Wednesday, 4 July 2012

2nd Post to Ben McLeish

This is part of an ongoing discussion between me and Ben McLeish of the Zeitgeist Movement.  It started with my critique here of Ben’s video here.  Ben responded to the first half of my critique here.  This post is a response to that piece.

I want to start by thanking Ben for his efforts to understand libertarianism and Austrian Economics.  I hope that this post will help further his understanding of both.  I thank him also for recommending some texts to me so that I can better understand his position.  I look forward to his response to the second half of my critique, where he has promised to describe his vision of a “resource-based economy” in more detail.

This post is going to begin with some definitions, followed by a general discussion of Austrian economics.  After that, I will deal with the subjects in Ben’s post directly and in order.


Ben asks me to provide my definitions of ‘voluntary’ and ‘free market’.  I have previously defined both these terms – and many others – in these three short blog posts: 1) The Task of Political Philosophers, 2) Libertarian Property Assignment Rules, and 3) The Task of Economists.  I ask Ben to read them first to get a better idea of my ‘framework’ for analysing society.  However, I will provide my definitions again here for completeness.

The most fundamental distinction between types of human interactions is the distinction between voluntary exchanges and coercive exchanges.  All (interpersonal) exchanges are one of these two types.  A voluntary exchange is an exchange where both parties consent to making the exchange.  A coercive exchange is an exchange where only one party consents.  Coercive exchanges only take place because the coercer uses or threatens to use violence to make the exchange take place (since otherwise the non-consenting party would just walk away).

I am sure Ben already recognises to some extent the significance of this distinction between coercive and voluntary exchanges.  For example, I presume Ben would consider it wrong for one individual to randomly punch another individual in the face – in most circumstances.  However there are circumstances where this is acceptable – for example, when boxing.  It is not wrong for one boxer to punch another boxer in the face while they are in the boxing ring.  What is the difference?  Consent.  By entering the ring, both boxers consent to be punched in the face, and neither one of them therefore has grounds to complain (of assault) when he is punched in the face.  In most circumstances, people do not consent to being punched in the face, and this is what makes it assault and wrong.

There are many other examples.  If I enter Ben’s house, it could be by invitation (voluntary) or it could be trespass (coercive), depending on whether I have Ben’s consent to enter his house.  This is a very important distinction.  The difference between normal sex and rape is consent.  The difference between charity and theft is consent.  The difference between employment and slavery is consent.  The former are all voluntary interactions; the latter are all coercive.

Fortunately, in our daily lives, almost all interactions between individuals are voluntary.  Some coercive actions – exchanges which involve the use or threat of violence (because otherwise the non-consenting party would simply walk away) – are committed by small-time criminals, but the vast majority of coercive exchanges today involve the State as the coercer.  All forms of taxation are coercive, for example, because taxes are, by definition, only paid because of the State’s threats of violence (imprisonment) against anyone trying to avoid paying taxes.  State regulations, price controls, tariffs, etc, are all coercive as well, since they too are based on the State using threats of violence against anyone who does not obey the commands of the State.

I hope this clarifies the crucial distinction between voluntary and coercive exchanges.  For more details, refer to my aforementioned blog posts.

The definition of a free market is now straightforward and easy to understand.  A market is defined as a pattern of interpersonal exchanges, and a free market is defined as a pattern of purely voluntary interpersonal exchanges.  To the extent that a market involves coercive exchanges, it is not a free market.  It may be referred to as a hampered market.  

Of course, it would be utopian to expect that a completely free market could ever be achieved.  Presumably there will always be people willing to commit coercion – murder, rape, assault, etc – and to that extent the market will never be completely free.  But as mentioned above, the biggest coercer in society today is the State; they are the largest of the criminal gangs (thanks mainly to their enormously successful PR).  My goal is a stateless society, at least, because all States are necessarily coercive so are incompatible with the free market.


So far, several topics have come up and we are in disagreement, I believe, not because of anything trivial that can be resolved by tackling each issue one-at-a-time, but because we have fundamentally different ways of understanding the world.  If this conversation is to be fruitful, I believe we must get to the heart of our differences, search for common ground, and build from there. 
From my point of view, Ben does not understand my arguments primarily because he is not yet familiar with (Austrian) economics.  Without this understanding, it is impossible to understand how free markets really work and why hampered markets do not work, when it comes to resource utilisation.

For examples 1) in response to Ben’s points about planned obsolescence, I referred to the idea of consumer sovereignty, but Ben is not convinced such a thing even exists – and without being familiar with (Austrian) economics, it is easy to see why he would doubt it.  2) In response to his points about technological unemployment, I referred to how the free market responds to technological advancement, but Ben does not yet understand how the market process, i.e. the process which happens in a free market economy in response to changing conditions, works in general.  3) Finally, I defended the charging of interest partly on the basis of its importance as a signal to entrepreneurs that guides efficient use of resources, but without an understanding of economic calculation, this defense will not be understood.  Without a solid understanding of how free markets work, my explanations of these things will continue to be misunderstood by Ben.

Ben has shown a good willingness to learn these things.  If Ben is to read one whole book to get a better understanding of markets, I hope that it is Economics in One Lesson by Henry Hazlitt.  There are several chapters in that short book that directly address some of Ben’s arguments.  I am thinking specifically of the chapters “The Curse of Machinery”, “Spread-the-Work Schemes” and “The Fetish of Full Employment”.  But the whole book will help enormously with understanding how free markets work, and recognising common mistakes made by opponents of free markets and wannabe central planners.  It is not ‘rigorous’ but serves as a good introduction to ‘thinking like an economist’.

Austrian Economics

I want to elaborate on a point I made in my original critique, because it is crucial to understand.

Empirical evidence itself is of no use for understanding the effects of different norms relating to how resources are used – for that we need economics, and economics is a strictly axiomatic-deductive, i.e. non-empirical, science, as explained by Austrian economists such as Ludwig von Mises, Murray Rothbard and Hans Hoppe.”

Ben characterises this paragraph as an ‘admission’.  But this is the unique method of Austrian economics: it is what sets it apart from other schools of economics.  This is the ultimate reason why Austrians reject Keynes, Friedman, and Marx etc: they have a flawed methodology, unsuitable for the science of economics. 

It may sound crazy to say that economics can be non-empirical.  Isn’t it a bit convenient (and unscientific!) that we Austrians can ‘ignore’ empirical evidence that appears to contradict our theories?  Our answer is a resounding no, and in fact it is the empiricists who are being unscientific!  This is a deep subject of course, and I could get carried away writing about it, so for the sake of brevity, I will refer you to Hans Hoppe for a full explanation.  His short book Economic Science and the Austrian Method is excellent, or you could watch his lecture Praxeology: The Austrian Method.  Alternatively there is David Gordon’s Introduction to Economic Reasoning.

I will just point out that it is of crucial importance to use the correct methodology in any subject.  The laws of chemistry and biology can only be learned using the scientific method, because they are empirical subjects.  We make observations, construct hypotheses, make predictions, perform experiments, and take measurements etc, to discover biological or chemical laws. 

The laws of mathematics, on the other hand, can only be learned through logical deduction, because mathematics is a non-empirical (a priori) subject.  Some ‘empirical mathematician’ who claimed to have found in nature a triangle that violated Pythagoras’ Theorem would be laughed at by mathematicians, and rightly so.  Obviously, he would be incorrect (perhaps his measuring instruments are faulty?) because Pythagoras has been mathematically (logically) proven to be true – which is to say, the theorem is true whenever the fundamental axioms of geometry are true.  Likewise, someone who claimed Pythagoras Theorem is true because he has drawn and measured 10,000 triangles and they all obey the theorem would also be laughed at.  He may be right in his conclusion, but he’s not using the right methodology to reach it and so his work is useless to mathematics.  He’s not a proper mathematician; he’s a crank.

Austrians (uniquely) put economics in the same category as mathematics in this sense.  Economics is axiomatic-deductive.  Take the statement “all other things being equal, the introduction of a minimum wage law will increase unemployment”.  Austrians maintain that this true because it has been derived using deduction from a true axiom.  A non-Austrian would say this is either a) true because the empirical data shows that minimum wage laws do usually increase unemployment, or b) false because the empirical data shows that minimum wage laws do NOT usually increase unemployment

While non-Austrians argue endlessly over the empirical data and its interpretation and meaning, Austrians sit back, knowing that the empirical evidence has no bearing on the truth or falsity of the statement.

So what if empirical evidence shows that, in some time and place, unemployment decreased when a minimum wage was introduced?  The Austrian response is that the clause “all other things being equal” obviously did not hold.  Some other factor – of the millions of factors that influence such variables as the unemployment rate in the real world – must have changed, and had a greater effect than the introduction of the minimum wage.  A non-Austrian pointing to a supposed ‘counterexample’ would be dismissed by Austrians the same way a proper mathematician would dismiss an ‘empirical mathematician’ who went around measuring triangles and trying to use the ‘scientific method’ to prove mathematical laws.
This is not to be taken to mean that Austrians ‘reject’ empirical data.  We merely understand the limits of empirical data, and use it only where it is appropriate to do so.  Empirical data is useful for economic history, and for economic forecasting, but not for economics itself.  Austrian economics cannot be refuted by empirical data; it can only be refuted by pointing to flaws in the axiom or in the deductive process used to reach conclusions.

Bearing in mind all my above points, I will now respond to Ben’s post directly and in order.


In my original critique, I asked Ben to provide a few definitions, starting with ‘money’ and ‘monetary system’ (and ‘monetary-market system’).  In his post, he defined the former, but not the latter.  I could assume that he defines ‘monetary system’ as a society of individuals who use money, but I would appreciate an explicit definition to avoid any misunderstanding.  There may be a difference between ‘monetary system’ and ‘monetary-market system’ as well that I am missing.

Ben defines money in this paragraph: “Money is, and has been throughout its relatively short history in the human story, a societal tool to facilitate the differential exchange value of property or human/machine labour (or property whose own value has been enhanced or modified by human or mechanical labour.)”

Definitions can never be true or false, of course; definitions are to be judged on their usefulness for communicating ideas.  I suggest to Ben that this is a poor definition.  First, by saying ‘and has been throughout its relatively short history’ Ben is making his definition context-dependent.  He is implying that money could be something other than what he is about to define it as.  This is not useful, because it is then not a general definition of money.  Second, the definition contains many terms that themselves need defining.  What is a ‘societal tool’?  How is it different from just ‘a tool’?  What is ‘value’?  What is ‘exchange value’?  What other types of value are there?  How is he defining ‘property’?  This definition of money does not help me understand what he has in mind, because I do not understand what he has in mind by these terms.  Simpler definitions are generally better than complicated definitions, and Ben’s definition of money here is unduly complicated.

As a comparison, my definition of money is simply: a general medium of exchange.  I explain what an exchange is, what a medium of exchange is, and what a general medium of exchange is, in my post The Task of Economics

Ben’s next two paragraphs make it appear, however, as though his definition is actually equivalent to mine, or very close.  He says: “What has been used as money? In addition to the fractional and fiat currency … much else has been used in the past as a medium of exchange. The most famous objects used are the “precious metals” of gold and silver, but also marijuana, chocolate, stones, ornamental belts in China and many others have been used at various times.”  It seems here that Ben is using ‘money’ and ‘medium of exchange’ as equivalent.   I could accept this definition, although I think it is more useful to add the requirement that money is a general medium of exchange, as opposed to any medium of exchange.

Since conversations don’t go anywhere until key terms are defined and agreed upon, I ask Ben to either accept my definition, explain how his complicated definition is different to mine, or make an argument for why it is more useful to define money as any medium of exchange, as he seems to do above.

Money Decoupled From Resources Today?  Yes!

Ben: “This overall description of money is a simplistic characterisation, however, and itself requires an additional explanation of how money has been framed in the philosophy of private property. Indeed, it is this framing that has ultimately given rise to two major issues with the monetary system. 1) Money has itself become a form of private property itself, and 2) it has become entirely decoupled from any real-world referent whatsoever, resulting in the overall separation of the operation of ANY definition of a market economy from its real world resource allocations”

I am unsure what to make of Ben’s point 1, because I don’t know how he is using the term ‘private property’.  I ask Ben to define that term.  I also don’t know what he means by “how money has been framed”.  He says this “framing” has given rise to the “issue” that money has “become a form of private property itself”.  I don’t know what this means.  What was it before that happened?  How did “framing” cause that to happen? 

His second “issue” is that money “has become entirely decoupled from any real-world referent”.  This I can agree with, within the current monetary regimeBecause of the government monopoly on money, there IS a large disconnect between the monetary ‘signals’ today and real underlying resources. 

It cannot at all be said, for example, that a millionaire today must have used resources efficiently in the past.  The majority of millionaires (and billionaires, especially) have made their money using coercion, either directly or indirectly.  For example the CEO of a bank or a big corporation today has got rich because his organisation has special privileges from the government, not because his organisation has used resources wisely for satisfying consumers.  The government uses coercion on behalf of these corporations and the result is that those corporations become much bigger than they would be without the privileges, and the CEOs get much richer. 

Today, money is very much decoupled from any real world referent.  However, in a free market, this is not the case.  In a free market, money – the general medium of exchange – is very closely related to resource usage.  For example, if you have a free market, a producer can add the money prices of his inputs and subtract them from the money price of his output, and if he is left with a positive number (a profit) then it can be said that he has used resources wisely.  He did the right thing (from the point of view of society as a whole) by engaging in that production process because he has transformed objects of lower value (reflected in lower prices) into objects of higher value (reflected in a higher price). 

The general problem with widespread use of coercion (i.e. a State) is precisely that it decouples money prices from real world values.  This is why with a hampered market, when a producer makes a profit, we cannot say at all that he has used resources wisely.  In other words, what State coercion hampers is economic calculation.  See Mises on economic calculation.

John Locke

Ben brings up Locke.  I am not sure why.  Locke is often credited with originating the important libertarian principle of homesteading, but the modern concept of homesteading is quite different to how Locke described it.  For this reason, I won’t comment on that part of Ben’s post.


Ben: “Graham has a problem with my defining money as being bestowed value by its scarcity (of the money supply, in this case) and its perceived shared value. He claims that since “value is subjective” this could be true of anything. Indeed – this is why many different items have been used as money in the past (even fairly spoilable ones.) Yet I am unsure how this argument is going to help him defend a monetary system.”

I apologise, Ben, because I must not have been very clear in that part of my post.  First, as you agreed at the top of your post, you didn’t even define money in your talk, so I cannot have had “a problem” with your definition.  Second, I did not comment on your claim that money gets its value from scarcity, except to ask you to provide a definition of the term, which you have still not done.  You will find my definition of scarcity in my post The Task of Political Philosophers.

Value is indeed subjective.  Do you agree?  What it means for value to be subjective is that objects do not have any kind of “inherent” or “objective” value.  If nobody in the world values object X, then object X has no value.  If one person values object X and another person does not value object X, then object X has value to the first person but has no value to the second person.  If object X is valued by everybody, then object X has value to everybody.  It really is that simple.  Value only makes sense in reference to a human actor doing the valuing.

So where does the value of money come from?  It comes from people valuing money.  So then why do people value money?  As I pointed out, it’s because they can exchange it for goods that they value in direct use.  It cannot be denied that money has value, because it is a plain fact that people value it, and this is what it means to say that an object “has value”.

I did not say in my post that today’s un-backed, fiat, paper money has no value.  I said that it has no value for direct use, which is true by definition.  It has value to individuals only for use in exchange.  A commodity money is, on the other hand, valued by individuals for direct use as well as for use in exchange.
I hope this resolves the problems you have with what I said about value and money. 

Ben: “And before we hear claims that this would not be the case with commodity money; what use is gold? Why is it valuable? Indeed it shines, and is malleable. But what uses does it have?”

To clarify, I am not in favor of commodity money as such.  I am in favor of free markets, which means I believe people should be free to use whatever they want as a medium of exchange – commodity or non-commodity.  The reason Austrians are often characterised as being in favor of commodity money is that we expect (predict) that a free market will result in a money developing (i.e. a general medium of exchange), and specifically a commodity money – not mere paper.  Further, Austrians tend to expect gold to be the particular commodity that takes the role of money in a free market.  It would take too long to explain here exactly why we expect these results, but the general idea is that media of exchange are useful, one medium will tend to become commonly accepted – a money – due to network effects, and gold has good “moneyish” qualities (divisibility, portability, density, easy to recognise, hard to inflate, hard to counterfeit, etc).

ABCT and Keynes

I was delighted to read the following:

Ben: “Graham points out the boom-bust cycle as a product of fractional reserve banking. He is entirely correct. I would add to this, that during busts, especially modern busts, like that of 1929 or 2008, MASSIVE redistribution of wealth aggregates to the top money-possessors.”

Since I didn’t mention it by name before, the idea that fractional reserve banking is the cause of the boom-bust cycle is called Austrian Business Cycle Theory (ABCT).  It is the only cycle theory in economics that is able to explain the busts of both 1929 and 2008 (and all other booms and busts in history).

I was disappointed when later I read:

Ben: “I am no explicit fan of [Keynes], by the way, and my arguments below actually do not rely on him – he just said it first – , but he didn’t exactly fail at The New Deal to clear up the mess of the prior “free market”, did he?”

The New Deal was a massive expansion of government, and it was a complete failure.  It made the recession following the bust of 1929 far worse than it otherwise would have been, and the recession deepened into a depression and dragged on because of the New Deal, and only ended when the troops returned home from WW2. 

The period before 1929 was not even close to a free market.  The Fed – the money monopolist (which makes massive fractional reserve banking possible) – had been established in 1913.  The Fed inflated the money supply massively (enabling the US to enter WW1), causing a malinvestment boom which resulted in the bust of 1920.  The government took a relatively hands-off approach to dealing with the recession of 1920, and as a result, the recession ended within 18 months.  From 1921-1929, the Fed inflated the money supply massively again, and just as ABCT predicts (and Mises and Hayek predicted at the time), a malinvestment boom and subsequent massive bust occurred. 

The blame for the bust of 1929 lies squarely with the Fed (a government institution), and Keynes’ New Deal expansion of government turned a short recession into a long depression.  Bob Murphy and Tom Woods are excellent on this subject.  Or there’s always Rothbard.

Ben may not be an “explicit fan” of Keynes, but his arguments (especially about technological unemployment) are very much Keynesian.  I mentioned Keynes’ support for the crazy money-in-bottles idea to make the point that his economic framework leads directly to such absurd conclusions, so that Ben might consider abandoning his Keynesian framework entirely and adopting the Austrian approach.

The Rich

Ben makes a great point here:

“Any millionaire, or rich group of individuals, will want to maintain their status as the richest in a society. Otherwise what’s the point of striving to be rich? This means that new disruptive innovations such as mass cheap transit will be fought by the existing and incumbent transport owners, no matter if they have a “state monopoly” or whether it’s a private cartel (or a lone super-moneyed oligarch.)”

This is correct: rich people generally hate free markets, and it’s not hard to see why.  When someone is rich, they prefer to have the government step in and use coercion against their competitors, so they can stay rich without having to continually satisfy consumers as they would have to do in a free market.  This is why big banks lobby for more banking regulations, big drug companies lobby for more drug regulations, big energy companies lobby for more energy regulations, and so on.  This is why so many major industries are dominated by a few small firms – they’re the ones who secured protection from government – they are a cartel.  Governments are only too happy to create these regulations at the behest of big business lobbyists – government and big business are a partnership in swindling the public.

What’s the solution?  Oppose the regulations.  Government regulations make the playing field unfair, by favouring big businesses and stifling new and smaller businesses, to the detriment of society as a whole.  The bank bailouts are probably the most obvious example of government doing favors to big business, but ALL regulations have the same effect of cartelizing industries, rendering them less responsive to consumers and able to charge high prices for poor quality goods and services.

Without government regulations, cartelization is nearly impossible.  No private cartel (of companies not satisfying consumers) can be maintained, due to internal and external pressures making it inevitable that the cartel will break up, without the government to hold it together.  For more on this, see Chapter 10.2 of Man, Economy and State by Murray Rothbard.

Ben: “What’s voluntary about having to borrow and become indebted? This is not a rhetorical question, I literally don’t understand nor can follow the logic (our disposition in this movement is that we should celebrate being wrong, for we “become right” in the process. Here I stand ready to be educated by “Mr Wright” – pun intended.)”

From my definitions of the top of this post, I hope you now understand the sense in which I’m saying a loan agreement is voluntary.  Both parties consent to it.  It is not one stealing from the other.  Either party could just walk away.  There is no threat of violence being used to make the exchange take place.

Ben: “Graham then frog-leaps back to the hunter-gatherer days, suggesting that certain individuals in this low-tech society “by saving and implementing good new ideas – like creating wheelbarrows, ploughs and pots, [...] enabled them to produce more with less effort. Individuals with wheelbarrows were now wealthier than the “have-nots” who didn’t have them. The consistent opponent of inequality would have to denounce this improvement to the material conditions of man on account that it creates a two-class society and breaks the condition of high equality.”

To clarify, here my point was that equality in itself isn’t a good thing.  We don’t want to all be equally poor!  We want to be wealthy – i.e. we want to be able to achieve our goals with minimal effort.  Ben did not respond to my hypothetical about whether it’s better to have everyone equally wealthy, or to have some who are even wealthier.

The point that Ben picked up on was not related to my main point.  He asks “Ok – what were these individuals saving?”  In the paragraphs that follow, Ben seems to be under the impression that the concept of savings requires the concept of money.  This is not true at all.  Saving logically precedes money, and actually all exchange – an individual living alone can decide to save if he wants.  Saving (i.e. not consuming all that is produced) is a prerequisite for all capital accumulation, growth, development and technological advancement.  Obviously if all individuals in society consume 100% of what they produce (i.e. save nothing) they cannot invest in capital goods at all, so the society will not develop.  On this point see Irwin Schiff’s comic book How An Economy Grows And Why It Doesn’t.  In that story, you can see that Able’s savings (of fish, in this case), along with his ingenuity, were what enabled to society to develop, long before money developed.

So when Ben says this - “I would grant Graham the point that money became the tool to divide labour in a society facing real physical scarcity, but this does not grant money the noble title of being the enabler of technology.” – he has totally misunderstood what I’m saying.  Savings are the enabler of technology – not money.  And I certainly did not describe money as “the tool to divide labor”.  The division of labor logically precedes money as well.  The division of labor occurs spontaneously (if you want to know why – see this short video) and not, as Ben’s phrasing here would suggest, due to the foresight of some central planner giving orders, who in his wisdom decided to “divide labor” using money as a “tool”.  Finally, I don’t know what Ben means by scarcity, so I don’t know what he means by a “society facing real physical scarcity”.

Ben says “Additionally, Graham’s argument is internally inconsistent. What’s being valued here, by him, and by me, is the wonders of innovation. Yet the data from the Equality Trust shows that Innovation is higher in countries with less inequality”

I do not see what is “internally inconsistent” in what I have said.  It would help me if Ben could explain why he thinks such data is relevant to our discussion.

Bank Job Losses

I appreciate your clarifying your purpose in bringing up the 45,000 jobs lost at Lloyds.  I am still not entirely sure what you are saying though.  It’s sad for the people who lost their jobs (just like it was sad when scribes lost their jobs), but from a resource allocation point of view, society is better off now that those people are freed up to do something useful rather than working in an unproductive bank job.  Do you agree with this?


Again, thanks for clarifying how you are using the term “growth”.  I am still not sure what your definition of growth is though, and I don’t understand your distinction between “good growth” and “bad growth”.  Could you provide explicit definitions?

Patents and Copyright
Ben: “In abstraction, patents are an expression of the market system.”

Absolutely not.  Patents are an expression of government-granted privilege, the exact opposite of the free market.  The same goes for copyright.

Ben: “It is the securing of a certain technology, system, or idea, externally restricted (owned) by one or more people in order to maintain a competitive advantage”

Indeed.  I have highlighted the crucial word: idea.  Copyright and patent laws are a government grant of monopoly privilege sanctioning ownership of ideas, and this is incompatible with libertarianism and free markets.  See Stephan Kinsella’s Against Intellectual Property.

Ben: “I do have a little trouble imagining how exactly a monetary system can function without any ownership or trademarked or copyrighted systems or products”

In addition to Kinsella’s piece, I recommend for you and Michele Boldrin and David Levine’s Against Intellectual Monopoly.  The former is more theoretical; the latter more practical. 

Again though, whether individuals in society use a money or not is irrelevant, so you ought to have said “a free market” in your above sentence, rather than “a monetary system”.

Planned Obsolescence
Ben presents some empirical evidence as a means to support his argument that “Every company in a monetary system is forced, by cost efficiency to… make items that are manufactured poorly”  He says “I’ll let the following iPhone4 breakage graph speak for itself”.

My interpretation of the graph is that if it shows anything at all it is saying that planned obsolescence of iPhones is clearly NOT happening.  If this graph were to support Ben’s view, I would expect the lines to start off fairly flat, and then spurt up quickly after 1 year or after 2 years – whatever the planned breakage date.  I ask Ben to explain how this graph could possibly support his case that iPhones are planned to break, and to explain what the graph would look like if iPhones were NOT subject to this so-called planned obsolescence.
But such empirical data is irrelevant anyway, and it actually highlights the point I was making earlier about the limits of empirical data.  I will suppose, for the sake of argument, that you are absolutely right that Apple are engaging in planned obsolescence – and that you can produce some empirical data that demonstrates this.  Then I will say (no doubt to your frustration, until you understand Austrian methodology!) that any malicious planned obsolescence that is occurring is occurring because we do not have a free market today.  I can always say this, just like you can always deny the relevance of things like Gosplan to what you are saying (which you did in your video).  This is the problem with using empirical data to critique societies.  That’s why we need economics (i.e. logical deduction) to inform our social theories.

As I have been saying, economics informs us that producers can get away with continually wasting resources only when the government protects them from their competitors.  Governments are heavily involved in all industries today (though some more than others), so it is possible that one of the ways firms today are wasting resources is by making their products deliberately break after some set period.  They are much more likely to be able to engage in such behavior in today’s hampered markets than they would in a free market.  In a free market, competition will eliminate such behavior to the extent that it is malicious to the consumer.  (I do not expect you to accept this point until you have read a bit more Austrian economics – if you don’t understand consumer sovereignty, then you won’t understand this argument.)  If you want to argue that planned obsolescence is a problem in a free market, and not just (allegedly) in today’s hampered markets, you will have to do so using economic arguments, not by presenting empirical data.

Technological Unemployment
After reading Ben’s further comments on this subject, I am left wondering: “so what?”  I have no idea why Ben thinks that automation (freeing up of labor) is some kind of problem for the free market.  I recommend again Henry Hazlitt’s “The Curse of Machinery”.  The great news about how quickly technology is developing today is all the more reason to embrace free markets, since they are the best possible system for responding to changes in conditions and shifting resources into the most valuable lines of production. 
Ben doesn’t directly respond to anything I said about automation in history or my hypothetical about doctors being made unemployed.  I have begun reading The End of Work by Jeremy Rifkin, but at this time I have no idea why he and Ben are so afraid of the effects of automation that they are (in Rifkin’s case, at least) willing to use coercion to “spread the work” (another fallacious concept Hazlitt addressed in his book: “Spread-the-Work Schemes”).

That will do for now.  As I said at the beginning of this post, I look forward to reading Ben’s response to the remainder of my original critique, and to his description of his vision of a Resource-Based Economy.  I am glad to hear that he has started reading some of the many works by Mises, Rothbard and Hoppe that are freely available online.  I particularly hope that he spends some time thinking about and reading about economic methodology before responding to this post.

Meanwhile, I will continue reading Rifkin’s book which Ben sent to me (not freely available online), as well as The Lights in the Tunnel by Martin Ford which he linked me to privately.  I have also started The Venus Project: The Redesign of Culture by Jacques Fresco.


  1. This comment has been removed by the author.

  2. Your argument seems to be Pro/Against Austrian economics, while it should be Austrian economics/Resource based economy.

    AE: competition, individual risks and rewards, people in power abuse their power, central planning won't work, property comes into existence when it is used, shared risks and rewards kills incentive, someone doing more should get a bigger reward

    RBE: collaboration (the worlds people considers themselves part of the same team much like a football team), shared risks and rewards (consider a football team where the score of an individual goes to the whole team), people in power will only abuse their power in systems where there is ownership and nations (a football team can function as an anarchic system because risk and reward are shared and there is enough data and knowledge for individual planning), planning will work with the aid of computers and scientific information, resources are collectively owned, economies in the near future will be heavily automised and only 1% of the population is expected to work + people will still have a lot of incentives besides material gain, heavily contributing to the community is a reward in itself (it's a matter of putting the team first, a striker won't feel bad when all his goals are shared by the team, he just wants to win)

    1. I encourage you to check out the links in this very post, especially to Hoppe and Gordon, so you can learn more about Austrian economics. I suggest you learn the difference between economics and political philosophy, for one thing.

      Economics is the study of the logical consequences of human action. Political philosophy is about devising a set of principles for ownership (i.e. who has ultimate decisionmaking jurisdiction over which resources), and then economics can teach what consequences we can expect from different ownership principles being used in societies.

      The debate between Ben and myself is - I think (his next post will hopefully make it clearer) - between libertarianism and RBE. Economics is the body of knowledge that can tell us whether resources will be used more efficiently for satisfying human desires in 1) a libertarian society, or in 2) an RBE society.

  3. I see, I will read those works when I can find the time.

  4. Graham: What is the ultimate aim of the economic system you advocate? What would a successful economic system yield up by your definition? How would you measure/quantify it? Economics is a study, a science, a thought process, fine, but to what end.

    1. Hi Colin - thanks for your questions!

      Economics is a science (in the broadest sense of: an area of study) that studies the logical consequences of human action. Economics tells us what consequences we can expect from certain rules/norms operating in society. Economics, rightly understood, concludes that a society operating using libertarian rules/norms will be more prosperous than a society operating using socialist rules/norms, for example. Economics doesn't have an end, just like mathematics doesn't have an end. Both are apriori sciences that tell us useful things about the world.

      So it's not quite right to say I am advocating an "economic system". I am advocating a set of rules/norms called libertarianism, and I am using the value-free science of economics to demonstrate why I favor libertarian rules/norms over all other sets of rules/norms... namely, because they maximise prosperity.

      A society is prosperous when the individuals in that society are wealthy. An individual is wealthy according to how many of his ends (needs/wants) he is able to satisfy. Economics, tells us, for example, that two people on a desert island will be able to satisfy more of their ends (in this case, hunger/shelter/whatever) if they trade (because of the benefits of the division of labor and the division of knowledge) than if they both work in isolation. A corollary of that being that any third-party preventing them trading, by using violence or threats, would be reducing wealth and making society less prosperous.

      Does that answer your questions?

      For more on this, see my blog post "The Task of Economists".