Monthly Archives: July 2011

Quote of the day: Government, the great fiction

Frédéric Bastiat:

One thing, however, remains – it is the original inclination which exists in all men to divide the lot of life into two parts, throwing the trouble upon others, and keeping the satisfaction for themselves. It remains to be shown under what new form this sad tendency is manifesting itself.

The oppressor no longer acts directly and with his own powers upon his victim. No, our conscience has become too sensitive for that. The tyrant and his victim are still present, but there is an intermediate person between them, which is the Government – that is, the Law itself. What can be better calculated to silence our scruples, and, which is perhaps better appreciated, to overcome all resistance? We all therefore, put in our claim, under some pretext or other, and apply to Government. We say to it, ” I am dissatisfied at the proportion between my labor and my enjoyments. I should like, for the sake of restoring the desired equilibrium, to take a part of the possessions of others. But this would be dangerous. Could not you facilitate the thing for me? Could you not find me a good place? or check the industry of my competitors? or, perhaps, lend me gratuitously some capital which, you may take from its possessor? Could you not bring up my children at the public expense? or grant me some prizes? or secure me a competence when I have attained my fiftieth year? By this mean I shall gain my end with an easy conscience, for the law will have acted for me, and I shall have all the advantages of plunder, without its risk or its disgrace!”

As it is certain, on the one hand, that we are all making some similar request to the Government; and as, on the other, it is proved that Government cannot satisfy one party without adding to the labor of the others, until I can obtain another definition of the word Government I feel authorized to give it my own. Who knows but it may obtain the prize? Here it is:

“Government is the great fiction through which everybody endeavors to live at the expense of everybody else.”

For now, as formerly, every one is, more or less, for profiting by the labors of others. No one would dare to profess such a sentiment; he even hides it from himself; and then what is done? A medium is thought of; Government is applied to, and every class in its turn comes to it, and says, “You, who can take justifiably and honestly, take from the public, and we will partake.” Alas! Government is only too much disposed to follow this diabolical advice, for it is composed of ministers and officials – of men, in short, who, like all other men, desire in their hearts, and always seize every opportunity with eagerness, to increase their wealth and influence. Government is not slow to perceive the advantages it may derive from the part which is entrusted to it by the public. It is glad to be the judge and the master of the destinies of all; it will take much, for then a large share will remain for itself; it will multiply the number of its agents; it will enlarge the circle of its privileges; it will end by appropriating a ruinous proportion.

From l’Etat by Frédéric Bastiat.


Rich people aren’t a problem

Often we hear allegations that our economic problems are a result of some people being too wealthy.  Often I think that argument is made out of envy or an inability to be happy when someone else has success.  But leaving that aside, is there any truth to this allegation that the wealthy are hoarding to much stuff, and that this is bad for society?  On the contrary!  Wealth is good for society, and concentrations of wealth (that’s rich people) are not bad for society unless the wealth is concentrated through aggression.

The economy isn’t a zero-sum game – trades only occur when the parties to an exchange each perceive that they will benefit.  This implies that in any voluntary trade between any two people (rich with rich, poor with poor, or poor with rich), both will leave richer in their own estimation.  Thus when one person become richer others don’t need to become poorer.

Lets say you are a rich person with a billion dollars, what can you do with that money?

  1. You can save it under your mattress
  2. You can save it in a bank
  3. You can spend it on all sorts of things the average person doesn’t need a lot of (parties, cars, booze, yachts ….)
  4. You can invest it in a business or in the bond market
  5. You can speculate and spend the money on things that poorer people need and drive up prices
  6. You can spend it on crime that hurts others
  7. You can spend it on “crime” that doesn’t hurt others
  8. You can buy stocks

Only one or two of those eight can be bad for the rest of us:

  1. If you stuff it under your mattress, then there is less money being used to purchase goods (kind of like deflation) so prices go down.  This is good for people who have to buy things, especially the poor.
  2. If you put it in the bank then the bank will lend it out to people who need it or to other businesses who create thing consumers want.  This is also good.
  3. If you spend it on parties and cars then that is good for non-wealthy people too because some have jobs working to provide those things.
  4. If you invest in a business that is also good.  It creates wealth, and lowers prices we pay.
  5. If you speculate and drive up prices then this is bad in the short term for the poor. Longer term it businesses will recognize a profit opportunity and expand production of the goods; driving down prices and creating a wealthier society.
  6. If you spend the money committing crimes which hurt people, then this is obviously bad.
  7. If you spend it on crimes that don’t hurt anyone, then you aren’t hurting anyone; and there is a chance you are doing good, like a normal business, by supplying a good to others in a voluntary transaction.
  8. If you buy stocks, then the previous owner of the stocks has your money and can use it on one of the above uses.

In conclusion, unless the wealthy use their money in outright aggression against someone, they do no harm over the long term, and in most cases quickly bring gains to society.  Don’t condemn a wealth disparity unless it is being created or maintained through force (including government force).

Further study:

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Posted by on July 9, 2011 in Economics


Quote of the day

All innovation goes through three stages. One possesses unique knowledge and profits from it. Others imitate and share profits. Finally, the knowledge is widely shared and no longer profitable on its own which thereby inspires new knowledge.

~ Stephan Kinsella, a summary of Bastiat’s Economic Harmonies ch.10 para. 35 – 41.

Discussion topic: Do you agree?  What are the implications for patents and copyright?

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Posted by on July 6, 2011 in Quote of the day


America is becoming a nation ruled by decree

Our country is supposed to have a rule of law not rule by decree. What do I mean by this? Rule by decree is where the powers that be (historically kings), rule by many arbitrary decrees that can be changed at their whim and do not universally apply to all citizens. Compare this to rule of law, where laws are not arbitrary or abundant, but few and universally apply to all.

America has gone far from this ideal of rule of law and has become in many ways a country ruled by many large and small “kings” which issue arbitrary decrees. There are two main ways in which we have become a country ruled by decree:

  1. Explicit rule by decree is where a government has abdicated its law making authority to another agency.  If you want to recognize where this type of rule by decree is in place look for phrases like “Some Agency has decided ____ will not be allowed.”  Examples:
    1. The federal government created the TSA and leaves much of the rule making to the arbitrary decisions of the TSA bureaucracy.  This has resulted in violation of constitutional rights and abhorrent procedures which most Americans detest – all in the name of security but in many cases without real security benefits (c.f. Security Theater).
    2. New York State DEC changed the environmental regulations to prohibit open burning.  This rule change was made without legislative approval since that power had been delegated to the DEC.
    3. Some town zoning boards make decisions or exceptions on a case by case basis rather than by laws which universally apply to everyone.  Other times they may use their power to hinder permits based on personal vendettas rather than uniform treatment of all.  Also towns on their own discretion will give tax breaks to individual companies to attract jobs.  Tax breaks are great, but they should universally apply to all.
  2. Implicit rule by decree due to selective enforcement of law.  This rule by decree is enabled by the sheer volume of laws currently on the books – civil-liberties lawyer Harvey Silverglate estimates the average American now unknowingly commits three felonies a day.  Examples:
    1. A prime example on both the Federal and State level is housing and mortgage fraud.  There have been a few low level prosecutions, but overall the justice system has tuned a blind eye to pervasive law breaking by the big banks.  A Tampa-area mortgage banker was sentenced to 15 years of prison, while Angelo Mozilo (former CEO of Countrywide) got no prison time but only a fine of slightly more than 10% of his wealth [link].
    2. Selective enforcement may not be as visible on a local level (unless it happens to you or a friend), but it is often used to intimidate, as in a recent case in Rochester.

America should not be a nation ruled by decree.  The law should be clear and simple, and the government should give out no favors.  I believe Americans are beginning to realize how far we’ve gone from the rule of law and are looking for a return to smaller, simpler government with firm rule of law and no favoritism.


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Posted by on July 2, 2011 in Political Theory