Star Wars and the Austrian School: A Brief Overview

By Zach Foster

Originally published by Young Americans For Liberty

Star Wars is unquestionably a brilliant saga that touches the hearts of many through its incorporation of timeless literary archetypes and humanist themes.  Adventure, love, loss, spirituality, good vs. evil, and the triumph of the human (and humanoid) spirit...

 

Yet there are other characteristics standing out that demand attention and respect, such as the saga’s inclusion of patterns of history (great wars and economic or political disasters) and of the interactions and exchanges of societies and individuals.  One could practically point to passages from Mises’ Human Action or Theory and History while watching any given Star Wars episode!

 

Everyone knows the basic storyline that spans six episodes and numerous television and novel tie-ins.  A once prosperous and peaceful republic decays over time from corruption and then war.  Victory over secessionists in a great galactic war only serves to undermine the Republic’s ideals of liberty and hastens its demise and overt reorganization into the Galactic Empire.  Following two decades of imperial rule and repression, a guerrilla army dedicated to reestablishing the Republic and maintaining its founding principles of liberty fights a lengthy campaign, pursuing only the help of willing parties, eventually destroying the Empire and restoring republican democracy to the galaxy.

 

While the whole republican democracy vs. imperial rule theme is incredibly broad and universal, there are a number of factors that tug on the heart strings of any Austrian economists.  The saga begins with the Trade Federation, involved in a dispute over taxing trade routes, launching a blockade of the planet Naboo.  This is unquestionably an aggressive action inflicted on a sovereign people for the purpose of maintaining protectionist taxes and other economic interventionism—a crime not only against a sovereign people but also a violation of the free market.

 

Throughout the Clone Wars, part of the C.I.S. (Separatist) war effort is paid for by Trade Federation revenues, as well as profits generated by the Intergalactic Banking Clan (secretly controlled by the emperor-to-be Palpatine).  Can anyone say Intergalactic Federal Reserve?  At the same time, the Republic’s war effort is paid for by inflation by its own central bank, and probably also by raising taxes on Republic member worlds.

 

The end of the Clone Wars is met the rise of the Empire and Darth Vader—warnings of what happens when great leaders and great societies sacrifice their principles under an end-justifies-the-means mentality and invariably become what they originally set out to fight against.  In order to carry out the Wilsonian fantasy of “making the world [err, galaxy] safe for democracy” the Republic had to become an Empire, a threshold from which there was no return.

 

Then comes the Rebel Alliance, a coalition resembling that of thirteen autonomous states during the American Revolutionary War, fighting the Empire so that the Republic and its Constitution could be restored.  This Republic would be one that respects individual rights and the self-determination of worlds.  What did the Rebels give to the galaxy? “A republic, if you can keep it” (Benjamin Franklin).

 

Across the journey the audience is introduced to fascinating commercial centers.  Two such places, radically different from each other, are Coruscant and Tatooine.  Corsuscant and its booming skyscrapers represent the hustle and bustle of Wall Street, while the desert spaceports of Tatooine are a haven for the black market—some would call the black market the free market.  Whatever drugs, technology, equipment, and other goods are off the market where the Republic  rigidly enforces its prohibitionist and protectionist laws can easily be obtained in the unregulated bazaars of Tatooine—for the right price of course.  There’s a whole galaxy thriving with exchanges and movement and all sorts of human and humanoid action to explore!

 

Let this serve as an introduction to a series of glimpses into the Star Wars universe through the eyes of an Austrian economist.  Feel free to come along for the ride, and may the Force be with you.

[Check out the original publication!]

 

Image edited by Zach Foster. Background taken from a U.S. government photo and in the public domain.

The Government and the Currency

By Ludwig von Mises

 

Media of exchange and money are market phenomena. What makes a thing a medium of exchange or money is the conduct of parties to market transactions. An occasion for dealing with monetary problems appears to the authorities in the same way in which they concern themselves with all other objects exchanged, namely, when they are called upon to decide whether or not the failure of one of the parties to an act of exchange to comply with his contractual obligations justifies compulsion on the part of the government apparatus of violent oppression. If both parties discharge their mutual obligations instantly and synchronously, as a rule no conflicts arise which would induce one of the parties to apply to the judiciary. But if one or both parties' obligations are temporally deferred, it may happen that the courts are called to decide how the terms of the contract are to be complied with. If payment of a sum of money is involved, this implies the task of determining what meaning is to be attached to the monetary terms used in the contract.

 

Thus it devolves upon the laws of the country and upon the courts to define what the parties to the contract had in mind when speaking of a sum of money and to establish how the obligation to pay such a sum is to be settled in accordance with the terms agreed upon. They have to determine what is and what is not legal tender. In attending to this task the laws and the courts do not create money. A thing becomes money only by virtue of the fact that those exchanging commodities and services commonly use it as a medium of exchange. In the unhampered market economy the laws and the judges in attributing legal tender quality to a certain thing merely establish what, according to the usages of trade, was intended by the parties when they referred in their deal to a definite kind of money. They interpret the customs of the trade in the same way in which they proceed when called to determine what is the meaning of any other terms used in contracts.

 

Mintage has long been a prerogative of the rulers of the country. However, this government activity had originally no objective other than… (Read more)

 

Source: Mises.org

The Value of Money

By Jeffrey M. Herbener

 

Although 1870 saw a breakthrough in price theory, the advances of the marginalist revolution had not yet penetrated to monetary theory by the early decades of the 20th century. Most economists were still content to work with the centuries-old quantity theory of money even though it took an aggregated approach while the key insight of the new price theory was the link between a good's price and the valuation of it made by individual consumers.

 

Benjamin Anderson was among a handful of economists, led by Ludwig von Mises in his pioneering work The Theory of Money and Credit in 1912, who set out to integrate monetary theory into a general theory of value.

 

Like Mises, Anderson devoted a major portion of his The Value of Money, published in 1917, to a refutation of the "mechanical" quantity theory of money. Many of Anderson's arguments will be familiar to any student of Mises: the causes and effects from which the data of the quantity equation are constructed are disaggregated and complex; whatever the correlation between the aggregate variables of the quantity equation, correlation is not causation; causation cannot be established in the equation because there are no quantitative constants in human action (in particular, velocity is not constant); the quantity theory ignores time; there is no unambiguous way to define the variables in the theory: the money stock, velocity, the quantity of goods, and the price level.

 

Additionally, Anderson holds that whatever true propositions the quantity theory offers can as well be deduced from a correct theory of value and that many true theories of modern economics… (Read on)

 

Source: Mises.org

The Greatest Economic Charity

By F.A. Harper

 

When asked to contribute an essay to Professor Mises's Festschrift, I was at first inclined to dip my pen in the well of humility and then lay it aside unused. On what economic theme has Professor Mises himself failed to write with a superiority to anything I could offer? Yet honor is due him. So I trust that friends of this great and patient teacher will tolerate an essay's imperfections for the sake of the spirit of an offering.

 

Professor Mises's main renown is as an economist. Yet to me he is a charitable person even more than an economist. His charity is not of the fashionable kind that ladles out economic pleasantries from a caldron filled with socialist loot obtained by theft. His is not even primarily of the material sort at all but is, instead, in the form of his inspiring mind and spirit. In my opinion there can be no greater charity than this, for it endures beyond any material form of benevolence.

 

In this essay I shall be dealing, however, with one aspect of economic charity — a form inferior to charity of the mind and the spirit. People spend vast sums trying to do good with economic alms in forms which, to me, seem open to serious question. In their haste to do good and to bask in the glow of immediate glory as purveyors of alms, they are being exceedingly wasteful of the… (Read more)

 

Source: Mises.org

Keynes vs. Say

By Henry Hazlitt

Keynes's "greatest achievement," according to his admirers, was his famous "refutation" of Say's law of markets. All that it is necessary to say about this "refutation" has already been said by Benjamin M. Anderson, Jr., and Ludwig von Mises. Keynes himself takes the matter so cavalierly that all he requires to "refute" Say's Law to his own satisfaction is less than four pages.

Yet some of his admirers regard this as alone securing his title to fame:

Historians fifty years from now may record that Keynes' greatest achievement was the liberation of Anglo-American economics from a tyrannical dogma, and they may even conclude that this was essentially a work of negation unmatched by comparable positive achievements. Even, however, if Keynes were to receive credit for nothing else … his title to fame would be secure … [Yet] the Keynesian attacks, though they appear to be directed against a variety of specific theories, all fall to the ground if the validity of Say's Law is assumed.

It is important to realize, to begin with, as Mises has pointed out, that what is called Say's law was not originally designed as an integral part of classical economics but as a preliminary — as a refutation of a fallacy that long preceded the development of economics as a recognized special branch of knowledge. Whenever business was bad, the average merchant had two explanations at hand: the evil was caused by a scarcity of money and by general overproduction. Adam Smith, in a famous passage in The Wealth of Nations, exploded the first of these myths. Say devoted himself to a refutation of the second… (Read more)

Source: Mises.org

How Mises Rebuilt Economics

By Hans-Hermann Hoppe

 

What is the logical status of typical economic propositions such as the law of marginal utility (that whenever the supply of a good whose units are regarded as of equal serviceability by a person increases by one additional unit, the value attached to this unit must decrease as it can only be employed as a means for the attainment of a goal that is considered less valuable than the least valuable goal previously satisfied by a unit of this good) or of the quantity theory of money (that whenever the quantity of money is increased while the demand for money to be held in cash reserve on hand is unchanged, the purchasing power of money will fall)?

 

In formulating his answer to this question, Ludwig von Mises faced a double challenge. On the one hand, there was the answer offered by modern empiricism. The Vienna Ludwig von Mises knew was in fact one of the early centers of the empiricist movement: a movement which was then on the verge of establishing itself as the dominant academic philosophy of the Western world for several decades, and which to this very day shapes the image that an overwhelming majority of economists have of their own discipline.

 

Empiricism considers nature and the natural sciences as its model. According to empiricism, the aforementioned examples of economic propositions have the same logical status as laws of nature: Like laws of nature they state hypothetical relationships between two or more events, essentially in the form of if-then statements. And like hypotheses of the natural sciences, the propositions of economics require continual testing vis-à-vis experience. A proposition regarding the relationship between economic events can never be validated once and for all with certainty. Instead, it is forever subject to the outcome of contingent, future experiences. Such experience might confirm the hypothesis. But this would not prove… (Read more)

 

Source: Mises.org

The Market for Literary Products

By Ludwig von Mises
 
Capitalism provides many with the opportunity to display initiative. While the rigidity of a status society enjoins on everybody the unvarying performance of routine and does not tolerate any deviation from traditional patterns of conduct, capitalism encourages the innovator. Profit is the prize of successful deviation from customary types of procedure; loss is the penalty of those who sluggishly cling to obsolete methods. The individual is free to show what he can do in a better way than other people.
 
However, this freedom of the individual is limited. It is an outcome of the democracy of the market and therefore depends on the appreciation of the individual's achievements on the part of the sovereign consumers. What pays on the market is not the good performance as such, but the performance recognized as good by a sufficient number of customers. If the buying public is too dull to appreciate duly the worth of a product, however excellent, all the trouble and expense were spent in vain.
 
Capitalism is essentially a system of mass production for the satisfaction of the needs of the masses. It pours a horn of plenty upon the common man. It has raised the average standard of living to a height never dreamed of in earlier ages. It has made accessible to millions of people enjoyments which a few generations ago were only within the reach of a small elite.
 
The outstanding example is provided by the evolution of a broad market for all kinds of literature. Literature — in the widest sense of the term — is today a commodity asked for by millions. They read newspapers, magazines, and books, they listen to the broadcasts and they fill the theaters. Authors, producers and actors who gratify the public's wishes earn considerable revenues. Within the frame of the social division of labor a new subdivision evolved, the species of the literati, i.e., people making a living from writing. These authors sell their services or the product of their effort on the market just as all other specialists are selling their services or their products. They are in their very capacity as writers firmly integrated into the cooperative body of the market society.
 
In the precapitalistic ages writing was an unremunerative art. Blacksmiths and shoemakers could make a living, but authors could not. Writing was a liberal art, a hobby, but not a profession. It was a noble pursuit of wealthy people, of kings… (Read more)
 
Source: Mises.org

Is There Room For Compromise With Socialism?

By Ludwig Von Mises

 

Private ownership of the means of production (market economy or capitalism) and public ownership of the means of production (socialism or communism or "planning") can be neatly distinguished. Each of these two systems of society's economic organization is open to a precise and unambiguous description and definition. They can never be confounded with one another; they cannot be mixed or combined; no gradual transition leads from one of them to the other; their obversion is contradictory. With regard to the same factors of production, there can only exist private control or public control.

 

If in the frame of a system of social cooperation only some means of production are subject to public ownership while the rest are controlled by private individuals, this does not make for a mixed system combining socialism and private ownership. The system remains a market society, provided the socialized sector does not become entirely separated from the nonsocialized sector and lead a strictly autarkic existence. (In this latter case there are two systems independently coexisting side by side — a capitalist and a socialist.)

 

Publicly owned enterprises, operating within a system in which there are privately owned enterprises and a market, and socialized countries, exchanging goods and services with nonsocialist countries, are integrated into a system of market economy. They are subject to the law of the market and have the opportunity of resorting to economic calculation.

 

If one considers the idea of placing by the side of these two systems…

 

(Read more)

 

Source: Mises.org

Impending Social Strife?

By Ron Paul

The greatest threat facing middle and working class Americans is our depreciating paper currency.

At least when the kings of old debased their coinage, by adding copper to the precious metal, there was still some objective value to the resulting money. But as economist David Ricardo observed almost two centuries ago, when money costs nothing, it will become worth nothing.

"Government," said Ludwig von Mises, "is the only agency that can take a useful commodity like paper, slap some ink on it, and make it totally worthless."

Today, thanks to 67 years of central bank control over the money supply, we face an economic and political crisis greater than any we have faced before.

We probably will see widespread civil disorder in the 1980s, as a direct result of our faltering economic system. The dollar has been damaged by decades of interventionism, and Congress has legitimized depreciation of the dollar and forced redistribution of wealth through corporate and social welfare schemes.

All aspects of the interventionist system threaten freedom and social peace, but money is the major issue, since it is the lifeblood of all economic transactions. If we are to reverse the trends of the past six or seven decades, honest money and monetary debasement must become top concerns of ordinary Americans.

The late Martin Gilbert, head economist for a Swiss bank, was a convert to the gold standard. Among his employees was a young manual worker. "Once a month," said Gilbert, "he took part of his pay and bought a gold coin for his wife. I remonstrated with him about it once, and he said, 'Look, don't you Americans come over here and try to tell us how to live. I go home and I give that coin to my wife, and I tell her, "If something happens to me, and to the bank and all the governments, you can go into the countryside and give it to a farmer, and with that coin you can eat for a week."’ I came around to the opinion that he knew something I didn't know."

This article was excerpted from the booklet Gold, Peace, and Prosperity, copyright © 1981 by the Foundation for Rational Economics and Education, Inc. Permission to quote from, or to reproduce liberal portions of, this publication is granted, provided due acknowledgement is made.

Sound Financial Advice!

By Zach Foster

“Congress should act to remove taxpayer support from the housing GSEs before the bubble bursts and taxpayers are once again forced to bail out investors who were misled by foolish government interference in the market.”

--Ron Paul, September 10, 2003 (four years before the housing bubble burst)

It is clear that Ron Paul understood economics better than most, if not all, members of Congress, and following his advice probably would have averted many of the terrible economic situations many Americans find themselves in today.  Congressman Paul knew that excessive spending, dishing out artificial credit, and government manipulation of free market practices led to the current economic recession which many are calling the Second Great Depression.

Dr. Paul’s extensive knowledge of solid economics, driven in part by his partnership with great economists like Ludwig Von Mises and Murray N. Rothbard[1], can help the country get back to a solid financial footing.  His solutions will not be overnight remedies as promised by the current administration and even some of the Republican contenders.

As President, Ron Paul would veto any unbalanced budget Congress sends him.  This practice would put in check the recent trend reflected both in the federal and various state governments of legislatures passing budgets with huge deficits.  Deficit is merely a nicer word for incurring extra debt and without a plan for paying it off.

Ron Paul would eliminate reckless and unconstitutional government departments.  If anything, this would achieve a major pillar of Republican ideology by SHRINKING the size of the federal government. Not all sections of various departments of various branches of government are necessary for running the country, and many of these departments serve only as red tape that either hinder economic growth or restrict individual liberties, or even both.  The last two Presidential administrations have been growing government faster than underground farmers grow marijuana in Humboldt County.  Even George W. Bush, the so-called maverick conservative, added 7,000 pages of new federal regulations over business and the economy, and even began opposing free trade by imposing tariffs on various imports.[2]

Ron Paul will not raise the debt ceiling.  He understands that raising the debt ceiling only furthers the country’s already out of control debt and puts the country in an even more precarious position should any of its creditors come knocking (ever heard of China?).  Government spending must be limited just the way credit card companies limit spending of careless clients who can’t pay their credit card debt.  The average credit card delinquent’s debt is in the tens of thousands.  The federal government’s debt is in the ball park of FOURTEEN TRILLION.[3]

Ron Paul would work to fully audit and then abolish the Federal Reserve.  The basic fact that damn the institution is that the Federal Reserve is only a quasi-governmental institution that can manipulate interest rates and the value of money without consulting any government authority.  Furthermore, every dollar that the federal government wishes into existence is PRINTED by the Federal Reserve and LOANED to the federal government with INTEREST FEES.  Basically, every dollar the federal government creates, it’s already in debt for.  Does anyone see a problem with this???  Congressman Paul makes an initial case for this in his 2008 book The Revolution, and outlines an excellent plan to end the Fed and restore the value of American currency in his book End the Fed.  These ideas are justified and the economic theories confirmed by celebrated economist Murray N. Rothbard in his books The Origins of the Federal Reserve, The Case Against the Fed, and What Has Government Done To Our Money?.

Ron Paul would oppose all unnecessary regulations on small businesses and entrepreneurs.  He knows that, unlike the careless and parasitic mega-corporations and huge banks that have stained the good reputations of capitalism and the free market, small businesses and entrepreneurs are the lifeblood of the American economy.  By creating jobs for themselves and others, small businesses and entrepreneurs leave other jobs open for other people and raise the number of employed citizens who work, earn, save for their retirement so they don’t have to sponge off the public coffers, and best of all, they spend most of their earnings on consumer goods like housing, cars, and food, thus stimulating the local and national economies.

Ron Paul would fight for lower taxes.  He strongly believes that hard workers should be able to keep what they earn rather than have the money robbed from their paychecks when only some of it will actually go to good things like roads and schools, while most of it will be blown on fruitless multi-billion dollar domestic programs, the wars in Iraq, Afghanistan, Libya (and Yemen too?), and generous foreign aid packages.  The author wrote in an earlier article:

“Walter E. Williams, distinguished Professor of Economics at George Mason University and syndicated columnist, explains how tax cuts on big business benefits the middle class.  ‘If a tax is levied on a corporation, and if it is to survive, it will have one of three responses, or some combination thereof. One response is to raise the price of its product, so who bears the burden? Another response is to lower dividends; again, who bears the burden? Yet another response is to lay off workers. In each case, it is people, not some legal fiction called a corporation, who bear the burden of the tax.’  What this also means is that when big businesses are taxed less, profits are higher and more disposable, therefore jobs are created, prices don’t rise, and wealth is spread more liberally and plentifully…”[4]

Ron Paul is the candidate who has a solid voting record and solid qualifications in virtually every sector of political issues Americans are debating about.  Ron Paul’s Presidency can lead the country back to prosperity[5] while protecting and preserving civil liberties and abiding strictly by Constitutional law.  Visit RonPaul2012.com for more details on his platform.

Image courtesy of Wikimedia Commons

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[1] Paul, Ron. End the Fed. Chapter 3.  Grand Central Publishing.  September 2009.

[2] Tanner, Michael.  Of Course That Implies He Has Principles. Cato Institute. http://www.cato-at-liberty.org/of-course-that-implies-he-had-principles/

[3] Federal Debt Limit (Debt Ceiling). The New York Times. June 2011. http://topics.nytimes.com/topics/reference/timestopics/subjects/n/national_debt_us/index.html

[4] Foster, Zach. The Failure to Vote on the James Zadroga 9/11 Health Bill. The Political Spectrum. December 2010. http://political-spectrum.blogspot.com/2010/12/failure-to-vote-on-james-zadroga-911.html

[5] Restore America’s Prosperity. http://www.ronpaul2012.com/wp-content/uploads/wpsc/product_images/RP-Economy-SJim.jpg

Are College Boards of Governors Qualified?

By Zach Foster

This article expands on an idea presented in Students Fight Back, Swinging Blindly

“Students should have a say in running our schools.”

This claim is actually grounded in legitimacy.  The true purpose of a student union and its student body organizations is not to waste time in trivial distractions like planning school dances and sports rallies, but rather to make the concerns, grievances, and suggestions of students known to the faculty, administration, and governing school board.  If the boards of governors of colleges and universities and/or the elected school boards of public schools are ignoring their student unions, then they do a grievous disservice to their main consumers: the students—the reason for their employment.  In this case it is appropriate for the students to organize under the leadership of well-informed cool heads and explore methods of civil disobedience until their rights are honored and they are given a voice that is heard.

However, students must never forget that they are not businessmen.  What many people forget is, though the purpose of all schools public and private is to educate and award degrees to those who have earned them, schools are businesses[1][2] and if they are not run for profit, they must at least earn back their operating cost.  Many students want to implement “free this” and “free that” for everyone while having little understanding of the costs, the benefits, and more importantly the consequences.  There is a reason why schools are run by elected boards.

Here, however, is where schools run into another problem.  Often times, the majority of board members come not from the private sector, where they would attain experience in running money making operations and knowing quality control, but from within academia.[3]  These are people who went to college after high school and never left.  They got their Bachelors Degree, stayed around to complete graduate school and maybe even entered the PhD program, and then became professors.  They have never dealt with the market and probably couldn’t even turn a profit at a lemonade stand.  Even professors of Economics have only theoretical experience, unless they have actually entered the private sector at some point in their lives, which few have.  This begs one question: who really has better qualifications for being on a school’s (a business’) governing board? A small business owner or department store manager who knows how to keep a business afloat and profitable, meeting the needs of consumers, or a professor whose knowledge of money comes in the form of a book or two on mere theory?  The answer is quite obvious.

Incompetent fools like these, as well as inexperienced students who think they can do a better job, are the ones causing the problems that make schools operate in the red and end up having to raise tuition and cut programs.  People like them are described even better in Ludwig Von Mises’ piece “The Anti-Capitalist Bias of American Intellectuals”[4] than they are in this piece.  These know-nothings who sit on boards and have no market experience are ill-qualified to run schools and are poor stewards of the American tax payer’s dollar.  More often than not, the board members’ only grasp of economic theory comes from Chapter 1 of Das Kapital.

These board members cry for more government money and grants, rather than finding innovative ways for the school, the college, or the university to make some of its own money.  This kind of people contributes little to societal development of improvement.  They are neither innovators nor entrepreneurs; they are merely an extension of government bureacracy.  Next time elections include candidates for a school board, voters should perhaps pay close attention to them and not just the clowns running for higher office.

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[1] Texas Governor Treats Colleges like Businesses. http://chronicle.com/article/Texas-Governor-Thinks-of/124603/

[2] “Like a Business.” http://www.washingtonmonthly.com/college_guide/blog/like_a_business.php

[3] Minimum Qualifications for Faculty and Administrators in California Community Colleges. P. 26-27. http://www.portervillecollege.edu/human-resources/docs/Min-qual-CCCCO-2006.pdf

[4] Von Mises, Ludwig.  The Anti-Capitalistic Mentality. Chapter 1. Mises Institute.