Political Theory

Re: Problems in Human Nature

Laotzu del Zinn — Wed, 08 Apr 2009 04:36:20 GMT

Rothbard showed that even in a much more market society than we have today banks tended towards cheap credit, causing the panic of 1819. Granted they had just created the first bank of america, but that was a private bank still.

Re: Problems in Human Nature

Juan — Tue, 07 Apr 2009 02:53:38 GMT

it will be the job of the market defenders to convince the people that cheap credit may help them but hurts all of us.

There's no such thing as cheap credit in a free market. In the current system cheap credit is just credit subsidized by the state. The only way for cheap credit to exist in a free market would be for firms to give their money away. Doesn't sound like a clever business plan though.

Re: Problems in Human Nature

nazgulnarsil — Tue, 07 Apr 2009 02:45:23 GMT

right, those who invest in a company that doesn't provide a service people actually want will pay the price when the company goes under. I think you're talking baout aggregate demand, which doesn't matter if you have free market currency.

Re: Problems in Human Nature

Laotzu del Zinn — Tue, 07 Apr 2009 02:26:27 GMT

When the market corrects itself (the bust) everyone is affected. That includes not only the company and all its shareholders and investors, but anyone attached to them as well. On my previous post I made the argument that public opinion (demand) will always tend towards cheap credit and high wages. The companies that succeed (until they bust) will be the ones that placate to public opnion. And after the market correction, new cheap credit offerers will step in to give the people what they want. Even in a free market, it will be the job of the market defenders to convince the people that cheap credit may help them but hurts all of us. Or we will have to find a way to reconcile these differences; to make cheap credit work with high wages.

Re: Problems in Human Nature

nazgulnarsil — Mon, 06 Apr 2009 14:47:59 GMT

in the completely free market those who desire inefficient allocation oof resources will be forced to bear the full cost of their stupid decisions.

Re: Problems in Human Nature

Laotzu del Zinn — Mon, 06 Apr 2009 14:38:30 GMT

Never in my post did I say any such thing. Im making the argument that even with the lack of a state, public opinion will always tend towards cheap credit and high wages. Mises and Rothbard see these as entirely incompatible with a stable economy.

Re: Problems in Human Nature

Zach_the_Lizard — Sat, 04 Apr 2009 15:00:34 GMT

I'm not quite sure what you're saying. Are you saying it is evil for a man to work for a profit, to attempt to better himself with his own productive abilities? A free market, over time, creates wealth. New and valuable uses are found for old materials, new materials are discovered, new uses of labor are made, and society, as a whole, grows wealthier. The economy is not a zero-sum game; wealth can be created. Let's show how.

Look at raw sewage. For much of history, it could be said to be worthless, less than worthless even. But suppose I found a way to use that waste as fuel. Overnight, a material has gone from being a health hazard that took resources to remove into a material with some value. There can be no siphoning of wealth in this system. No evil cartel or monopoly can long withstand the combined assault of every entrepreneur who wishes to enter that business. No man can treat his employees as slaves and expect them to be happy and productive; he can't even count on them working for him for long.

Problems in Human Nature

Laotzu del Zinn — Sat, 04 Apr 2009 06:51:25 GMT

It would seem to me that libertarianism seeks to end a problem inherent in human nature; trying to justify one man's self-preservation with another's. Mises is correct in his view that populations, subject to resource limitations, interact with each other in order to better their situation and change what they view as impediments to their prosperity." Unfortunately, sometimes these interactions aren't as beneficial to certain parties as they would like, and disputes arise. So populations engage in systems of cooperation and contract with the intended consequence of coverage under the law for both parties.

These systems have a tendency to grow and expand as new populations make a need for ever more resource and ever more coverage under the law. People, being in control of these systems tend to use them to what they see as their benefit. As one man uses it for detriment, another uses it stop the first man. As another uses it for benefit, another seeks to use it to siphon from the benefit. As a result the the system becomes bloated, inefficient, and corrupt.

But this problem is much like a rotting strawberry. The problem isn't that it is a strawberry, it's that it is rotten; “It has been said that all Government is an evil. It would be more proper to say that the necessity of any Government is a misfortune (James Madison).” Whether through a formal state or not, the same problems will plague any system.

It is the job of men to check their system every once in a while, find, study, and eliminate the problems that plague their society. "If men were angels, no government would be necessary. If angels were to govern men, neither external nor internal controls on government would be necessary. In framing a government which is to be administered by men over men, the great difficulty lies in this: you must first enable the government to control the governed; and in the next place, oblige it to control itself (Federalist 51).

With the removal of state institutions (making no value judgments) it is the private agents who adopt the role of government. But, “even in the panic of 1819, when our country was largely laissez-faire, by their own accord, “Banks continued to expand in number and note issue, without the obligation of redeeming in specie, and their notes continued to depreciate and fluctuate from bank to bank, and from place to place (Rothbard).” It is the tendency of the public to want cheap credit and high wages. And though these two things are seemingly incompatible, it has been the effort of many a human to reconcile these differences.

Rothbard later shows the letter of an early american writing to a british gentleman saying, “you find it difficult to comprehend, why persons who had a right to demand coin from the Banks in payment of their notes, so long forbore to exercise it... The whole of our population are either stockholders of banks or in debt to them. It is not the interest of the first to press the banks and the rest are afraid'”

Banks are businesses, and as such are subject to market forces. Public opinion as a market force will always tend towards cheap credit to pursue happiness, and high wages to sustain it. So banks, and all forms of money lending institutions will always engage in this behavior.