Price of Kindle edition of Capitalism cut to $9.99

The price for the Kindle edition of Capitalism has been reduced from $39.95 to $9.99. Sales of the book at the original price had been fairly brisk, with the book ranking between 25th and 75th in its category on Amazon.com until less than a week ago. In the last week, however, the book has fallen from the top 100 list in its categoy and has been steady at a ranking of approximately 250,000th in Kindle sales overall. Hopefully, the new price will broaden the market substantially.
Flash: as of 9AM this morning, California time, Capitalism is now 31st in itsc category, which is economic theory, and is ranked at 67,043rd overall in Kindle sales.
The new price may not show up outside the US until later today or even tomorrow.

Article in Current Issue of QJAE Squelches Evidence on Environmentalism

According to an article in the current issue of The Quarterly Journal of Austrian Economics by one Matthew McCaffrey, “when discussing all the hatred and vitriol which supposedly flows from the environ­mental movement, Reisman’s claims are rarely substantiated with textual evidence. We must simply take Reisman at his word when he states that the environmental movement believes this or that. Even worse, we are not even given criteria to judge the relative weight of any reference Reisman makes to the environmental literature. But surely a movement that is responsible for ‘the creation of a horde of hysterical bumpkins in the midst of modern civilization’ (1996, p. 79) should have left behind some records which would (even implicitly) indicate their designs. Environmentalism must have left some sort of, if I may be allowed a happy word, ‘footprint’ (pp. 137-38).”

Allow me to supply the “footprint”—more accurately, the massive crater—of evidence concerning the nature of environmentalism that is to be found in my book Capitalism: A Treatise on Economics. I will do so by quoting a few relevant passages from it. These are passages that are replete with verified references to statements by prominent environmentalists. They also contain a fundamental logical argument demonstrating implicit endorsement of those statements by everyone who accepts the basic environmentalist premise of an intrinsic value of nature.

Mr. McCaffrey simply ignores these passages, the statements they quote, the proof of the existence of the statements, and the logical argument demonstrating the applicability of the statements quoted to the whole of the environmental movement insofar as it proceeds on the premise of nature’s intrinsic value. Instead, he arbitrarily decides that statements that demonstrate the actual nature of environmentalism are simply to be disregarded, allegedly representing mere “exaggeration for literary and pedagogical effect” (p. 139). In effect, he argues, they’re only a kind of joke, not meant to be taken seriously. In this way, he gives environmentalism a free pass, as it were, on its expressions of a desire for mass human death and of enjoyment at the prospect of human terror. He then claims that he’s left looking for a “footprint” of something that in his mind does not exist for no other reason than that he’s decided to ignore its existence.

Here are the passages. They constitute a subsection of my book, titled “The Toxicity of Environmentalism and the Alleged Intrinsic Value of Nature (pp. 80-83).”

“The environmental movement’s blindness to the value of industrial civilization is matched only by the blindness of the general public toward the nature of the environ­mental movement’s own actual values. Those values explain the movement’s hostility to industrial civiliza­tion, including its perversion of the concept of efficiency. They are not known to most people, because the environ­mental movement has succeeded in focusing the public’s attention on absolutely trivial, indeed, nonexistent dan­gers, and away from the enormous actual danger it itself represents.

“Thus, not so long ago, as a result of the influence of the environmental movement, a popular imported min­eral water was removed from the market because tests showed that samples of it contained thirty-five parts per billion of benzene. Although this was an amount so small that not many years ago it would have been impossible even to detect, it was assumed that considerations of public health required withdrawal of the product.

“Such a case, of course, is not unusual nowadays. The presence of parts per billion of a toxic substance is routinely extrapolated into being regarded as a cause of human deaths. And whenever the number of projected deaths exceeds one in a million (or less), environmental­ists demand that the government remove the offending pesticide, preservative, or other alleged bearer of toxic pollution from the market. They do so, even though a level of risk of one in a million is one-third as great as that of an airplane falling from the sky on one’s home.

“While it is not necessary to question the good inten­tions and sincerity of the overwhelming majority of the rank-and-file members of the environmental or ecology movement, it is vital that the public realize that in this movement itself, which is so widely regarded as noble and lofty, can be found more than a little evidence of the most profound toxicity—evidence provided by leaders of the movement themselves, and in the clearest possible terms. Consider, for example, the following quotation from David M. Graber, a research biologist with the National Park Service, in his prominently featured Los Angeles Times book review of Bill McKibben’s The End of Nature:

This [man’s “remaking the earth by degrees”] makes what is happening no less tragic for those of us who value wildness for its own sake, not for what value it confers upon mankind. I, for one, cannot wish upon either my children or the rest of Earth’s biota a tame planet, be it monstrous or—however unlikely—benign. McKibben is a biocentrist, and so am I. We are not interested in the utility of a particular species or free-flowing river, or ecosystem, to mankind. They have intrinsic value, more value—to me—than another human body, or a billion of
them.

Human happiness, and certainly human fecundity, are not as important as a wild and healthy planet. I know social scientists who remind me that people are part of nature, but it isn’t true. Somewhere along the line—at about a billion years ago, maybe half that—we quit the contract and be­came a cancer. We have become a plague upon ourselves and upon the Earth.

It is cosmically unlikely that the developed world will choose to end its orgy of fossil-energy consumption, and the Third World its suicidal consumption of landscape. Until such time as Homo sapiens should decide to rejoin nature, some of us can only hope for the right virus to come along.40 [40. Los Angeles Times Book Review, Sunday, October 22, 1989, p. 9.]

“While Mr. Graber openly wishes for the death of a billion people, Mr. McKibben, the author he reviewed, quotes with approval John Muir’s benediction to alliga­tors, describing it as a ‘good epigram’ for his own, ‘humble approach’: ‘Honorable representatives of the great saurians of older creation, may you long enjoy your lilies and rushes, and be blessed now and then with a mouthful of terror-stricken man by way of a dainty!’41 [41. Bill McKibben, The End of Nature (New York: Random House, 1989), p. 176.]
“Such statements represent pure, unadulterated poison. They express ideas and wishes that, if acted upon, would mean terror and death for enormous numbers of human beings. These statements, and others like them, are made by prominent members of the environmental movement.42 [42. Another example is that of Christopher Manes, the author of Green Rage: Radical Environmentalism and the Unmaking of Civilization (Boston: Little, Brown, 1990). He and the Earth First! organization he supports regard famine in Africa and the spread of AIDS as environmentally beneficial developments. The founder of Earth First!, David Foreman, has described mankind ‘as a cancer on nature,’ and has said, ‘I am the antibody’ (in New York Times Book Review, Sunday, July 29, 1990, p. 22). Another representative of Earth First! writes: ‘Only a very few of human pathogens are shared by other partners on our planet. Biological warfare will have no impact on other creatures, big or small, if we design it carefully’ (in Forbes, October 29, 1990, pp. 96–97). And Paul Ehrlich, one of the oldest and most prominent leaders of the environmental movement, who is supposedly entirely respectable, criticizes the ‘preoccupation with death control,’ by which he means, ‘preoccupation with the problems and diseases of middle age.’ In his view, such preoccupation, and its consequent lengthening of human life expectancy, ‘will lead to disaster.’ (Ehrlich, The Population Bomb [New York: Ballantine Books, 1968], p. 91).]
“The significance of such statements cannot be dimin­ished by ascribing them only to a small fringe of the environmental movement. Indeed, even if such views were indicative of the thinking only of 5 or 10 percent of the members of the environmental movement—the “deep ecology,” Earth First! wing—they would represent tox­icity in the environmental movement as a whole not at the level of parts per billion or even parts per million, but at the level of parts per hundred, which, of course, is an enormously higher level of toxicity than what is deemed to constitute a danger to human life in virtually every other case in which deadly poison is present.

“But the toxicity level of the environmental movement as a whole is much greater even than parts per hundred. It is certainly at least at the level of several parts per ten. This is obvious from the fact that the mainstream of the environmental movement makes no fundamental or sig­nificant criticisms of the likes of Messrs. Graber and McKibben. Indeed, John Muir, whose wish for alligators to ‘be blessed now and then with a mouthful of terror-stricken man by way of a dainty’ McKibben approvingly quotes, was the founder of the Sierra Club, which is proud to acknowledge that fact. The Sierra Club, of course, is the leading environmental organization and is supposedly the most respectable of them.

“There is something much more important than the Sierra Club’s genealogy, however—something which provides an explanation in terms of basic principle of why the mainstream of the ecology movement does not attack what might be thought to be merely its fringe. This is a fundamental philosophical premise which the main­stream of the movement shares with the alleged fringe and which logically implies hatred for man and his achievements. Namely, the premise that nature possesses intrinsic value—that is, that nature is valuable in and of itself, apart from all contribution to human life and well-being.

“The antihuman premise of nature’s intrinsic value goes back, in the Western world, as far as St. Francis of Assisi, who believed in the equality of all living crea­tures: man, cattle, birds, fish, and reptiles. Indeed, pre­cisely on the basis of this philosophical affinity, and at the wish of the mainstream of the ecology movement, St. Francis of Assisi has been officially declared the patron saint of ecology by the Roman Catholic church.

“The premise of nature’s intrinsic value extends to an alleged intrinsic value of forests, rivers, canyons, and hillsides—to everything and anything that is not man. Its influence is present in the Congress of the United States, in such statements as that made by Representative Morris Udall of Arizona: to wit, that a frozen, barren desert in Northern Alaska, where substantial oil deposits appear to exist, is ‘a sacred place’ that should never be given over to oil rigs and pipelines. It is present in the support­ing statement of a representative of the Wilderness Soci­ety that ‘There is a need to protect the land not just for wildlife and human recreation, but just to have it there.’43 [43. New York Times, August 30, 1990, pp. A1, C15.] It has, of course, also been present in the sacrifice of the interests of human beings for the sake of snail darters and spotted owls.

“The idea of nature’s intrinsic value inexorably implies a desire to destroy man and his works because it implies a perception of man as the systematic destroyer of the good, and thus as the systematic doer of evil. Just as man perceives coyotes, wolves, and rattlesnakes as evil be­cause they regularly destroy the cattle and sheep he values as sources of food and clothing, so on the premise of nature’s intrinsic value, the environmentalists view man as evil, because, in the pursuit of his well-being, man systematically destroys the wildlife, jungles, and rock formations that the environmentalists hold to be intrinsi­cally valuable. Indeed, from the perspective of such alleged intrinsic values of nature, the degree of man’s alleged destructiveness and evil is directly in proportion to his loyalty to his essential nature. Man is the rational being. It is his application of his reason in the form of science, technology, and an industrial civilization that enables him to act on nature on the enormous scale on which he now does. Thus, it is his possession and use of reason—manifested in his technology and industry—for which he is hated.

“Indeed, the doctrine of intrinsic value implies that man is to regard himself as profaning the sacredness of nature by virtue of his very existence, because with every breath he draws and every step he takes he cannot help but disturb something or other of alleged intrinsic value. Thus, if man is not to extinguish his existence altogether, he is obliged by the doctrine of intrinsic value to mini­mize his existence by minimizing his impact on the rest of the world, and to feel guilty for every action he takes in support of his existence.

“The doctrine of intrinsic value is itself, of course, only a rationalization for a preexisting hatred of man. It is invoked not because one attaches any actual value to what is alleged to have intrinsic value, but simply to serve as a pretext for denying values to man. For example, caribou feed upon vegetation, wolves eat caribou, and microbes attack wolves. Each of these, the vegetation, the caribou, the wolves, and the microbes, is alleged by the environmentalists to possess intrinsic value. Yet ab­solutely no course of action is indicated for man. Should man act to protect the intrinsic value of the vegetation from destruction by the caribou? Should he act to protect the intrinsic value of the caribou from destruction by the wolves? Should he act to protect the intrinsic value of the wolves from destruction by the microbes? Even though each of these alleged intrinsic values is at stake, man is not called upon to do anything. When does the doctrine of intrinsic value serve as a guide to what man should do? Only when man comes to attach value to something. Then it is invoked to deny him the value he seeks. For example, the intrinsic value of the vegetation et al. is invoked as a guide to man’s action only when there is something man wants, such as oil, and then, as in the case of Northern Alaska, its invocation serves to stop him from having it. In other words, the doctrine of intrinsic value is nothing but a doctrine of the negation of human values. It is pure nihilism.”

And it is the philosophical sum and substance of environmentalism.

Summary and Conclusion­
All of the above serves as the clearest possible refutation of McCaffrey’s claim that “when discussing all the hatred and vitriol which supposedly flows from the environ­mental movement, Reisman’s claims are rarely substantiated with textual evidence. We must simply take Reisman at his word when he states that the environmental movement believes this or that. Even worse, we are not even given criteria to judge the relative weight of any reference Reisman makes to the environmental literature.”

As I said at the beginning, Mr. McCaffrey simply ignores the passages from my book that I have reproduced, the statements they quote, the proof of the existence of the statements, and the logical argument demonstrating the applicability of the statements quoted to the whole of the environmental movement insofar as it proceeds on the premise of nature’s intrinsic value. The premise of nature’s intrinsic value constitutes the intellectual equivalent of a steel cable, as it were, which ties virtually the whole of the environmental movement to the collection of concrete blocks constituted by its effusions of hatred for the human race. The connection is such that it makes my references “to the environmental literature” carry a weight sufficient to sink the whole movement. McCaffrey obviously does not understand this and does not want to understand it.

As I have shown, McCaffrey arbitrarily decides that statements that demonstrate the actual nature of environmentalism are simply to be disregarded, allegedly representing mere “exaggeration for literary and pedagogical effect.” In effect, he argues, they’re only a kind of joke, not meant to be taken seriously. In this way, he gives environmentalism a free pass, as it were, on its expressions of a desire for mass human death and of enjoyment at the prospect of human terror. He then claims that he’s left looking for a “footprint” of something that in his mind does not exist for no other reason than that he’s decided to ignore both its existence and the fact that it permeates the environmental movement. In this way, he pretends to have a hard time finding something that’s blatantly obvious. His difficulty is the result of nothing but his own choice not to see.

Mr. McCaffrey’s claims here are simply untrue. They are so profoundly in contradiction of the facts, that they make it difficult to believe that he ever even bothered to read the passages I have quoted from my book, which he certainly had a responsibility to read.

The suspicion that McCaffrey did not read those passages is reinforced by a comment of his in a footnote: “Reisman does occasionally temper his criticisms of environmentalism with qualifying statements to the effect that not all environmentalists are ‘poison’ (1996, p. 81, 82–83), proposing instead the odd claim that only ‘several parts per ten’ are poisonous (p. 138, n. 20).’” If it came out the blue, so to speak, a reference to “several parts per ten” would, indeed, seem odd. But it clearly did not come out of the blue. It was made in the context of a discussion that here and there referred to toxicity levels of varying degrees of concentration. Describing matters in such terms would have seemed odd only to someone who was not aware of the context established by that discussion, which Mr. McCaffrey apparently was not. Mr. McCaffrey has placed himself in the unfortunate position of literally not knowing what he is talking about, for the simple reason that never took the trouble to find out.

Interestingly, the rest of McCaffrey’s footnote serves both to reinforce the conclusion that he did not bother to read what he should have read, and to raise the further question of whether McCaffrey even understands the nature of swallowing poison. He appears to think that it is unclear why swallowing a drink that is poison at the level of 3 or 4 parts per 10, might not allow one to swallow nutrition at the level of 6 or 7 parts per 10 instead. He writes: “Yet even this qualification belies his ultimate conclusion: ‘The problem is that the mixture is poisonous. And thus, when one swallows environmentalism, one inescapably swallows poison’ (1996, p. 82). It is not clear why accepting environmentalist principles necessitates accepting bad principles at the expense of good, and not, for example, the other way around.” I do not believe that it is possible for anyone to have read the relevant passages of my book and for this not be clear.

There are various other claims that Mr. McCaffrey makes in his article, and which constitute the rest of its substance, that are equally incorrect. But they appear to be the product merely of confused thinking, plain ignorance, and insufficient powers of analysis on his part, rather than any obvious, blatant contradiction of readily available facts. However, it would be an unprofitable use of my and my readers’ time to attempt to unravel them, since they are likely to so little noticed by the world as to leave Mr. McCaffrey as the sole beneficiary of the process, an outcome to which I feel no need to contribute.
*George Reisman, Ph.D., is Pepperdine University Professor Emeritus of Economics, Senior Fellow at the Goldwater Institute, and the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996; Kindle Edition, 2012). His website is www.capitalism.net.

Capitalism in Kindle Format

At long last, my book Capitalism: A Treatise on Economics has been converted to Kindle format. (Click on the title to see it at Amazon.com.) Until recently, I had thought that the book's two-column format and full page diagrams made such conversion impossible. But, thankfully, I was wrong. The book has been converted just about perfectly, and it's now fully readable not only on any ordinary Kindle device but even on a smartphone. And most surprising, even the most complex of its diagrams can be read on a smartphone (though the use of the zoom feature is helpful in such instances).

The conversion was accomplished by eBookArchitects, an outstanding firm in this field.

The Luddite-Statist Attacks on Amazon by Gen LaGreca

Imagine you’re living in the 15th Century. You’re witnessing a revolution that will profoundly change the world. This revolution doesn’t involve swords and cannons, but rather words and books. The cause of this upheaval is the most important invention in more than a thousand years: the printing press, by Johannes Gutenberg.

Within a few decades of its launch, you see the printing press transform the field of bookmaking in ways previously unimaginable. Printed books are far easier, faster, and less costly to produce than the books that had preceded them, which had to be laboriously copied, one page at a time, by hand. In the time it took to copy one page by hand, the printing press could turn out hundreds or thousands of copies of that same page, thereby making it possible for the first time in history for almost anyone to own books. Within a century of its creation, the printing press will spread throughout Western Europe, producing millions of books, spurring the economic development of industries related to it, such as papermaking, and spreading literacy and knowledge around the world. The printing press will make possible the rapid development of education, science, art, culture—and the rise of mankind from the Medieval period to the Early Modern age.

Let us further imagine that not everyone in the 15th Century is happy about this innovation. Unable to match the benefits of the printing press, the producers of hand-copied books are outraged. The scribes are being put out of business. The penmanship schools that train the scribes, the quill makers that supply their pens, and the manufacturers of the stools and drafting tables that literally support them are seeing a drop in sales. The hand-copied books are now priced too high to compete with the Gutenberg press, so their publishers are experiencing no growth, with no new capital coming into their industry. The sales force for the hand-copied books is also in despair, with their customers now ordering the new printed books from the Gutenberg people, and their lost income being money they can no longer put into their communities. Alas, the monopolistic monster, the printing press, is taking over.

The hand-copied book interests complain bitterly to the Great Sages at their Hallowed Council of Justice. “Sires,” they cry, “you must stop the predatory pricing and scorched earth policies of the Gutenberg press. It’s wiping out the competition. How can this be in the public interest?”

Fast-forward to the 21st Century, and we see another revolution that is turning the book industry topsy-turvy—the transformation from printed books to electronic ones. This revolution is spearheaded by a modern-day Gutenberg, Amazon.com, the pioneer of the e-book, the Kindle device for reading it, and the online marketplace for publishing and selling it.

What Amazon has accomplished is truly amazing. With Kindle, it has eliminated the industry middlemen that come between the writer and reader of a book—from agents to publishers to distributors to wholesalers to brick-and-mortar bookstores. Kindle has also eliminated the need for a physical inventory of books, with its high printing, warehousing, and shipping costs. These innovations have resulted in far less expensive books now available to consumers. And the new marketplace of e-books has been especially advantageous for small and self-publishers unable to get their books accepted through the traditional channels, who now have an avenue open to them for reaching customers directly.

The popularity of these ground-breaking innovations is enormous, with Kindle books now outselling the combined total of all paperback and hardcover books purchased from Amazon.

Without any middlemen or gatekeepers, with virtually no costs involved, and with self-marketing possible through social media and other Internet channels, electronic publishing is creating a robust market for new writers and books. For example, one novelist who was unable to find an agent or publisher has self-published two of her novels on Kindle. With her books priced at $2.99 and with a 70-percent royalty from Kindle, she earns approximately $2 per book. She is selling 55 books per day, or 20,000 books per year, which amounts to sales of $60,000 and royalties to her of $40,000. (As a simple comparison, without getting into the complexities of book contracts, this author might earn a royalty of approximately 10-percent from a traditional publisher, which would require her to achieve sales of $400,000 to earn as much money as she does self-publishing on Kindle.) Other authors are doing even better, including two self-published novelists who have become members of the Kindle Million Club in copies sold. These writers started with nothing—they were not among the favored few selected by agents and trade publishers, and they had no publicists or book tours—yet, thanks to electronic publishing, they are making a living, with some achieving stunning success.

The low-pricing of e-books, scorned by the traditional publishing interests, is the emerging writer’s new ticket of admission into the book industry. While readers may be highly reluctant to risk $25 in a bookstore to try a new writer’s hardcover work, they are buying the e-books of new writers priced at or around $2.99 on Kindle. Writers are finding their fans and making money at these prices, and readers, judging by Amazon’s “customer reviews,” are happy with these low-cost books.

The writer-publisher in America dates back to our founding, promoting vigorous free speech and intellectual entrepreneurship. Benjamin Franklin’s “Poor Richard’s Almanac” and Thomas Paine’s “Common Sense,” both best sellers in their day, were self-published. If the American Dream is to start with nothing but one’s own talent, motivation, and hard work, and from that achieve success, then in recent times this dream was essentially closed to writers who failed to win the favor of the agents and trade publishers. Prior to the e-book revolution and online marketing spurred by Amazon, there was a stigma attached to self-publishing, despite its long and distinguished tradition in America. The major trade reviewers would not consider a self-published book, which meant that libraries and bookstores, which order based on the reviews, would not carry it. Now, e-books are not only taking the stigma out of self-publishing, but arguably making it the preferred route. Amazon has opened the avenue to pursuing the intellectual’s American Dream once again.

Yet the same medieval attacks projected above against the printing press are now being launched against Amazon, with the attackers imploring the modern-day “sages” at the Justice Department to stop the new menace called Amazon.

Leading the charge back to the Middle Ages is The New York Times. Two articles appearing on the front page of its business section on April 16, 2012 illustrate what happens when the Luddites, i.e., those hostile to technological development, meet the statists, i.e., those who look to achieve their ends through government force.

“Daring to Cut Off Amazon” by David Streitfeld praises a publisher-distributor for pulling its printed books out of Amazon. (Not only does Amazon discount e-books, but also the printed books it so successfully sells.) The company is Educational Development Corporation, whose CEO Randall White laments, “Amazon is squeezing everyone out of the business. . . . They’re a predator. We’re better off without them.”

One of Mr. White’s concerns was that his sales people were losing business because their customers were buying the company’s books cheaper from Amazon. Sales consultant Christy Reed comments about her local customers: “Yes they got the books for less [from Amazon]. But my earnings go back into our community. Amazon’s do not.” It apparently didn’t occur to her that by buying books cheaper on Amazon, her former customers have more money to spend in her community, and the Amazon staff who replaced her have more money to spend in their communities. But where spending does or doesn’t take place is not the main economic point. The real point is that for the same total spending in the economic system as a whole, people now obtain more books and have money left over to buy more of other things.

“Book Publishing’s Real Nemesis” by David Carr cites the recent antitrust suit brought by the Justice Department against five publishers and Apple, charging they engaged in the price-fixing of e-books. Instead of condemning this police action against production and trade, Mr. Carr bemoans the fact that the strong arm of the law didn’t go far enough to grip the “monopolistic monolith” Amazon, which “has used its market power to bully and dictate.” Mr. Carr considers it bullying and dictating when a private company (Amazon) sets its terms, and other players (the publishers) are free to do business with it or not. But it’s not bullying and dictating when the compulsory power of the state intervenes to set economic terms and punish businesses arbitrarily?

Mr. Carr quotes Authors Guild president and best-selling author Scott Turow, who worries that the club of authors and publishers will shrink. (Really?) “It is breathtaking to stand back and look at this and believe that this is in the public interest,” complains Mr. Turow about Amazon’s success. He also wonders if Amazon will drive the price of books so low that there will be “no one left to compete with them.” Apparently the “public interest” doesn’t include the millions of customers who choose to buy the mother load of affordable e-books from Amazon and who may not welcome his solicitous concern over the low prices they’re paying. And apparently the “public interest” doesn’t include the fresh crop of new authors now sprouting through e-books, without the benefit of the major publishers and lucky breaks that he had.

The Luddite tone of the attacks against Amazon rings like the following: The electric light will replace the candle. The car will replace the horse-and-buggy. The cure for tuberculosis will put the sanatoriums out of business. The computer will replace the typewriter. The statist element lies in the attackers’ desire to enlist the police power of the state to stifle the competition and artificially prop up their businesses.

Granted, it may be disappointing and painful for those whose jobs are thinning out or becoming obsolete due to technological advancements, but that can’t justify government intrusion. Morality is on the side of the people engaged in voluntary trade and against those who urge the Justice Department’s encroachment into their industry. The charges levied against Amazon—as a predator, monopolist, bully, etc.—actually do not apply to a company engaged in voluntary trade, no matter how big its market share, but rather to those trying to preserve their interests through government action. In the case of Amazon, the ones trying to restrain trade are the attackers, themselves. Moreover, not only is morality on the side of Amazon, but so too are the long-run material self-interests of everyone in the economic system. Everyone working will earn money, but, thanks to Amazon, and every other innovator of better products or more efficient methods of production, the buying power of the money he earns will be greater. The enemies of productive innovators are, by the same token, anti-social enemies of the general buying public.

The complaints lodged against Amazon would be harmless if the complainers could not use the government to advance their cause. But they can, through antitrust laws. These laws give the state the power to evaluate the price of a company’s product in relation to its competition and to punish companies—severely and arbitrarily—for prices deemed to be unacceptable. If a company’s price for its goods is deemed to be too low, it can be punished for being predatory and destructive of competition. If the price is deemed to be the same as its competitors, it can be punished for collusion and price-fixing. If the price is deemed to be too high, it can be punished for being monopolistic.

Using antitrust laws against the book industry poses an additional grave danger over and above their use against other industries. Because the book industry represents the dissemination of knowledge and ideas, an attempt to regulate the price of books abridges the free flow of ideas and violates our First Amendment right to freedom of the press.

Anyone interested in the survival of a robust book industry—or any other industry—with the free flow of products, the creativity of new business methods, and the preservation of economic freedom and property rights, must support the repeal of these oppressive laws.

The market—comprising the voluntary decisions of millions of free people—determines the pricing of books, the form a book will take, the device it will be read on, the winners and the losers of the competition. If the market chooses an innovative technology and a new direction, then so be it. Let the Medieval bookmakers copying their books by hand and their contemporary counterparts using needless paper and ink, warehouses, delivery trucks, and bookstores, adopt the advances or quit! Totally unlike competition in the animal kingdom, in which the losers are eaten or die of starvation, the losers of an economic competition do not die. At worst, they must relocate in the economic system at a lower level. But in an economic system free enough rapidly to progress, as ours has been for most of the last two and a half centuries, even the lowest paid workers enjoy a standard of living that surpasses that of the kings and emperors of earlier ages. This is why the Gutenbergs of the world must be left free to dream, to create, and to trade without fear of punishment.

Economist George Reisman contributed to this article.

Gen LaGreca is the author of Noble Vision, a novel that won a ForeWord magazine Book-of-the-Year Award and was a finalist in the Writer’s Digest International Self-Published Book Awards. After being rejected by dozens of agents and unable to find a trade publisher, it now enjoys steady ranking in the Top 100 Best Sellers in medical and political genre fiction on Kindle.

Copyright © 2012 by Genevieve LaGreca. Permission to reproduce is granted with attribution.

New York Times Runs Pro-Capitalist Article

I never thought I would live to see it, but The New York Times has run an article that puts capitalism in an extremely favorable light. The article is titled "Scaling Caste Walls With Capitalism's Ladders."It appeared on the front page of this last Thursday's (December 22, 2011) National Edition. It was written by Lydia Polgreen. (The Times' has retitled the article on the internet. There, when one does a search under the author's name, it appears as "India's Boom Creates Openings for Untouchables." A tribute to capitalism was evidently news that at least some at the Times thought simply didn't comply with its slogan "All the news that's fit to print," and so they tried to bury it.)

In any case, the article features the story of a now very wealthy and highly productive Indian businessman who was born in extreme poverty, as a member of the caste of the "Untouchables." It stresses the role of capitalism in making possible his success.

I can only hope that the author will be able to keep her job after this article.

A Romanian Translation

Mr. Alexander Orsov has translated the home page of http://www.capitalism.net/ into the Romanian language. Thank you, Mr. Orsov.

Free Speech and Occupy Wall Street

The Occupy Wall Street protesters were allowed to remain in New York’s Zucotti Park for two months, against the will of its private owners. They were clearly trespassers, indeed, much worse than garden variety trespassers, who almost always quickly leave. They were there prepared to stay indefinitely. In effect, they were literally attempting to steal the park from its lawful owners.

Nevertheless, they were allowed to remain, in the belief that to eject them would somehow constitute a violation of their freedom of speech. They had seized the park in order to denounce capitalism. Ejecting them, would have ended their use of the park for that purpose and thus, according to virtually everyone with a public voice, from New York’s Mayor to the lowliest media reporter, would have violated their freedom of speech.

A major lesson to be learned from the occupation is that hardly anyone nowadays understands the meaning of freedom of speech. Contrary to the prevailing view, freedom of speech is not the ability to say anything, anywhere, at any time. Actual freedom of speech is consistent with respect for property rights. It presupposes that the speaker has the consent of the owners of any property he uses in speaking, such as the land, sound system, or lecture hall or radio or television studio that he uses.

Had the owners of Zucotti Park invited the protesters to camp on their land and propound their ideas, and then the police had ejected them, the protesters’ freedom of speech would in fact have been violated. But that was not the case. The only actual violation of freedom present was the protesters’ violation of the freedom of the owners of Zucotti park to use their property for their own purposes. The protesters did not violate specifically the freedom of speech of the owners, but they certainly did violate their freedom in general with respect to the use of Zucotti Park. Had the owners wanted to invite some other person or group for the purpose of speaking, then the protesters would have violated the freedom of speech specifically, by means of their presence and their activities.

Nevertheless, by the logic of the prevailing view of freedom of speech, protesters in the future will be able to storm into lecture halls and/or seize radio and television stations in order to deliver their message and then claim that their freedom of speech is violated when the police come to eject them, even though the police in such cases would in fact be acting precisely in order to uphold the freedom of speech. Indeed, since the days of the so-called Free Speech Movement at Berkeley, back in the 1960s, disruptions of speeches delivered by invited guests have occurred repeatedly on college campuses, in the name of the alleged freedom of speech of the disrupters. No attention has been paid to the actual violation of the freedom of speech of the invited speakers.

The prevailing view of freedom of speech is a major threat to freedom of speech. Not only does it provide justification for actual violations of freedom of speech of the kinds just mentioned, but it also makes freedom of speech appear to be a fundamental enemy of rational communication. Speakers cannot address audiences, professors cannot lecture to students if disrupters are permitted to drown them out and then hide behind the claim that they do so in the name of freedom of speech. If the prevailing view of freedom of speech were correct, the ability of speakers to speak and professors to lecture would require accepting the principle of the need to violate freedom of speech.

Of course, the prevailing view is totally incorrect. Actual freedom of speech, based on respect for property owners’ rights to use their own property as they see fit, is the guarantor of rational communication. If the property rights of the owners of parks, lecture halls, and radio and television stations are respected, the disrupters will be ejected and very soon will no longer even bother to appear. Rational communication will then proceed without incident.

Upholding freedom of speech and rational communication requires a policy of no tolerance for the occupation of property against the will of its owners. Any such occupation is in violation of the owners’ freedom, including their freedom of speech. Protester-occupiers are enemies of freedom, including, above all, freedom of speech.


Copyright © 2011 by George Reisman. George Reisman, Ph.D. is Pepperdine University Professor Emeritus of Economics, a Senior Fellow at the Goldwater Institute, and the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996). His website is www.capitalism.net and his blog is georgereismansblog.blogspot.com.

How a Highly Productive and Provident One Percent Provides the Standard of Living of a Largely Ignorant and Ungrateful Ninety-Nine Percent

The protesters in the Occupy Wall Street Movement and its numerous clones elsewhere in the country and around the world chant that one percent of the population owns all the wealth and lives at the expense of the remaining ninety-nine percent. The obvious solution that they imply is for the ninety-nine percent to seize the wealth of the one percent and use it for their benefit rather than allowing it to continue to be used for the benefit of the one percent, who are allegedly undeserving greedy capitalist exploiters. In other words, the implicit program of the protesters is that of socialism and the redistribution of wealth.

Putting aside the hyperbole in the movement’s claim, it is true that a relatively small minority of people does own the far greater part of the wealth of the country. The figures “one percent” and “ninety-nine” percent, however exaggerated, serve to place that fact in the strongest possible light.

What the protesters do not realize is that the wealth of the one percent provides the standard of living of the ninety-nine percent.

The protesters have no awareness of this, because they see the world through an intellectual lens that is inappropriate to life under capitalism and its market economy. They see a world, still present in some places, and present everywhere a few centuries ago, of self-sufficient farm families, each producing for its own consumption and having no essential connection to markets.

In such a world, if one sees a farmer’s field, or his barn, or plow, or draft animals, and asks who do these means of production serve, the answer is the farmer and his family, and no one else. In such a world, apart from the receipt of occasional charity from the owners, those who are not owners of means of production cannot benefit from means of production unless and until they themselves somehow become owners of means of production. They cannot benefit from other people’s means of production except by inheriting them or by seizing them.

In the world of the protesters, means of production have the same essential status as consumers’ goods, which as a rule are of benefit only to their owners. It is because of this that those who share the mentality of the protesters typically depict capitalists as fat men, whose plates are heaped high with food, while the masses of wage earners must live near starvation. According to this mentality, the redistribution of wealth is a matter merely of taking from the overflowing plates of the capitalists and giving to the starving workers.

Contrary to such beliefs, in the modern world in which we actually live, the wealth of the capitalists is simply not in the form of consumers’ goods to any great extent. Not only is it overwhelmingly in the form of means of production but those means of production are employed in the production of goods and services that are sold in the market. Totally unlike the conditions of self-sufficient farm families, the physical beneficiaries of the capitalists’ means of production are all the members of the general consuming public who buy the capitalists’ products.

For example, without owning so much as a single share of stock in General Motors or Exxon Mobil, everyone in a capitalist economy who buys the products of these firms benefits from their means of production: the buyer of a GM automobile benefits from the GM factory that produced that automobile; the buyer of Exxon’s gasoline benefits from its oil wells, pipelines, and tanker trucks. Furthermore, everyone benefits from their means of production who buys the products of the customers of GM or Exxon, insofar as their means of production indirectly contribute to the products of their customers. For example, the patrons of grocery stores whose goods are delivered in trucks made by GM or fueled by diesel oil produced in Exxon’s refineries are beneficiaries of the existence of GM’s truck factories and Exxon’s refineries. Even everyone who buys the products of the competitors of GM and Exxon, or of the customers of those competitors, benefits from the existence of GM’s and Exxon’s means of production. This is because GM’s and Exxon’s means of production result in a more abundant and thus lower-priced supply of the kind of goods the competitors sell.

In other words, all of us, one hundred percent of us, benefit from the wealth of the hated capitalists. We benefit without ourselves being capitalists, or being capitalists to any great extent. The protesters are literally kept alive on the foundation of the wealth of the capitalists they hate. As just indicated, the oil fields and pipelines of the hated Exxon corporation provide the fuel that powers the tractors and trucks that are essential to the production and delivery of the food the protesters eat. The protesters and all other haters of capitalists hate the foundations of their own existence.

The benefit of the capitalists’ means of production to non-owners of means of production extends not only to the buyers of the products of those means of production but also to the sellers of the labor that is employed to work with those means of production. The wealth of the capitalists, in other words, is the source both of the supply of products that non-owners of the means of production buy and of the demand for the labor that non-owners of the means of production sell. It follows that the larger the number and greater the wealth of the capitalists, the greater is both the supply of products and the demand for labor, and thus the lower are prices and the higher are wages, i.e., the higher is the standard of living of everyone. Nothing is more to the self-interest of the average person than to live in a society that is filled with multi-billionaire capitalists and their corporations, all busy using their vast wealth to produce the products he buys and to compete for the labor he sells.

Nevertheless, the world the protesters yearn for is a world from which the billionaire capitalists and their corporations have been banished, replaced by small, poor producers, who would not be significantly richer than they themselves are, which is to say, impoverished. They expect that in a world of such producers, producers who lack the capital required to produce very much of anything, let alone carry on the mass production of the technologically advanced products of modern capitalism, they will somehow be economically better off than they are now. Obviously, the protesters could not be more deluded.

In addition to not realizing that the wealth of the so-called one percent is the foundation of the standard of living of the so-called ninety-nine percent, what the protesters also do not realize is that the “greed” of those who seek to become part of the one percent, or to enlarge their position within it, is what serves progressively to improve the standard of living of the ninety-nine percent.

Of course, this does not apply to wealth which has been acquired by such means as obtaining government subsidies or preventing competition through protective tariffs and other forms of government intervention. These are methods which are made possible to the extent that the government is permitted to depart from a policy of strict laissez-faire and thereby arbitrarily reward or punish firms.

Apart from such aberrations, the way that business fortunes are accumulated is by means of the high profits generated by the introduction of new and improved products and more efficient, lower-cost methods of production, followed by the heavy saving and reinvestment of those high profits.

For example, the $6 billion fortune of the late Steve Jobs was built on a foundation of Mr. Jobs having made it possible for Apple Computer to introduce such new and improved products as the iPod, the iPhone, and the iPad, and then heavily saving and reinvesting the share of the profits that came to him.

Two closely related points need to be stressed. First, the fortunes that are accumulated in this way generally serve in the larger-scale production of the very sort of products that provided the profits out of which their accumulation took place. Thus, for example, Jobs’ billions serve largely in the production of Apple’s products. Similarly, old Henry Ford’s great personal fortune, earned on the foundation of introducing major improvements in the efficiency of automobile production, which brought down the price of a new automobile from about $10,000 at the beginning of the 20th Century to $300 in the mid 1920s, was used to make possible the production of millions of Ford automobiles.

Second, the high rates of profit earned on new and improved products and methods of production are temporary. As soon as the production of the new product or use of the new method of production becomes the norm in an industry, it no longer provides any exceptional profitability. Indeed, further improvements again and again render earlier improvements downright unprofitable. For example, the first generation of the iPhone, which was highly profitable just a few years ago, is or soon will be unprofitable, because further advances have rendered it obsolete.

As a result, the accumulation of great business fortunes generally requires the introduction of a series of improvements in products or methods of production. This is what is required to maintain a high rate of profit in the face of competition. For example, Intel’s ability to maintain its high rate of profit over the years has depended on its ability to introduce one substantial improvement in its computer chips after another. The net effect has been that computer users have gotten the benefit of improvement after improvement not only at no rise but a drastic decline in the prices of computer chips. Insofar as high profits rest on low costs of production, competition drives prices down to correspond to the lower level of costs, which necessitates the achievement of still further cost reductions to maintain high profits.

The same outcome, of course, applies not only to Intel and microprocessors but also to the rest of the computer industry, where gigabytes of memory and terabytes of hard drive data storage now sell at prices below the prices of megabytes of memory and hard drive data storage just a couple of decades ago. Indeed, if one knows how to look, the principle of ever more and better products for less and less applies throughout the economic system. It is present in the production of food, clothing, and shelter as well as in the high tech industries, and in virtually all industries in between.

It is present in these industries even though the government’s inflation of the money supply has caused the prices of their products to rise sharply over the years. Despite this, when calculated in terms of the amount of labor the average person must expend in order to earn the wages needed to enable him to buy these products, their prices have sharply fallen.

This can be seen in the fact that today, the average worker works 40 hours per week, while a worker of a century or so ago worked 60 hours a week. For the 40 hours he works, the average worker of today receives the goods and services comprising the average standard of living of 2011, which includes such things as an automobile, refrigerator, air conditioner, central heating, more and better living space, more and better food and clothing, modern medicine and dentistry, motion pictures, a computer, cell phone, television set, washer/dryer, microwave oven, and so on. The average worker of 1911 either did not have these things at all or had much less of them and of poorer quality.

If we describe the goods and services received by the average worker of today for his 40 hours of labor as being 10 times as great as those received by the average worker of 1911 for his 60 hours of labor, then it follows that expressed in terms of the amount of labor that needs to be performed today in order to be able to buy goods and services equivalent to the standard of living of 1911, prices have fallen to two-thirds of one-tenth of their level in 1911, i.e., to one-fifteenth of their level in 1911, which is to say, by 93 1/3 percent.

Capitalism—laissez-faire capitalism—is the ideal economic system. It is the embodiment of individual freedom and the pursuit of material self-interest. Its result is the progressive rise in the material well-being of all, manifested in lengthening life spans and ever improving standards of living.

The economic stagnation and decline, the problems of mass unemployment and growing poverty experienced in the United States in recent years, are the result of violations of individual freedom and the pursuit of material self-interest. The government has enmeshed the economic system in a growing web of paralyzing rules and regulations that prohibit the production of goods and services that people want, while compelling the production of goods and services they don’t want, and making the production of virtually everything more and more expensive than it needs to be. For example, prohibitions on the production of atomic power, oil, coal, and natural gas, make the cost of energy higher and in the face of less energy available for use in production, require the performance of more human labor to produce any given quantity of goods. This results in fewer goods being available to remunerate the performance of any given quantity of labor.

Uncontrolled government spending and its accompanying budget deficits and borrowing, along with the income, estate, and capital gains taxes, all levied on funds that otherwise would have been heavily saved and invested, drain capital from the economic system. They thus serve to prevent the increase in both the supply of goods and the demand for labor that more capital in the hands of business would have made possible. They have now gone far enough to have begun actually to reduce the supply of capital in the economic system in comparison with the past.

Capital accumulation is also impaired and can ultimately be turned into capital decumulation, through the effects of additional government regulation in raising the costs of production and thus reducing its efficiency. This applies to practically all of the regulations imposed by the Environmental Protection Agency, the Occupational Safety and Health Administration, the Consumer Product Safety Commission, the National Labor Relations Board, the Food and Drug Administration, and the various other government agencies. The effect of their regulations is that for any given amount of labor performed in the economic system, there is less product than would otherwise be produced.

Now anything that serves to reduce the ability to produce in general, serves also to reduce the ability to produce capital goods in particular. Because of such government interference, any given amount of labor and capital goods devoted to the production of capital goods results in a smaller output of capital goods, just as any given quantity of labor and capital goods devoted to the production of consumers’ goods results in a smaller output of consumers’ goods. At a minimum, the reduced supply of capital goods produced serves to reduce the rate of economic progress. A reduction in the supply of capital goods produced great enough to prevent the addition of any increment to the previously existing supply of capital goods, and thus to put an end to capital accumulation, brings economic progress to a complete halt. A still greater reduction, one that renders the supply of capital goods produced less than the supply being used up in production, constitutes capital decumulation and thus a decline in the economic system’s ability to produce. As indicated, the United States already appears to be at this point.

The problem of capital decumulation has been greatly compounded as the result of massive credit expansion induced by the Federal Reserve System and its policy of easy money and artificially low interest rates. This policy led first to a great stock market bubble and then a vast housing bubble, as large quantities of newly created money poured into the stock market and later the housing market. Between these two bubbles, trillions of dollars of capital were lost. In both instances, vast overconsumption occurred as people raced to buy such things as new automobiles, major appliances, vacations, and all kinds of luxury goods that they would not have believed they could afford in the absence of the effects of credit expansion, often incurring substantial debt in the process.

In the one case, it was the artificial rise in stock prices that misled people into believing that they could afford these things. In the other, it was the artificial rise in home prices that produced this result. The seeming wealth vanished with the fall in stock prices and then again, later, with the fall in housing prices. In the housing bubble, moreover, millions of homes were constructed for people who could not afford to pay for them. All of this represented a huge loss of capital and thus of the ability of business to produce and to employ labor. It is this loss of capital that is responsible for our present problem of mass unemployment.

Despite this loss of capital, unemployment could be eliminated. But given the loss of capital, what would be required to accomplish this is a fall in wage rates. This fall, however, is made virtually illegal as the result of the existence of minimum-wage laws and pro-union legislation. These laws prevent employers from offering the lower wage rates at which the unemployed would be reemployed.

Thus, however ironic it may be, it turns out that virtually all of the problems the Occupy Wall Street protesters complain about are the result of the enactment of policies that they support and in which they fervently believe. It is their mentality, the Marxism that permeates it, and the government policies that are the result, that are responsible for what they complain about. The protesters are, in effect, in the position of being unwitting flagellants. They are beating themselves left and right and as balm for their wounds they demand more whips and chains. They do not see this, because they have not learned to make the connection that in violating the freedom of businessmen and capitalists and seizing and consuming their wealth, i.e., using weapons of pain and suffering against this small hated group, they are destroying the basis of their own well being.

However much the protesters might deserve to suffer as the result of the injury caused by the enactment of their very own ideas, it would be far better, if they woke up to the modern world and came to understand the actual nature of capitalism, and then directed their ire at the targets that deserve it. In that case, they might make some real contribution to economic well being, including their own.


Copyright © 2011 by George Reisman. Permission is hereby given to reproduce this article via electronic transmission, including republication on other websites.
George Reisman, Ph.D. is Pepperdine University Professor Emeritus of Economics, a Senior Fellow at the Goldwater Institute, and the author of Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996). His website is http://www.capitalism.net/ and his blog is georgereismansblog.blogspot.com. Note: since its orginal publication on this blog, this article has also appeared under the title “In Praise of the Capitalist 1 Percent.”

Further Note: Please disregard all links to the web site "Fun With Gravity." They are unwelcome, but I am presently unable to get rid of them.

James Madison was Right About Property Rights—by Gen LaGreca & Marsha Enright

Constitution Day on September 17 celebrates the 1787 signing of the document that established the United States of America. But like the victim of a terrible accident, the government that was formed that historic day in Philadelphia is hardly recognizable today, and the heart that propelled it—the principle of individual rights—is on life support.

Ironically, what started as a government of radically limited powers now mandates that the nation’s schools “hold an educational program on the United States Constitution” on the holiday of its signing.

In fact, the best “educational program” comes from James Madison, the man who scoured political thought and history to create the blueprint for our government, earning him the title Father of the Constitution. He has a crucial lesson for us on property rights.

To prepare for his lesson, let’s contrast today’s treatment of our First Amendment rights with that of property rights.

People would be shocked if the President of the United States said: “I do think at a certain point you’ve made enough speeches,” or “you’ve given enough sermons,” or “you’ve authored enough books.” Virtually all Americans would protest such remarks and boldly assert that it’s a free country, so they can say, preach, or write whatever they please.

Yet the president can get away with saying: “I do think at a certain point, you’ve made enough money.” And he can get away with seizing and redistributing our money in order to “spread the wealth around,” with only a minority shouting in disbelief at the outrage. These dissenting voices have been unable to stop a century-long growth of the welfare state.

Consider the onslaught against property in recent years: The city of New London, Connecticut can seize Susette Kelo’s house and land to sell to a shopping mall developer. Congress appropriates billions of our dollars and redistributes them to the companies of its choice, including failing banks, auto manufacturers, and solar panels producers. And businesspersons like Warren Buffet blithely suggest that the wealthy be taxed more.

Are these attacks on our possessions accepted because the right to property is a lesser right, one that isn’t unalienable like the others?

In his article Property, Madison emphatically says no. He explains that our right to property is as untouchable as our freedom of speech, press, religion, and conscience. In fact, he views the concept of property as fundamental, pertaining to much more than merely our material possessions.

In the narrow sense, Madison says, “a man’s land, or merchandize, or money is called his property.” But in a wider sense, “a man has a property in his opinions and the free communication of them . . . in his religious beliefs . . . in the safety and liberty of his person . . . in the free use of his faculties and free choice of the objects on which to employ them.”

He then concludes: “[A]s a man is said to have a right to his property, he may be equally said to have a property in his rights.”

This statement represents a profound expression of the individual’s sovereignty over his possessions of every kind: spiritual, intellectual, and material. According to Madison, a human being is master of his mind and body, his beliefs and possessions, his person and property. It is all the province of the individual to create and control.

Madison argues that there is no parceling of rights. Our rights to life, liberty, and property are indivisible. The reason for this was explained with unusual clarity by Ayn Rand two centuries later: “The right to life is the source of all rights—and the right to property is their only implementation. Without property rights, no other rights are possible. Since man has to sustain his life by his own effort, the man who has no right to the product of his effort has no means to sustain his life.”

Government, according to Madison, is “instituted to protect property of every sort,” and is judged solely by this yardstick: “If the United States mean to obtain or deserve the full praise due to wise and just governments, they will equally respect the rights of property, and the property in rights.”

But what does our current government do? Instead of respecting our material property at least as well as it does our other rights, its redistribution of wealth, strangling regulations on business, and deeply ingrained entitlement mentality are blatant assaults on our right to property. As Ronald Reagan famously remarked: “Government's view of the economy could be summed up in a few short phrases: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it.”

It’s as if Madison looked into the future as he observed: “When an excess of power prevails, property of no sort is duly respected.” That is precisely our current situation.

Today, the huge onslaught of regulations such as Dodd-Frank, Obamacare, and the EPA’s controls on energy production has brought us almost to the point of economic paralysis. Buying and selling homes, as well as autos, has all but halted. Companies are hoarding cash and not hiring as they fearfully watch the latest attempts by government to control them. The stock market is epileptic, with seizures up and down triggered by the latest political and economic news. With these curtailments on our right to acquire, use, and control our property in the economic realm, the very essence of our liberty—the right to free action—is lost.

And government’s violation of property rights isn’t limited to the economic realm. Because our rights are interconnected, it’s spreading to all aspects of life.

Consider the trial balloons we’ve already seen to limit free speech, such as the so-called “Fairness Doctrine” or “Net Neutrality.” Or consider the expanding government grip over deeply personal areas of our lives, such as regulations on what fats or sugars we eat, what physicians we see, what health insurance we buy, what treatments or drugs we’re allowed to have—and what our children may bring to school for lunch.

Because our rights can’t be divided, if we lose one, we could lose them all. That’s why we have to fight against government intrusion in the free market with the same moral certitude—and the same fire-in-the-belly—that we’d have if the government invaded our homes without a warrant, or forbade us to peacefully assemble. We have to treat the government’s encroachment on the economy as we would an encroachment on our opinions, beliefs, and conscience.

On Constitution Day, as well as on every other day, let’s remember Madison’s lesson on the full meaning of property—and fight for our right to property as if our life depended on it, because it does.


Gen LaGreca is author of Noble Vision, an award-winning novel about the struggle for liberty in healthcare today. Marsha Familaro Enright is president of the Reason, Individualism, Freedom Institute, the Foundation for the College of the United States.

All quotes from James Madison are taken from his essay Property, published March 29, 1792 in the National Gazette.

Copyright © 2011 by Gen LaGreca and Marsha Enright. Permission to reproduce is granted with copyright notice and author attribution.

Professor Brian Simpson of National University has asked me to make the following announcement:

National University of La Jolla, CA has a limited number of scholarships available for three online courses that focus on free-market economics and the philosophical foundations of capitalism. These scholarships are being funded by a grant from the Charles G. Koch Charitable Foundation. The scholarships cover the full tuition for the courses plus the application fee to NU. Two courses (ECO 401 and 402, Market Process Economics I and II, respectively) use Capitalism: A Treatise on Economics by George Reisman as the required textbook. One course (ECO 430 - Economics and Philosophy) uses Ayn Rand’s The Virtue of Selfishness and Capitalism: The Unknown Ideal as the required textbooks. These courses can be taken from anywhere in the world, as long as one has access to the internet. The courses incorporate live chat sessions in which the professor and students interact in a virtual classroom, much as they would in a traditional classroom. The courses run for the next time in the summer and fall of 2012. More information about the courses on the web can be found here, simply by clicking on the names of the courses:

ECO 401 – Market Process Economics I

ECO 402 – Market Process Economics II

ECO 430 – Economics and Philosophy

To apply for one or more of these scholarships, send your name, transcript from your high school or university, and an essay of no more than 750 words discussing why you believe you deserve a scholarship and your future education and career plans to Dr. Brian P. Simpson. Send them to bsimpson@nu.edu or 11255 North Torrey Pines Rd.; La Jolla, CA 92037. Please indicate which course or courses for which you are applying for a scholarship. You can apply for one to three scholarships, depending on how many courses you are interested in taking. Note that to receive a scholarship you will have to apply to National University and enroll in the course(s). If you have questions, please contact Dr. Simpson at the email address above or 858-642-8431.

The New York Times Urges Government Aggression Against Producers and Consumers of Automobiles

In its lead editorial, titled “Sticker Shock,” The New York Times of Sunday, June 5, 2011, has the audacity to declare that “…Detroit and other manufacturers make big changes only when regulators force them to.”

The Times apparently forgets that the big changes constituted first by the introduction of the automobile, way back in 1894, and then by the countless improvements in the automobile since that time, such as the self-starter, automatic transmission, power brakes, and power steering, were made by "Detroit" without the presence of government regulators, indeed, in large part precisely because of the absence of government regulators. And that the same point applies to virtually every other “big change,” in very line of business that has taken place since the beginning of the Industrial Revolution.

Clearly, the free market, the market insofar as it is free of government regulators, has made not merely big, but absolutely enormous changes, the enormous changes that constitute the economic progress of the last 260 years or more!

The “big changes” that the Times complains of not being made unless forced by regulators are changes that do not constitute economic progress but impoverishment. The specific change referred to in its editorial is compelling the automobile industry to produce cars so small and light that they will be able to achieve 62 miles per gallon. The obvious fact is that consumers do not want such pieces of junk and because they don’t, the automobile industry does not waste time trying to produce them. The only thing that can bring about such a “big change” is the government’s use of physical force in an act of naked aggression against the consuming public and the automobile producers who profit by serving the consumers.

Wages and the Irrelevance of Worker Need and Employer Greed

The Marxian doctrine of the alleged arbitrary power of employers over wages appears plausible because there are two obvious facts that it relies on, facts which do not actually support it, but which appear to support it. These facts can be described as “worker need” and “employer greed.” The average worker must work in order to live, and he must find work fairly quickly, because his savings cannot sustain him for long. And if necessary—if he had no alternative—he would be willing to work for as little as minimum physical subsistence. At the same time, self-interest makes employers, like any other buyers, prefer to pay less rather than more—to pay lower wages rather than higher wages.

People put these two facts together and conclude that if employers were free, wages would be driven down by the force of the employers’ self-interest—as though by a giant plunger pushing down in an empty cylinder—and that no resistance to the fall in wages would be encountered until the point of minimum subsistence was reached. At that point, it is held, workers would refuse to work because starvation without the strain of labor would be preferable to starvation with the strain of labor.

What must be realized is that while it is true that workers would be willing to work for minimum subsistence if necessary, and that self-interest makes employers prefer to pay less rather than more, both of these facts are irrelevant to the wages the workers actually have to accept in the labor market.

Let us start with “worker need.” To understand why a worker’s willingness to work for subsistence if necessary is irrelevant to the wages he actually has to work for, consider the analogous case of the owner of a late-model car who decides to accept a job offer, and to live, in the heart of New York City. If this car owner cannot afford several hundred dollars a month to pay the cost of keeping his car in a garage, and if he cannot devote several prime working hours every week to driving around, hunting for places to park his car on the street, he will be willing, if he can find no better offer, to give his car away for free—indeed, to pay someone to come and take it off his hands. Yet the fact that he is willing to do this is absolutely irrelevant to the price he actually must accept for his car. That price is determined on the basis of the utility and scarcity of used cars—by the demand for and supply of such cars. Indeed, so long as the number of used cars offered for sale remained the same, and the demand for used cars remained the same, it would not matter even if every seller of such a car were willing to give his car away for free, or willing even to pay to have it taken off his hands. None of them would have to accept a zero or negative price or any price that is significantly different from the price he presently can receive.

This point is illustrated in terms of the simple supply and demand diagram presented in Figure 14–1. On the vertical axis, I depict the price of used cars, designated by P. On the horizontal axis, I depict the quantity of used cars, designated by Q, that sellers are prepared to sell and the buyers to buy at any given price. The willingness of sellers to sell some definite, given quantity of used cars at any price from zero on up (or, indeed, from less than zero by the cost of having the cars taken off their hands) is depicted by a vertical line drawn through that quantity. That vertical line, labeled SS, denotes the fact that sellers are willing to sell the specific quantity A of used cars at any price from something less than zero on up to as much as they can get for their cars. The fact that they are willing to sell for zero or a negative price has nothing whatever to do with the actual price they receive, which in this case is the very positive price P1. The actual price they receive in this case is determined by the limitation of the supply of used cars, together with the demand for used cars.



In Figure 14–1, it is determined at point E, which represents the intersection of the vertical supply line with the demand curve. The price that corresponds to that juncture of supply and demand is P1. The fact that the sellers are all willing if necessary to accept a price less than P1 is, as I say, simply irrelevant to the price they actually must accept. The price the sellers receive in a case of this kind is not determined by the terms on which they are willing to sell. Rather, it is determined by the competition of the buyers for the limited supply offered for sale. (This, of course, is the kind of case Böhm-Bawerk had in mind when he declared that “price is actually limited and determined by the valuations on the part of the buyers exclusively.”1)

Essentially the same diagram, Figure 14–2, depicts the case of labor. Instead of showing price on the vertical axis, I show wages, designated by W. Instead of the supply line being vertical to the point of the sellers being willing to pay to have their good taken off their hands, I assume that no supply whatever is offered below the point of “minimum subsistence,” M. This is depicted by a horizontal line drawn from M and parallel to the horizontal axis. Thus, the supply curve in this case has a horizontal portion at “minimum subsistence” before becoming vertical. These are the only differences between Figures 14–1 and 14–2.

Figure 14–2 makes clear that the fact that the workers are willing to work for as little as minimum subsistence is no more relevant to the wages they actually have to accept than was the fact in the previous example that the sellers of used cars were willing to give them away for free or pay to have them taken off their hands. For even though the workers are willing to work for as little as minimum subsistence, the wage they actually obtain in the conditions of the market is the incomparably higher wage W1, which is shown by the intersection—once again at point E—of the demand for labor with the limited supply of labor denoted by point A on the horizontal axis. Exactly like the value of used cars, or anything else that exists in a given, limited supply, the value of labor is determined on a foundation of its utility and scarcity, by demand and supply—more specifically, by the competition of buyers for the limited supply—not by any form of cost of production, least of all by any “cost of production of labor,” i.e., “minimum subsistence.”

It also quickly becomes clear that “employer greed” is fully as irrelevant to the determination of wage rates as “worker need.” This becomes apparent as soon as one thinks in terms of the conditions of an auction. The competition of two or more bidders at an auction brings out the essential nature of the market for labor and clearly demonstrates the actual nature of the self-interest of buyers. Thus, assume that there are two people at an art auction, both of whom want the same painting. One of these people, let us call him Mr. Smith, is willing and able to bid as high as $2,000 for the painting. The other, let us call him Mr. Jones, is willing and able to go no higher than $1,000.

Of course, Mr. Smith does not want to spend $2,000 for the painting. This figure is merely the limit of how high he will go if he has to. He would much prefer to obtain the painting for only $200, or better still, for only $20, or, best of all, for nothing at all. What we must understand here is precisely how low a bid Mr. Smith’s rational self-interest allows him to persist in. Would it, for example, actually be to Mr. Smith’s self-interest to persist in a bid of only $20, or $200?

It should be obvious that the answer to this question is decidedly no! This is because if Mr. Smith persists in such a low bid, the effect will be that he loses the painting to Mr. Jones, who is willing and able to bid more than $20 and more than $200. In fact, in the conditions of this case, Mr. Smith must lose the painting to the higher bidding of Mr. Jones, if he persists in bidding any sum under $1,000! If Mr. Smith is to obtain the painting, the conditions of the case require him to bid more than $1,000, because that is the sum required to exceed the maximum potential bid of Mr. Jones.

This case contains the fundamental principle that names the actual self-interest of buyers. That principle is that a buyer rationally desires to pay not the lowest price he can imagine or would like to pay, but the lowest price that is simultaneously too high for any other potential buyer of the good, who would otherwise obtain the good in his place.

This identical principle, of course, applies to the determination of wage rates.

The only difference between the labor market and the auction of a painting is the number of units involved. Instead of one painting with two potential buyers for it, there are many millions of workers who must sell their services, together with potential employers of all those workers and of untold millions more workers. This is because just as in the example of the art auction, the essential fact that is present in the labor market is that the potential quantity demanded exceeds the supply available. The potential quantity of labor demanded always far exceeds the quantity of labor that the workers are able, let alone willing, to perform.

For labor, it should be understood, is scarce. It is the most fundamentally useful and scarce thing in the economic system: virtually everything else that is useful is its product and is limited in supply only by virtue of our lack of ability or willingness to expend more labor to produce a larger quantity of it. (This, of course, includes raw materials, which can always be produced in larger quantity by devoting more labor to the more intensive exploitation of land and mineral deposits that are already used in production, or by devoting labor to the exploitation of land and mineral deposits not presently exploited.)

At the same time, for all practical purposes there is no limit to our need and desire for goods or, therefore, for the performance of the labor required to produce them. In having, for example, a need and desire to be able to spend incomes five or ten times the incomes we presently spend, we have an implicit need and desire for the performance of five or ten times the labor we presently perform, for that is what would be required in the present state of technology and the productivity of labor to supply us with such increases in the supply of goods. Moreover, almost all of us would welcome the full-time personal services of at least several other people. Thus, on both grounds labor is scarce.

For the maximum amount of labor available to satisfy the needs and desires of the average member of the economic system can never exceed the labor of just one person. One person is the number that always results when we divide one and the same number of people in their capacity as consumers by that number of people in their capacity as potential producers. Indeed, in actual practice, the amount of labor available per person falls far short of the labor of one person, because of the existence of large numbers of people, notably young children and the elderly, who are incapable of performing labor and must live as dependents on the labor of others.

The consequence of the scarcity of labor is that wage rates in a free market can fall no lower than corresponds to the point of full employment. At that point the scarcity of labor is felt, and any further fall in wage rates would be against the self-interests of employers, because then a labor shortage would ensue. Thus, if somehow wage rates did fall below the point corresponding to full employment, it would be to the self-interest of employers to bid them back up again.

These facts can be shown in the same supply and demand diagram I used to show the irrelevance to wage determination of workers being willing to work for subsistence. Thus, Figure 14–3 shows that if wage rates were below their market equilibrium of W1, which takes place at the point of full employment, denoted by E—if, for example, they were at the lower level of W2—a labor shortage would exist. The quantity of labor demanded at the wage rate of W2 is B. But the quantity of labor available—whose employment constitutes full employment—is the smaller amount A. Thus, at the lower wage, the quantity of labor demanded exceeds the supply available by the horizontal distance AB.



The shortage exists because the lower wage of W2 enables employers to afford labor who would not have been able to afford it at the wage of W1, or it enables employers who would have been able to afford some labor at the wage of W1 to now afford a larger quantity of labor. To whatever extent such employers employ labor that they otherwise could not have employed, that much less labor remains to be employed by other employers, who are willing and able to pay the higher wage of W1.

At the artificially low wage of W2, the entire quantity AB of labor is employed by employers who otherwise could not have afforded to employ that labor. The effect of this is to leave an equivalently reduced quantity of labor available for those employers who could have afforded the market wage of W1. The labor available to those employers is reduced by AC, which is precisely equal to AB. This is the inescapable result of the existence of a given quantity of labor and some of it being taken off the market by some employers at the expense of other employers. What the one set gains, the other must lose. Thus, because the wage is W2 rather than W1, the employers who could have afforded the market wage of W1 and obtained the full quantity of labor A are now able to employ only the smaller quantity of labor C, because labor has been taken off the market by employers who depend on the artificially low wage of W2.

The employers who could have afforded the market wage of W1 are in identically the same position as the bidder at the art auction who is about to see the painting he wants go to another bidder not able or willing to pay as much. The way to think of the situation is that there are two groups of bidders for quantity AB of labor: those willing and able to pay the market wage of W1, or an even higher wage—one as high as W3—and those willing and able to pay only a wage that is below W1—a wage that must be as low as W2. In Figure 14–3, the position of these two groups is indicated by two zones on the demand curve: an upper zone HE and a lower zone EL. The wage of W1 is required for the employers in the upper zone to be able to outbid the employers in the lower zone.

The question is: Is it to the rational self-interest of the employers willing and able to pay a wage of W1, or higher, to lose the labor they want to other employers not able or willing to pay a wage as high as W1? The obvious answer is no. And the consequence is that if, somehow, the wage were to fall below W1, the self-interest of employers who are willing and able to pay W1 or more, and who stood to lose some of their workers if they did not do so, would lead them to bid wage rates back up to W1. The rational self-interest of employers, like the rational self-interest of any other buyers, does not lead them to pay the lowest wage (price) they can imagine, but the lowest wage that is simultaneously too high for other potential employers of the same labor who are not able or willing to pay as much and who would otherwise be enabled to employ that labor in their place.

The principle that it is against the self-interest of employers to allow wage rates to fall to the point of creating a labor shortage is illustrated by the conditions which prevail when the government imposes such a shortage by virtue of a policy of price and wage controls. In such conditions, employers actually conspire with the wage earners to evade the controls and to raise wage rates. They do so by such means as awarding artificial promotions, which allow them to pay higher wages within the framework of the wage controls.

The payment of higher wages in the face of a labor shortage is to the self-interest of employers because it is the necessary means of gaining and keeping the labor they want to employ. In overbidding the competition of other potential employers for labor, it attracts workers to come to work for them and it removes any incentive for their present workers to leave their employ. This is because it eliminates the artificial demand for labor by the employers who depend on a below-market wage in order to be able to afford labor. It is, as I say, identically the same in principle as the bidder who wants the painting at an auction raising his bid to prevent the loss of the painting to another bidder not able or willing to pay as much. The higher bid is to his self-interest because it knocks out the competition. In the conditions of a labor shortage, which necessarily materializes if wage rates go below the point corresponding to full employment, the payment of higher wages provides exactly the same benefit to employers.


On the basis of the preceding discussion, it should be clear that average money wage rates are determined neither by worker need nor by employer greed, but, basically, by the quantity of money in the economic system and thus the aggregate monetary demand for labor, on the one side, and by the number of workers willing and able to work, on the other—that is, by the ratio of the demand for labor to the supply of labor. It should also be clear that in a free labor market, money wage rates can fall no lower than corresponds to the point of full employment.

Two points should be realized in connection with the principle that it is against the self-interest of employers to allow wage rates to fall below the point that corresponds to full employment. First, the operation of the principle does not require that full employment be established throughout the economic system before wage rates cease to fall. On the contrary, the principle applies to each occupation and, still more narrowly, to each occupation within each geographical area. For example, the wage rates of carpenters in Des Moines can fall no further than corresponds to the point of full employment of carpenters in Des Moines. Any further fall would create a shortage of such carpenters and thus would be prevented or quickly reversed, even though there might still be major unemployment in other occupations or in other geographical areas.

Second, the operation of the principle need not be feared as possibly serving to bring about the establishment of subsistence wages through the back door, so to speak. By this, I mean that so long as unemployment exists, there is room for wage rates to fall without the creation of a labor shortage. And in a free market, wage rates would in fact fall in such circumstances. This is because in such circumstances, the self-interest of the employers, and also of the unemployed, would operate to drive them down. It should not be thought, however, that the fall in wage rates in these circumstances meant that the conditions of supply and demand were capable of accomplishing the human misery that Marxism attributes to the alleged arbitrary power of businessmen and capitalists.

A drop in wage rates to the full employment point does not imply any drop in the average worker’s standard of living. That is, it does not imply any reduction in the goods and services he can actually buy—any reduction in his so called real wages—because the elimination of unemployment that the fall in wage rates brings about means more production and a fall in costs of production, both of which mean lower prices. Indeed, it is likely that real wages actually rise with the elimination of unemployment, even in the short run, because not only do prices fall as much as, or even more than, wages, but also the burden of supporting the unemployed is eliminated, with the result that disposable, take-home pay drops less than gross wages and less than prices. When these facts are kept in mind, it is clear that insofar as market conditions require a fall in wage rates, they are, if anything, at the same time operating to raise the average worker’s standard of living further above subsistence, not drive it down toward subsistence.

Copyright © 2011 by George Reisman. This article is adapted from a section of Chapter 14, specifically pp. 613-18, of the author’s Capitalism: A Treatise on Economics (Ottawa, Illinois: Jameson Books, 1996). George Reisman, Ph.D., is Pepperdine University Professor Emeritus of Economics and Senior Fellow at the Goldwater Institute. His web site is http://www.capitalism.net/. His blog is georgereismansblog.blogspot.com. Send him mail. (A PDF replica of the complete book Capitalism: A Treatise on Economics can be downloaded to the reader's hard drive simply by clicking on the book’s title, immediately preceding, and then saving the file when it appears on the screen.)

1. See Eugen von Böhm-Bawerk, Capital and Interest, 3 vols., trans. George D. Huncke and Hans F. Sennholz (South Holland, Ill.: Libertarian Press, 1959), 2:245. See also above, pp. 162–63.