The Next Generation of Fed Policymakers

The Next Generation of Fed Policymakers

11/09/2017Mark Thornton

Jay Powell is a continuation of the Yellen years, but he may be a slight improvement over Yellen's complacency as a proponent of endless easy money. Would that there was someone at the Fed with the sensibilities of Paul Volcker...

The Federal Reserve's Next Generation

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Political "Tribalism" is the Consequence of Centralized Power

11/21/2017Tho Bishop

This clip from MSNBC's Morning Joe went through my Facebook feed earlier, with the show's panel pointing to the willingness of Alabama Republicans to vote for Roy Moore as an example of "extreme" tribalism that has taken over American politics. As Willie Geist put it:

If you're willing to protect the tribe at the cost of a 14-year old girl, you need to re-evaluate yourself.

Now, living in Alabama, I know many Moore defenders will dismiss the legitimacy of the original claims made against him. Putting aside the specific details of the case, it's hard to argue with Mr. Geist's point - if you are truly willing to sacrifice a 14-year old girl simply for the sake of your "tribe", then it may be worth evaluating your actions.Of course, the case of Roy Moore isn't a particularly unique one. Whenever allegations of inappropriate behavior are made against an individual that wields political power, the natural reaction to defend or attack an individual often coincides with how close their political views are to yours. 

In fact, one of my favorite articles that has emerged in light of recent allegations came out last week in the Washington Post after allegations emerged about Senator Al Franken. Written by a "feminist" who "studies rape culture", she is refreshingly honest by admitting that she would never want Democrats to take action against Franken simply because he's better than any Republican.

If I believed for one second that Franken is the only Democrat in the Senate who has done something like this, with or without photographic evidence, I would see that as the best and most appropriate option. But in the world we actually live in, I’m betting that there will be more. And more after that. And they won’t all come from states with Democratic governors and a deep bench of progressive replacements. Some will, if ousted, have their successors chosen by Republicans.

In other words, if we set this precedent in the interest of demonstrating our party’s solidarity with harassed and abused women, we’re only going to drain the swamp of people who, however flawed, still regularly vote to protect women’s rights and freedoms. 

While it may be fair to argue that this reaction is "tribalistic", it's also quite rational. 

After all, politics is simply war by other means - and you tend to prefer an SOB on your side over an enemy choir boy.

The solution, of course, is to change the battlefield. If we take away the power Washington has, and allow politics to be played out at the State and Local level, then America will no longer be a country in which we are required to force our political beliefs on everyone else. Instead, we would all have genuine options about the style of government we live under. 

As the scope of government America continues to grow, we will see political tribalism only grow.

Until that trend reverses itself, a politician's political affiliation will always matter more than his morals. 

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Herbener Contributes to New Book on the Theory of Costs

11/21/2017Shawn Ritenour
My friend and department Chairman Jeff Herbener has a chapter included in the new book The Economic Theory of Costs: Foundations and New Directions edited by Matt McCaffrey and published by Routledge. Herbener's chapter is entitled "Time and the Theory of Cost" The abstract reads as follows:
Production costs in Neoclassical models account for the physical conditions of production (MPP) and consumer demands (MR) but fail to incorporate time across the structure of production. Incorporation of real time in production necessitates the recognition that capitalist-entrepreneurs make production decisions. They discount the MRPs of factors when buying them in advance of selling their output and they must speculate about the DMRPs of factors in the face of uncertainty of the future when deciding what they will pay for them. This chapter develops a theory of cost in light of capitalist-entrepreneurs acting in real time.

It is a joy to work with colleagues who continue to add to our understanding of the laws of economics.

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Trophy Hunting Saves Endangered Species

11/20/2017Ryan McMaken

Legal trophy hunting creates an incentive for entrepreneurs to preserve endangered species since the trophy hunting industry makes these species valuable as  investments. The logic here is so apparent that even TruTV's show "Adam Ruins Everything" — which is hardly a right-wing propaganda rag — has figured it out: 

Adam Ruins Everything - Why Trophy Hunting Can Be Good for Animals

Two years after the killing of the cutely-named Cecil the Lion sparked outrage over trophy killing, the topic has once again been stoked by the Trump administration said it planned to end the ban on the importation into the US of some trophies from hunting. A backlash followed, and now Trump says he's not so sure

This is a topic we've already covered more than once here at The fact remains that when animals have no economic value, there is no incentive to preserve them from total destruction:

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Yellen Announces She Will Leave Fed Next Year

11/20/2017Tho Bishop

Today Janet Yellen announced that she will be leave the Fed entirely when Jay Powell is confirmed as the next Federal Reserve Chairman, she had the option of staying on as a governor. It was widely expected that Yellen would stay on, though there was some thought that her ideological similarity with Powell made it possible she could have stayed on the Federal Reserve Board.

This move gives Trump yet another spot to fill at the Fed, which will make five total during his presidency. He filled one of those spots earlier this year when Randal Quarles, a former Bush Treasury official, was confirmed by the Senate. 

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Bovard: Trump Making Thanksgiving Travel Worse

11/20/2017James Bovard

On the campaign trail last year, Donald Trump derided the Transportation Security Administration as a "total disaster". But his administration is making TSA more intrusive and abusive while its 42,000 screeners remain as incompetent as ever.

New TSA screening guidelines will likely make Thanksgiving travel a disaster for legions of Americans — and the worst is yet to come.

Read the full article at USA Today.

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Mises, Hoppe, and Rothbard: On the Foundations of Liberty

11/20/2017C.Jay Engel

[Reprinted from the site Austro Libertarian.]

The debate over the proper philosophical foundation for economics, ethics, and political theory (which, being focused on the justification for the use of force in society, is a particular application of ethics), are all grounded in the study of knowledge; or, epistemology. This is why the first hundred pages or so of Ludwig von Mises’ treatise Human Action is pure epistemology; a dry subject, but nonetheless imperative. Ideas which are to be argued and defended must have intellectual justification. There is no point in engaging in argumentation if there is no justification for one’s position. When we state that we subscribe to the Austrian School of economics, we are saying that we reject the empirical basis of other schools –whether they be Monetarism, Keynesianism, Marxism, Classicalism, etc. –and we embrace the rationalist or apriori basis of the Austrian School.

To be an Austrian economist is to accept that economic propositions are understood independent of experience and empirical observation. They are facts that must be learned by the employment of the laws of logic and do not depend on all the plethora of data and statistics and number-crunching of the majority of widely accepted economic schools of thought. They cannot be falsified by empirical observation anymore than any logical syllogism can be falsified. No amount of testing and historical analysis can falsify the fact that 1+1=2.

The starting point of the Austrian methodology is that “human beings act purposefully.” From this, more propositions are deduced and derived. Mises was the first to really hone in on this “axiom.” However, Mises and Hoppe justify that starting point in a different way than does Rothbard. Mises and Hoppe, being neo-Kantians, justify it rationalistically; that is, they consider that to deny this proposition is to affirm it. For one cannot deny that humans act purposefully without acting purposefully. Therefore, this axiom is a result of the application of the laws of logic and is dependent on an apriori way of thinking.

In slight distinction with Hoppe and Mises, Rothbard finds his epistemological roots in the empirical tradition of Thomas Aquinas. Thus, he considers the proposition that “human beings act purposefully” to be founded on experience, on observing both one’s self and other humans.


In the realm of political theory and ethics, these three “Austro-libertarian” intellectual giants have a bit more diversity. While Mises did not take libertarian principles as far as Rothbard and Hoppe (to anarcho-capitalism), they can all be seen as members of the libertarian tradition. Mises’ case for a libertarian society was utilitarian. The free-market system, for Mises, is so powerful and beneficial for mankind, that it alone must be demanded as compared to all other systems whether communistic, fascistic, interventionist, and their variations. For the sake of prosperity and human flourishing, only a free society can achieve these ends. Any government promises to act in the place of the free society in pursuit of a better world, can be proven as impossible based on economic theory. And in all his statements about the benefits of the free market and capitalism, Mises was right.

And yet, as Hoppe noted

[Mises] favors life over death, health over sickness, abundance over poverty. And insofar as such ends, in particular the goal of achieving the highest possible standard of living for everyone, are indeed shared by other people, as he assumes they generally are, as an economic scientist Mises recommends that the correct course of action to choose is a policy of laissez faire. And doubtlessly, insofar as economics can say this much, the case for laissez faire is a highly important one. However, what if people do not consider prosperity to be their ultimate goal? As Rothbard points out, economic analysis only establishes that laissez faire will lead to higher standards of living in the long run. In the long run, however, one will be dead. Why then would it not be quite reasonable for a person to argue that while one perfectly agreed with everything economics had to say, one was still more concerned about one’s welfare in the short run and there, clearly for no economist to deny, a privilege or a subsidy would be the nicest thing? Moreover, why should social welfare in the long run be one’s first concern at all? Couldn’t people advocate poverty, either as an ultimate value in itself or as a means of bringing about some other ultimate value such as equality?

In other words, Mises is to be commended by showing the potential of the free market and its results. But why are the results good? Economics does not establish what is right and wrong. Powerful and rich kings and tyrants have no reason to desire the prosperity for many that the capitalistic and free markets produce. Mises however, denied that ethical propositions could be rationally defended. His utilitarianism was the only thing that he was left with.

Rothbard rejected his master’s Utilitarianism. We ought to hold him in high esteem for the simple fact that he had the courage to reject the relativistic solutions of so many in the present age. Mises was certainly not a cultural relativist, and in fact was a defender of Old World mannerisms, behavior, and social respectability, but these things came from his Austrian heritage and not from any justification via pure reason.

In dissenting from utilitarianism, Rothbard sought a transcendent ethic that was binding on all people at all times. Rothbard’s Natural Law libertarianism was built on the normative propositions surrounding the fact that man has ownership in his body and external property. Ownership entails that the owner has the exclusive right to determine the use of the property in question. The nature of this ownership is such that use of the property by a non-owner is ethically wrong. Thus, man is free to use his property in accordance with his desires by virtue of the fact that no one has the moral authority to prevent such use. The implication of this, of course, is that the boundary of man’s use of his own property is the property rights of those in society. Thus, for Rothbard, the property-rights social order was of an ethical nature, not a utilitarian one.

Hoppe however, being a strict apriorist, rejects both Rothbard’s Natural Law empiricism as well as Mises’ utilitarianism. His view is that libertarian theory ought to be defended with the very same methodology as his Austrian theory. This is important. And when he first introduced this idea, it was hotly contested and quite controversial in libertarian circles. If Mises was a Utilitarian and Rothbard a Thomist, Hoppe has made the praxeological case for a private property order.

It is his contention that the goal of political theory to provide norms which prevent conflict. Without the possibility of conflict, there is no need for a political theory. But conflict exists in a world of scarce resources and therefore property assignment rules are to be demanded. In order for one to justify any of these rules, that is, in order to put forth an argument in defense of a political theory, one must presuppose self-ownership. One must assume at the outset that he owns the body through which he (man is spirit, not body) communicates and justifies his position. Thus, Hoppe finds the same logical potential here as in his justification for the economic “Action axiom” described above. For if one seeks to deny that humans have ownership over their bodies, but in engaging in argument in order to deny this they exercise or prove this belief, they would only be contradicting their presuppositions. Thus, for Hoppe, any political theory except the libertarian one is a contradictory theory.

To be clear, this is not a statement of “ought.” It does not purport to explain why it might be wrong for someone to steal or murder, only that those things cannot be rationally justified. He has sought to avoid the is-ought problem of philosophy altogether. No political order can be rationally defended except the Austro-libertarian one without falling into self-contradiction. But, the critic may wonder, why is it bad to contradict oneself? Surely the criminal or politician (but I repeat myself) cares not one wit for the laws of logic. And Hoppe recognizes this critique. His answer however, is that he is only concerned with what can be rationally defended.

The Austro-libertarian property rights theory and the Austrian School economic theory need an epistemological foundation. The great debate is what, exactly, that foundation is. Studying the distinctions within the Austro-Libertarian world is a rewarding and illuminating effort.

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Call for Papers: AERC 2018

11/17/2017Mises Institute

The Austrian Economics Research Conference is the international, interdisciplinary meeting of the Austrian school, bringing together leading scholars doing research in this vibrant and influential intellectual tradition. The conference is hosted by the Mises Institute at its campus in Auburn, Alabama, and directed by Joseph Salerno, professor of economics at Pace University and academic vice president of the Mises Institute.

Proposals for Papers

Proposals for individual papers, complete paper sessions or symposia, and interactive workshops are encouraged. Papers should be well developed, but at a stage where they can still benefit from the group’s discussion. Preference will be given to recent papers that have not been presented at major conferences. All topics related to Austrian economics, broadly conceived, and related social-science disciplines and business disciplines such as management, strategy, and entrepreneurship are appropriate for the conference. Proposals from junior faculty and PhD students are especially encouraged. The Grant Aldrich Prize of $1,000 will be awarded to the best graduate student paper. Abstracts should be limited to 750 words. All proposals are peer reviewed by the AERC Program Committee. Additional information is here.

Submit your proposal to by January 29, 2018. Proposals after the deadline will be considered as space permits. Decisions will be communicated by February 5.

Besides paper sessions and symposia, the conference includes five named keynote lectures and the awarding of three cash prizes: the Lawrence W. Fertig Prize in Austrian Economics, the O.P. Alford III Prize in Political Economy, and the Grant Aldrich Prize for Best Graduate Student Essay.

Student scholarships are available

Register for AERC 2018 today

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Police Priorities: Prosecuting Locals for Rude Bumper Stickers

11/16/2017Ryan McMaken

A county sheriff in Texas has run afoul of the social media mob when he publicly announced on Facebook that he was seeking to press charges against a local resident known for using the F-word on a sign on his vehicle. 

Social media readers responded with the expected protests over freedom of speech when Sheriff Troy Nehls posted a photo of the offending truck and announced the local district attorney "has informed us she would accept Disorderly Conduct charges regarding it." 

Numerous other sites have focused on the First-Amendment implications of the situation. But let's focus here instead on the use of taxpayer-funded resources by a county employee:

In essence, the Sheriff is seeking to make an arrest over what amounts to a rude bumper sticker. 

By announcing that he has met with or called the local prosecutor, and may have charges filed, the sheriff is threatening the owner of the truck with state violence that may include arrest, fines, and perhaps even a short period of imprisonment. 

Given all the effort the Sheriff has gone to, a reasonable person might conclude that there is essentially no crime at all in Fort Bend County. 

However, in spite of the fact that the Sheriff acts like he has nothing better to do, it turns out that Fort Bend County has its share of crime. 

Indeed, according to the FBI's crime statistics, the Fort Bend County in 2016 reported a total of 758 violent crimes. This included 18 homicides, 83 rapes, 141 robberies, 516 aggravated assaults. Property crimes included 269 auto thefts. 

The population of the county is approximately 580,000, which means the homicide rate is around 3.0 per 100,000. That's not an especially high homicide rate by American standards, but it's not an especially low one, either, especially for a high-income suburban area like Fort Bend County. 

In other words, the county has its share of crime, but the Sheriff is more concerned with waging petty battles over bumper stickers with local residents, rather than focus on prosecuting violent criminals, or on recovering stolen property. 

In the past, here at, we've noted how with any organization — including law enforcement agencies — time spent on one activity necessarily reduces the resources spent on other activities. The often-used police claim that police "must enforce all the laws" has always been nonsense since there are limited resources available. 

Thus, there is a real opportunity cost to tracking down people with naughty words on bumper stickers, while there are also 500-odd aggravated assaults per year. 

This should surprise no-one of course, since the Sheriff's department is not subject to any market discipline and is guided more by how well it can lobby the county government for a bigger budget, and how well the Sheriff is at getting votes from the local population. This fracas over a bumper sticker, of course, is likely little more than a political ploy, given that the Sheriff apparently has ambitions for higher office. 

It may be that this publicity pays off well for the Sheriff. Local victims of crime, however, may fare less well. 

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Claudio Grass Interviews Mark Thornton

11/16/2017Mark Thornton

In this new interview, Claudio Grass and I discuss economic bubbles, the European Central bank, and the state of the US dollar. 

Sound Money Sound Society Podcast Interview with Dr. Mark Thornton - November 2017

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Bylund: The Chinese Economic Miracle Is a Sham

11/16/2017Ryan McMaken

From The Observer: 

During a three-and-a-half-hour speech to mark China’s five-year congress in Beijing, President Xi Jinping laid out his vision for the nation’s future. Xi spoke at length about economic concerns troubling Chinese leaders, including problems with medical care, education, employment, and a growing income gap.

President Xi’s speech was by no means negative, though the hints of pessimism were unusual during a weeklong event designed to build confidence in the Chinese Communist Party. His opening remarks came mere weeks after rating agency Standard & Poor’s downgraded China’s credit rating because of rising debts. Chinese officials have slammed the downgrade as a “wrong decision,” but there is evidence to suggest the nation’s economy is not the powerhouse it seems.

I recently spent two weeks visiting China to attend several economic conferences. Aside from its magnificent scenery, what really struck me was the amount of development underway. Massive tower cranes dominate city skylines, and it’s not unusual to hear the clamor of construction at all hours. The country has an endless slate of infrastructure projects, including high-speed railways, bridges, and grand architecture.

It might look like a prosperous economy growing at warp speed, but these projects are not representative of genuine growth. This construction is commonly the result of cronyism in which investors, builders, and other players are “insiders” who profit from politically directed and supported clout.

Despite a flurry of construction, many of these structures are notably desolate. When you stroll through China’s large cities at night, dark skyscrapers tower over the metropolis, with nary a twinkling light from employees working late into the evening. Entire residential areas sit lifeless and lightless, casting an eerie vibe over a seemingly booming city.

Read the full article. 

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