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Archive for the ‘Economics’ Category

Why is everyone talking about inflation?

In Economics, Humane Economy on October 15, 2021 at 7:00 am

The post originally appeared here in the Alabama Political Reporter.

If you’ve paid attention to the news this year, you’ve heard warnings and predictions about inflation. What is inflation? Why all the hubbub about it?

Inflation occurs when the purchasing power of money diminishes because prices have increased rapidly or unexpectedly. Economists are worried about inflation because of government responses to the coronavirus pandemic.

The Federal Reserve’s response, for instance, was to slash interest rates. The Fed seeks to stabilize prices and improve employment while regulating the banking system. When it lowers interest rates, it attempts to induce borrowing and generate spending to stimulate the economy. Lowering interest rates expands available credit, causing people and businesses to take out loans.

The problem is, when it is cheaper and easier to borrow money, prices rise. Think about it: the sudden influx of cash into the economy means there’s more demand for goods and services, so the market adjusts by increasing costs. If the market didn’t adjust, we would suffer shortages of goods and services.

The more currency in circulation, the less value it has. Whenever there is an abundance of something—including money—it is worth less. There’s a superabundance of air, for example, so we don’t pay to breathe. By contrast, diamonds are scarce, so they are expensive.

When money is injected into the economy after the Fed lowers interest rates to artificial levels—levels that would not exist on the market—people may have more cash on hand, but that cash cannot buy what it could have bought before inflation set in.

Another government response to the pandemic was to distribute stimulus checks to qualified families and individuals. Sounds good in theory, but what are the ramifications?

Stimulus money creates artificial demand for goods and services, resulting in rising prices and a reduction in purchasing power. Have you noticed rising housing prices? What about the costs of lumber or timber?

The surge of demand from stimulus money leads to an economic bust. Consider this analogy: drinking alcohol feels good at first, but the hangover from excessive imbibing hurts badly and impairs one’s ability to function. The government’s issuance of stimulus money is like overconsumption of tequila shots: initially fun, but eventually damaging.

Stimulus money isn’t real, earned income. Dishing it out will have long-term deleterious consequences, namely inflation. 

Inflationary pressures fall disproportionately on the poorest in society, the very groups that stimulus money is designed to help. Because of increases in the money supply, basic goods are now more expensive than they would have been without any stimulus money. Spending splurges due to artificial demand are unsustainable; eventually the market must correct malinvestment.

Want to learn more about sound money? Get in touch with the Manuel H. Johnson Center at Troy University.     

What is Capitalism?

In Academia, Economics, Libertarianism on September 1, 2021 at 11:08 am

High Costs of Legal Fees

In Economics, Law on October 28, 2020 at 6:45 am

Why do lawyers cost so much?

In Economics, Law on September 23, 2020 at 6:45 am

What Austrian Economists Can Learn From Roger Scruton

In Arts & Letters, Austrian Economics, Britain, Conservatism, Economics, Essays, History, Humane Economy, Humanities, liberal arts, Libertarianism, Literature, Philosophy, Western Civilization, Western Philosophy on June 17, 2020 at 6:45 am

This piece originally appeared here in The Imaginative Conservative. 

The room is alive with happy discussion, the clanking of plates and silverware, hearty laughter, and the pitter-patter of smartly dressed servers buzzing about the room. Wine flows. We’re on the final course, awaiting dessert and coffee, when suddenly the lights dim, leaving dancing candlelight on the tables and the illicit glow of cell phones. On an enormous screen behind the stage comes a loud, hoarse voice: “It is a great honor to be named Defender of Western Civilization.”

I look up, puzzled. There before me in magnified form, filling the screen, is Sir Roger Scruton, sitting beside a lamp, his face framed by a flux of flaxen hair, his chair squeaking as he readjusts himself.  It’s evening, both here and in England, and the sun is down, so the faint light beaming on his face through an obscured window betrays the disappointing reality that we’re watching a recording, not a live feed. The moment, at any rate, is exciting. Scruton goes on to ask, “What is a civilization?”  And to answer: “It is surely a form of connection between people, not just a way in which people understand their languages, their customs, their forms of behavior, but also the way in which they connect to each other, eye to eye, face to face, in the day-to-day life which they share.”

That, anyway, is how I recall the Intercollegiate Studies Institute’s 14th Annual Gala for Western Civilization that honored Scruton, who, because of his chemotherapy treatment, was unable to attend.

Sir Roger, as he’s affectionately known, departed from this world on January 12, 2020.  This erudite philosopher of a bygone era raises grave questions about the compatibility between traditionalism and classical liberalism, custom and markets, the individual and the state, convention and innovation. From Scruton, we can, I think, learn the following. That a society of modest scope and scale functions optimally when its people are good and virtuous, when they voluntarily organize themselves into charitable communities, fearing the eternal consequences of wickedness. That free societies thrive where crime is rare and private property rights are both recognized and respected, where families work hard and support one another and leaders are classically and rigorously educated, having wrestled with the greatest thinkers and texts from across the ages. That lasting social harmony develops in cohesive communities where solidarity involves kindness and benevolence and members do not superciliously dismiss received wisdom and norms.

Scruton’s Fools, Frauds and Firebrands—first published in 1985 as Thinkers of the New Left, reworked and rereleased in 2015, produced in paperback in 2016, and reissued in 2019 as yet a newer edition—demonstrates that Scruton wasn’t tilting at windmills as conservative pundits and talking heads on television and popular media seem too often to do. Scruton’s chief targets were, not senseless and sycophantic politicians, but ideas. He traced these ideas to particular leftist luminaries: Eric Hobsbawm, E. P. Thompson, J.K. Galbraith, Ronald Dworkin, Jean-Paul Sartre, Michel Foucault, Jürgen Habermas, Louis Althusser, Jacques Lacan, Gilles Deleuze, Antonio Gramsci, Edward Said, Alain Badiou, and Slavoj Źižek. His concern was principally philosophical and cultural. He took ideas seriously and didn’t simplify or exploit them merely for entertainment value.

Scruton acknowledged that the term “Left,” referring to the object of his opprobrium, covers a wide range of intellectuals and ideological movements, but that all of these, to some degree, “illustrate an enduring outlook on the world, and one that has been a permanent feature of Western civilization at least since the Enlightenment, nourished by … elaborate social and political theories,”[1] namely those which hold “that the goods of this world are unjustly distributed, and that the fault lies not in human nature but in usurpations practiced by a dominant class.”[2] The word “Left” or “leftist,” then, suitably encompasses a multiplicity of views that, although singular in their particulars, hang together as a classifiable category at a certain level of generalization.

Scruton added that leftists “define themselves in opposition to established power, the champions of a new order that will rectify the ancient grievance of the oppressed,”[3] and that they pursue two abstract goals: liberation and social justice. The liberation Scruton refers to is not necessarily a libertarian version of personal autonomy; rather, it refers to “emancipation from …. ‘structures,’” e.g., from “the institutions, customs and conventions that shaped the ‘bourgeois’ order, and which established a shared system of norms and values at the heart of Western society.”[4] The Left seeks to deconstruct and dismantle historic associations (families, churches, clubs, sporting leagues, etc.) that provide order and stability in the absence of overarching government rules and regulations.

If that’s “the Left” in a nutshell, then what’s “the Right,” according to Scruton?  In short, the Right is a community of individuals believing in the primacy of those personal relationships, prevailing norms, and controlling institutions that precede government, mediate between private actors and the State, and celebrate the intrinsic worth of every human being. “The right,” explains Scruton, “rests its case in representation and law,” advocating a “civil society that grows from below without asking permission of its rulers.”[5] The Right, accordingly, treats government as accountable to its citizens in light of its dangerous capacity for mischief and violence. The Right also recognizes the sinful, flawed nature of human beings and, therefore, attempts to offset or neutralize—rather than to amass or centralize—power.

By contrast, the Left promotes institutionalized coercion and centralized power. Its attempts to realize concretely the abstractions of social justice and equality necessitate the use of a forcible apparatus, controlled by a select group of people, to press resistant communities into compliance. “Who controls what and how in the realm of pure equality,” asks Scruton on this score, “and what is done to ensure that the ambitious, the attractive, the energetic and the intelligent do not upset whatever pattern it is that their wise masters might impose on them?”[6] No true and absolute equality of talent or wealth can ever be achieved in tangible reality because humans are wonderfully and brilliantly diverse, even as they are made, universally, in the image of God.

Given a binary choice between the Left and the Right so described, libertarians ought to side with the Right, cultivating a literate society characterized not only by self-ownership, free markets, and private property, but also by aesthetic appreciation, religious worship, obedience to successful and constructive customs, and concern for the souls and material wellbeing of the generations not yet born. Libertarians and conservatives can agree that everyone is plugged into vast networks of commerce and activity, however remote their neighborhoods or habitats. They can agree with Scruton that self-regulating, disciplined communities of caring individuals administer felt, proportional restraints more fairly and efficiently than do faraway government bureaucrats or impersonal agencies of mechanical functionaries who enjoy a compulsory monopoly on the implementation of force.

Scruton suggested that the Right, more than the Left, benevolently esteems the multiplying, bewildering variety of human behavior and interests. Whereas the Left reduces human beings to determined products of intractable systems and rigid social structures, the Right marvels in the mystery of quotidian experience, mining the past for evidence of good and bad decisions, prudent and imprudent courses of action, and workable and unworkable approaches to difficult challenges and exigent circumstances.

There can be no freedom, however, absent some authority. Conservatives and libertarians alike may locate that authority in mediating institutions of modest size, recognizing the importance of consent and localism, family and place, to good government. Scruton’s example shows that certain conservative cultural conditions enable market-based economies to flourish. Conservatives and libertarians may agree that, in Scruton’s words, “[Ludwig von] Mises and [Friedrich] Hayek between them destroyed the possibility of a socialist economy,” giving the “conclusive argument against it.” Mises’s and Hayek’s argument, a tenet of the Austrian School of Economics, involves the recognition that humans are fallible creatures with limited knowledge and perspective who prosper when society writ large values humility over hubris, and economic exchange over warfare or coercion.

Despite the rancor between them lately, conservatives and libertarians need each other. Dividing them unites the Left. Scruton was no libertarian, but his ideas, if thoughtfully considered by libertarians, could enable a more fruitful, contemplative, and beautiful libertarianism to emerge.

[1] Pg. 1.

[2] Pg. 3. Note: I have Americanized Scruton’s spelling so that, for instance, “practised” has become “practiced.”

[3] Pg. 3.

[4] Pg. 3.

[5] Pg. 286.

[6] Pg. 274.

Alcohol to the Rescue!

In Economics, Humane Economy, Libertarianism on April 8, 2020 at 6:45 am

This article originally appeared here at the American Institute for Economic Research on March 21, 2020.

The world, it seems, is full of bad news.

The disorienting coronavirus pandemic has occasioned an upsetting parade of horribles: Government-imposed shutdowns of business. Bans on public gatherings. A national lockdown. Restricted travel. Shortages of testing kits and hospital beds. Mass layoffs. Social distancing. Martial law. Strained supply chains.

There’s even talk of recession and depression.

Should we panic? Should we despair?

Of course not! How would that help?

This unusual moment, however stressful it may be, teaches us about the wonderful workings of spontaneous order in society, and of the innovative ability of ordinary people—not of presidents, dictators, chancellors, generals, or prime ministers—to improve lives and institutions in disparate communities across the globe.

Take the example of craft distilleries, which, of course, make liquors and spirits. Today they’re distilling a different concoction: hand sanitizer!

One estimate is that 75% of craft distilleries in the United States have considered producing hand sanitizer, which, because of panic purchasing, has been difficult to find in grocery stores and pharmacies. Bottles of hand sanitizer can sell for hundreds of dollars. Yet many distilleries are now giving them away!

Right down the road from AIER, where I’ve spent the last week as a visiting scholar, Berkshire Mountain Distillers is selling hand sanitizer for a mere $6 per bottle. And, folks, these aren’t little bottles.

Back home, where my family anxiously awaits my return, John Emerald Distilling Company is converting its facility into a “disinfectant depot.” It’s providing hand sanitizer in large spray bottles.

Wait, you might ask, what about those pesky regulations that prohibit distilleries from generating hand sanitizer? Well, the federal government has waived them. Makes you wonder: were these regulations even necessary?

It’s fascinating that distillers found a simple solution to a pervasive problem before the bureaucrats did. While governments investigated and arrested alleged price gougers who “stockpiled” hand sanitizer, industrious individuals invented practical substitutes.

Hubris and arrogance deceive government leaders into believing that only the most qualified experts among us can centrally design and maintain a mass, uniform plan to mitigate if not contain coronavirus. Meanwhile, despite government red tape, entrepreneurial forces quietly operate to supply consumers with the products they need during trying times.

Come to think of it, I don’t remember owning or using hand sanitizer when I was a kid. Presently, though, it seems so essential to quotidian experience that stores can’t keep it on the shelves. How quickly and innocently we grow accustomed to everyday possessions that would have amazed us just decades ago.

The current crisis, if that is the right word, affirms F. A. Hayek’s proposition that a spontaneous order constitutes “an adaptation to the multitude of circumstances which are known to all the members of that society taken together but which are not known as a whole to any one person.” Each of us, despite government action or inaction, as the case may be, has changed our lives to respond to this rapidly evolving situation. We’ve made sacrifices and compromises, adjusted our habits and routines, and imaginatively resolved unforeseeable challenges.

That’s what the market is: the free, aggregated actions and decisions of innumerable buyers and sellers within their unique settings and particular contexts. The market isn’t some monolithic evil bent on elevating certain classes of people at the expense of others. It isn’t the embodiment of a single, undifferentiated intent or an unvarying scheme to enrich some homogenous group.

Perhaps the invisible hand metaphor, though well meaning, is misleading. We human beings are not wooden chess pieces that a deific Mr. Market moves from square to square on his playing board. We’re complex, conflicted, loving, and curious agents exercising our reason and judgment to help our families, friends, and neighbors—and to discover needed goods and services as well as the viable means for delivering them.

People are, sadly, suffering and dying because of coronavirus, the harms from which are planetary in scale. We should remember, all of us, amid hardships and confusion, isolation and loss, disruption and sorrow, to appreciate the small, entrepreneurial miracles that have widespread and salubrious effects—like turning vodka into pocket-sized, germ-killing gel!

To distillers everywhere, let’s raise a glass. Cheers! Salud! Yamas! Kanpai! Prost! Saúde! Chin chin! Noroc! Skål! Ganbei! Geonbae! Gesondheid! Santé! 

Thank you, and here’s to your health.

What Coronavirus Teaches Us About Human Connection

In Arts & Letters, E.M. Forster, Economics, Humane Economy, Humanities on April 1, 2020 at 6:45 am

This post originally appeared here at the American Institute for Economic Research on March 19, 2020.

Only connect!” reads the epigraph to E.M. Forster’s novel Howards End. That phrase possibly encapsulates Forster’s entire philosophy.

It is also contrary to the current commands of our authorities and the mass media: Stay home! Keep inside! Close down! Quarantine! Be afraid! Socially distance! Don’t gather in groups!

However prudent they may be under the circumstances, these imperatives seem strange, confusing, and unnatural. Most of us don’t like alienating ourselves from others for lengthy periods. In times of trouble, we want to help others. We want to do something. If the coronavirus has harmed our psychology, if it has bothered or disturbed us, it is probably because we feel so helpless and vulnerable in the face of its transmittable power. The only thing we can do is….nothing.

Perhaps there is a silver lining. Absent tangible contact with others, we find communities online and via information technologies. Can’t visit your elderly parent or grandparent in the nursing home? Here’s a web camera. Can’t make that meeting in Boston or Atlanta? No problem: chat on Skype or Zoom or Google. Can’t visit the Met? Happily, that opera is livestreamed!

None of this would have been possible, let alone conceivable, a century ago. Free markets and the innumerable innovations of countless entrepreneurs have improved our lives and institutions in ways we take for granted. As bad as circumstances seem, they could be much worse.

It is popular in some circles to caricature those who celebrate free markets as cold, utilitarian ideologues promoting a radically technocratic vision of society that is characterized by atomized individuals ruthlessly committed to wealth maximization at the expense of the less fortunate. Nothing could be further from the truth. Markets are about freedom, coordination, cooperation, collaboration, association, peace, commerce, prosperity, and exchange. They bring people together. They incentivize trade and honest dealing over violence and war, and voluntary consent over coercion and compulsion.

As the stock market tumbles and businesses shut down, as we quit spending money on everyday goods and pleasures, as we restrict travel and shutter restaurants and bars, perhaps we will begin to more fully appreciate the beauty and joy that a free economy enables.

I have spent the last week as a visiting scholar at AIER, enjoying the company of kind, hospitable colleagues while living in the grand and elegant Edgewood Estate. In sharp contrast to the coronavirus hysteria and panic I’ve seen in popular media, life here has been calm, friendly, warm, and studious. We dine together for each meal, maintaining the appropriate distance of course. We help each other clean rooms and wash dishes. We meet for cocktail hour each evening after a long day of rigorous research and writing. On these occasions we discuss our work, seek advice and feedback, exchange information and data, and test our theories and arguments. The ideas we bandy about don’t end right then and there. They form the basis of articles and of interviews for television and radio. They find their way onto AIER’s website, the traffic for which, this week alone, has hit unprecedented levels.

I have noticed during my time here, gradually and by slow degrees, something far more infectious than coronavirus: ideas. Even in self-imposed isolation, the keen intellects at AIER have managed to reach people across the globe, providing unique perspectives and key economic insights to those who most want and need it. A communicable virus has nothing on communicable ideas. AIER has met a negative force with a positive one that is stronger and more lasting.

As governments close borders and impose curfews, as militaries take to the streets to enforce martial law, as universities cancel in-person classes and companies send their employees home, it is important to remember how formidable, vigorous, and enduring ideas can be. Deirdre McCloskey’s seminal trilogy—Bourgeois VirtuesBourgeois Dignity, and Bourgeois Equality—surveys the places and periods in which culture, shaped by ideas, facilitated human flourishing to an astonishing extent. Rhetoric and the concepts it conveys are, in her account, the vital factors that explain economic growth in the modern era.

Imagine what could be accomplished if we proliferated ideas about freedom and liberty more widely and quickly than any contagious virus could ever spread. One person comes into contact with another, transmitting an idea, which is passed on to yet another, who shares it with friends and family. Before long the idea has captured the minds of hundreds, then thousands, then millions, then billions. The contagion is academic, not pandemic. It is good, not bad. It is transmissible through any communicative network and doesn’t require face-to-face proximity for its rapid diffusion.

Only connect!

This morning, over coffee, I watched the sun rise above the rolling hillsides and heard exuberant birds chirping in the trees. I realized, sitting there, taking in the sights and smells and sounds of the coming spring, that this pandemic, like all upheavals, will pass. Exhilarated, I sensed with growing intensity a feeling not unlike what William Wordsworth must have felt when he wrote that “in this moment there is life and food / For future years.”

For many, this is undeniably a dark, sad, and scary hour of sorrow and hardship, loss and pain. You may be mourning or suffering. You may be comforting a sick loved one. You may be locked away in your room. But take solace: light always drives out the darkness, and hope springs eternal.

Dr. Jason Jewell on Justice versus Social Justice

In Conservatism, Economics, Ethics, History, Humanities, Law, liberal arts, Liberalism, Philosophy, Politics on February 5, 2020 at 6:45 am

Michael Anton vs. Samuel Gregg

In America, Civics, Conservatism, Economics, History, Humanities, Law, Philosophy, Politics, Western Civilization, Western Philosophy on July 17, 2019 at 6:45 am

Interview with the James G. Martin Center regarding English Departments, Higher Education, Marxism, and Legal Education

In Arts & Letters, Economics, higher education, History, Humane Economy, Humanities, Law, Law School, Legal Education & Pedagogy, liberal arts, Literary Theory & Criticism, Literature, Pedagogy, Philosophy, Scholarship, Western Philosophy on March 13, 2019 at 6:45 am

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