to know Wyatt Earp, the great, great nephew of the American Legend. He talks about his famous ancestor and says that the first Wyatt did two things to prepare for possible physical confrontations. He tried every way possible to avoid conflict so he would not be questioning his motives in the middle of a gunfight. Then he arranged as many of the physical things in his favor as he could if conflict could not be avoided. He had a lot more to fear than fear itself and tried to attend to those concerns. And guess what? It fits our idea that there is no free lunch. Setting the physical stage requires a lot more work than repeating “I think I can.” Positive thinking can be done while one is falling asleep. How hard is that? Go with the idea that success is not likely to come easily. Start with the physical.

I might close my iteration here with a quote from Spinoza, “If the way I have shown to lead to these things seems very difficult now, nevertheless it can be found. Indeed that which is obtained so seldom must be difficult. How could it be, if salvation were at hand and could be obtained without great labor, that it is neglected by almost everybody? But all things excellent are as difficult as they are rare.”


Hazlitt has thus far been excluded on the pricing issue here. Let’s bring him in:


“The private enterprise system, then, might be compared to thousands of machines, each regulated by its own quasi-automatic governor, yet with these machines and their governors all interconnected and influencing each other, so that they act in effect like one giant machine.” The free market is regulated by natural cause and effect as opposed to arbitrary judgment of authority.


“It follows that it is just as essential for the health of a dynamic economy that dying industries should be allowed to die as that growing industries should be allowed to grow. For the dying industries absorb labor and capital that should be released for the growing industries. It is only the much vilified price system that solves the enormously complicated problem of deciding precisely how much of tens of thousands of different commodities and services should be produced in relation to each other. These otherwise bewildering equations are solved quasi-automatically by the system of prices, profits, and costs. They are solved by this system incomparably better than any group of bureaucrats could solve them. For they are solved by a system under which each consumer makes his own demand and casts a fresh vote, or a dozen fresh votes, every day, whereas bureaucrats would try to solve it by having made for the consumers, not what the consumers themselves wanted, but what the bureaucrats decided was good for them.

Yet though the bureaucrats do not understand the quasi-automatic system of the market, they are always disturbed by it. They are always going to improve it or correct it, usually in the interests of some wailing pressure group.”

Choices must be made. “Heads Carolina, tails California” means exclude one.


Inflation:

There are twenty-four chapters to Economics in One Lesson. They all illustrate the lesson. You need to read the book. It is written for the non-academic, addresses a myriad of issues, and arrives in a beautiful hardback cover from the Mises Institute for a mere $12.

We have probably gathered the precept we need. Reading the book itself brings the lesson to life and addresses more issues of economics. This relates to Jefferson’s caution that “those who expect to be ignorant and free expect what never was and never will be.” He was not talking about learning quadratic equations or the Krebs cycle. He meant human behavior and social relations. At issue is liberty and freedom. Economics is central to that. Read the book.

I shall move to a second Hazlitt work after citing one of his paragraphs on inflation. It is central to understanding where we are today as a country and a civilization. If we all perish in nuclear winter we shall at least know why. And if it is possible to avoid Armageddon we might get some help on how to do it. He writes:

“Like every other tax, inflation acts to determine the individual and business policies we are all forced to follow. It discourages all prudence and thrift. It encourages squandering, gambling, reckless waste of all kinds. It often makes it more profitable to speculate than to produce. It tears apart the whole fabric of stable economic relationships. Its inexcusable injustices drive men toward desperate remedies. It plants the seeds of fascism and communism. It leads men to demand totalitarian controls. It ends invariably in bitter disillusion and collapse.”

It is too late for us to avoid these consequences. Governments and their people lack the will to act in time. But it is not too late to react to the collapse and build thereafter with the principles of liberty and freedom a structure which can survive. Government cannot do this. It is the citizen’s responsibility.