This is an analysis of Ben McLeish’s video here. Ben is an active member of The Zeitgeist Movement UK. This is the start of a cross-blog discussion. Ben's blog is here.
Money and
‘The Monetary System’
Ben begins (at 1:50) by explaining he is going to discuss
“unresolvable problems in the monetary-market system, and by-products of money
itself”. These are “systemic issues, not
only to capitalism, but to the very entity and organisation of money
itself”. They are “inherent problems
that will lead to the collapse of any system in which it appears as a
regulating force”. Ben says that “As a
mechanism for cooperation and survival, money has outgrown its usefulness”.
Unfortunately Ben fails to provide a definition of money, or
of monetary-market system. This proves
to be a fateful error, because most of the rest of Ben’s talk is one huge fallacy of composition. He
briefly acknowledges the idea of commodity money and commodity-backed money,
but does not explain how they work. For
the entire talk, he refers only to the current system, with fiat money,
monopolised by a central bank, and with a cartelized banking system engaging in
rampant fractional-reserve banking. Yet
he uses his conclusions about this particular money and monetary system to denounce
the whole concept of money and ‘monetary systems’.
In order to persuade me that all monetary systems have
“systemic, inherent problems”, Ben must first of all provide a definition of
money, and then critique the most general form of money. It may be wise at this point to stop and ask
for a definition of money and monetary system, and to see if Ben recognises the
fallacy of composition he is making if he continues to argue against all money
by attacking fiat money. But I will
continue to comment on his talk, for the sake of discussion.
Fiat
Money
Ben explains that (fiat) money gets its value from two
things: 1) belief in money’s value (the “mutually shared illusion”) and 2)
scarcity of supply.
First it should be noted that value is subjective, so
everything, technically speaking, has
value only because people believe it
has value. Second, the plain fact is
that fiat money’s value is not an
illusion: I really can take my
fiat money to the local store and exchange it for goods that satisfy my
needs. People really do value money, and
why wouldn’t they, when it is so useful for exchanging for things that will
directly satisfy them? What Ben seems to
be referring to is that fiat money is not
useful for anything other than exchanging; it cannot be eaten, or used in
production of anything, for example.
This is true. But that’s the very
definition of a fiat money! This point,
therefore, clearly does not apply to commodity monies, which are by definition useful
for other purposes. So if this is the
sense in which Ben is saying money is an illusion, only fiat money is an
illusion, not commodity money.
With regard to his second source of (fiat) money’s value,
Ben refers to scarcity. He fails to
provide a definition of scarcity so it is difficult to know what he means by
this.
At 5:40 Ben begins to talk about where today’s fiat money
comes from. He starts with the Bank of
England and then goes on to give an explanation of fractional-reserve
banking. Possibly for reasons of time, he
does not mention the main consequence of fractional-reserve banking: the
business cycle of artificial boom, bust, recession and/or depression. Nor does he mention the redistributive effect
of inflation of the money supply: from savers to borrowers; from those on fixed
incomes to those on variable incomes; in general from those distant from the point at which the
money is created to those closer to
the source of the new money: especially the
government and the banks. Nor does he
mention that this system is impossible without a central bank monopoly
privilege on bank notes and a cartelized banking system. I recommend this very short video for
a clear explanation of fiat money, emphasising the redistributive effects of
inflation. For a full explanation of the
methods and effects of money expansion and contraction, and what cartelization
of the banking system enables, see chapter 12, section 11 of Man,
Economy and State by Murray Rothbard.
Debt and
the Money Supply
At 9:00 Ben makes a minor error by saying that there is not
enough money in the system to fully pay back the debt, because of the interest
which “was never created”. The error is
in assuming that creditors, when the money is paid back to them, will not spend
it back into the economy. Obviously they
will, since the creditors want goods and services, not piles of money. In theory, any amount of physical money can
be used to pay back any amount of debt in this way, so even a total debt higher
than the total money supply is not “mathematically impossible” to pay off, in
the way that Ben implies here.
Interest
At 10:15 Ben makes a further point about interest. It is not entirely clear whether he is
talking merely about interest being charged within this fiat fractional-reserve
system, or the general idea of interest.
He mentions with some disdain that a millionaire can earn £50k interest
“simply by having money in an account with 5% interest rate”. He ignores that (in a free market system, at
least) the millionaire must have previously produced so much to satisfy the
needs of his fellow man that he was able to become rich; that the money is not
available to the millionaire during the time it is loaned out; that some risk
is involved in lending; and most importantly that debtors voluntarily accept the terms of their loan
and therefore expect to benefit from the transaction - the loan is for mutual
benefit. Any third-party using
violence to prevent this kind of voluntary exchange would clearly be making
both worse off by preventing the gain from trade being realised.
On top of this, Ben overlooks the social / economic function
of interest, and the calculational chaos that a price control of zero on the charging of interest (which is the
effect of “usury” laws: forbidding the charging of interest) would have on
society. Entrepreneurs – the individuals
that make most of the decisions about resource allocation in a free market
economy – have ideas about how to change the world for the better, and the
incentive to put those ideas into action, but they often need a large amount of
savings in order to embark upon their wealth-generating project. Savers – individuals who saved their income
for use later rather than spending it on consumption now – have the funds that
the entrepreneur needs. Interest is what brings them together. The entrepreneur voluntarily agrees to pay
interest because he expects to be better off in the future; the saver agrees to
invest their money (rather than hoarding it) because of the expected interest
income. The money becomes inaccessible
to the saver for some period of time, while the entrepreneur adds value to the
world. With usury laws, the saver, the
borrower, and society as a whole, is worse off than in a free market, because
in a free market interest rates serve as a crucial signal and incentive for
guiding improvements to economic conditions and more efficient use of resources. On this point, see my video Economic Coordination and the Business Cycle.
Social
Mobility and Inequality
At 11:30 Ben brings up empirical data that appears to show
that social mobility has been declining, that life expectancy is inversely
related to inequality, and that mental illness is more prevalent where there is
higher inequality. See this
blog post for my response to this.
On top of my comments in that post, I would point out that Ben's quoting of facts and statistics
about societies today, with today's economic system, and then the using those facts to denounce all monetary
systems, would be another example of the fallacy of composition that pervades
Ben’s talk.
Downsizing
of Banks
At 15:10 Ben moves on to discuss “innovation, pollution, and
false positive indicators”. Ben explains
that when Lloyds TSB cut 45,000 jobs, the bank’s share price increased, but
does not explain the relevance of this point.
He just got through explaining that our economy is virtually held
hostage to big banks. And yet he
presents news that a bank is shrinking in size as a bad thing. It is unclear why he would apparently prefer that
those people still had their unproductive jobs, when they could be doing
something more productive. Does Ben not feel
that the banking sector is already too large?
Does he believe that downsizing of the banking system in this country is
a bad thing? The relevance of the Lloyds
TSB story is unclear.
GDP and
‘Growth’
He quickly moves on to criticise the idea that wealth is
measured by GDP. Ben correctly points
out that many activities (oil spills, wars, epidemics, etc) that clearly
decrease wealth actually increase GDP.
This point is the tip-of-the-iceberg of the problems associated with the
concept of GDP. Austrian economists have explained the uselessness and
pointlessness of GDP and most other “economic indicators”. Austrian economists recognise that economic
wealth cannot be measured due to the subjective, ordinal nature of value.
At 17:40, Ben seems to make the error of thinking that GDP
actually is a good measure of wealth, a position he well refuted a few moments
ago. He denounces “growth”. Unfortunately he does not define this term
explicitly; it generally means an increase in wealth or productivity, but Ben seems to define
it as an increase in GDP! Of course, due
to the aforementioned Austrian critique of GDP, Ben is right that “growth” by
this definition isn’t always good! But
when growth is given the more useful and common definition (an increase in
wealth), then the only people who ought to be opposed to growth are primitivists,
who actually desire a society of poverty.
Patents
At 18:45 Ben shifts to the subject of innovation and
immediately brings up patents and the large amounts of money spent on patent
trolling and patent defense. Patents are
a government-granted monopoly privilege, and therefore any critique of the
patent system does not apply to the free market. At 21:10 he says “This [patent wars] is
implicit to the monetary system itself”.
This is obviously false, and a fallacy of composition again. Patent wars can clearly only happen in societies
which have patent laws. There can exist
monetary systems with or without patent laws; and there can exist non-monetary
systems with or without patent laws.
Planned
Obsolescence
At 21:35, Ben says “Every company in a monetary system is
forced, by cost efficiency to… make items that are manufactured poorly”. He gives the example of mobile phones being
“calibrated” to break down within a specific timeframe set by the manufacturer;
so-called “planned obsolescence”.
Planned obsolescence is a myth in the sense that ultimately (at least in
free markets) manufacturers, and all producers, are beholden to consumers’
desires, so the longevity of any product will be optimal given the values of
the people in society. Longevity of a
product has to be weighed against other attributes. If products break after some “short” period
of time (short in the arbitrary opinion of the person speaking) it must be
because the costs of making the product last longer outweigh the benefits, from
the point of view of consumers.
It would therefore be a decrease of wealth if any third-party
were to use violence to prevent manufacturers making decisions about their
products based on cost-efficiency, for example by imposing arbitrary legal
minimum standards with regard to longevity of different types of products. In a free market, if a producer engages in so-called
“planned obsolescence” (meaning he manufactures goods that don’t last as long
as the speaker arbitrarily feels they
should) and there is a real detriment to consumers, then that producer will
soon be out-competed, ceteris paribus,
by a firm which makes their products last longer and satisfies consumers
better.
The Ghost
of Keynes
At 23:10 Ben says that “One overriding economic point will
make our way of life impossible… ‘Technological unemployment’”. He defines this term, by referring to the
discredited economist John Maynard Keynes, as “Unemployment due to our
discovery of means of economizing the use of labor, outrunning the pace at
which we can find new uses for labor”.
This one sentence sums up one of the major errors of Keynesianism
remarkably well: the idea that “we” need
to “find new uses for labor”.
Keynes was a central planner who believed in
work-for-work-sake, even so far as recommending to the U.S. government that
they pay people to bury money in bottles deep underground, so that people can be employed in the task of digging for them, just to keep
them busy. He said that if no more useful for work can
be found for them to do, it would actually be a net economic benefit for the
government to spend taxpayers’ money in this absurd way. One would have thought, when his economic understanding led him to this ridiculous conclusion, Keynes
might have re-thought his framework. But
alas, Keynesianism still dominates in Universities today and policy is still
made based on Keynesian recommendations.
Sound Austrian economic ideas remain a small minority in academia, but
the ideas are spreading very quickly due to the rise of the internet and the
beginning of the collapse of the Keynes-inspired economic system in 2008, which
many Austrian
economists predicted.
Keynes put the cart before the horse. Humans engage in labor because we
want to produce something, which we can then enjoy by consuming, or exchanging
for something we can consume. By
definition, we do not enjoy labor for its own sake (for then it would be
leisure). Every individual could choose
to live a life of complete leisure, and just sit in a yen-like state
contemplating the world. But we’d
quickly get hungry, so we find that we need to engage in labor (combining our
skills and energy with elements of nature) in order to satisfy our desire to
not feel hungry. We need to produce food,
and other things to satisfy our desires.
That is why we labor.
Automation
Prior to the Agricultural Revolution, this food production consisted
of hunting and gathering. Both hunting
and gathering were done with the help of technology: spears, arrows, nets,
traps, bowls, vessels and long pointy sticks.
Why did men use these technologies?
Because it enabled them to be more efficient, meaning they could produce
more for less. With a bow-and-arrows, if
hunting becomes 4 times as efficient (meaning it takes only a quarter of the
time to hunt for the same game with the technology than without) then an
individual with a bow-and-arrows can either have 4 times as much food, or he
can devote three-quarters of the time he previously spent hunting doing
something else - maybe producing something else, or just sitting back and
relaxing with more leisure time, or some combination of these options.
The Agricultural Revolution dramatically increased food
production, enabling the human population to increase considerably while at the
same time each individual had more food.
As food productivity continued to increase, through savings and investment
in agricultural technology, as well as technological advancement itself, less
labor was needed to produce enough food for everyone, even as the human
population continued to grow. This increased
productivity freed up men’s time to devote to other activities besides
agriculture. With the
intensification and extensification of the division of labor and knowledge, and
increasing trade between individuals and across larger distances, some men did
not have to work in agriculture at all; they could specialize in other
productive activities and exchange with other people for their food needs.
At 24:30, Ben relates the wonderful statistic that by 1860,
40% of the human population were in the enviable position of being able to do
things besides just labor to produce food
– a remarkable achievement given that even just a hundred years earlier, almost
everyone still worked in agriculture!
And today, less than 1% of people work in agriculture; over 99% of
people do not have to work in agriculture!
99% of the population has been freed up to produce other things! These facts should be marvelled at, but Ben
seems to think the trend is something to be feared, and that perhaps we should
look back in fondness to the days when most people spent all day laboring just for
food for survival.
At 27:00, Ben gives another wonderful statistic: “iPhones
are selling for £25, and they are 1000x more powerful than the MIT
supercomputer in the 1970s, and that cost $11 million.” Incredibly, once again, Ben seems to be
highly concerned, rather than celebratory, about this remarkable fact about the
increasing standard of living: the ease with which we can create things
today.
‘Technological
Unemployment’
At 27:10, Ben says, sounding just like Keynes, that “This is
a big trend and it affects everything.
It means that ultimately automation is going to be much cheaper than
human labor, even if you think you’re special, even if you think your job isn’t
technical. And even if it was: what are
you, 10, 20, 30%? What if it’s 50%? How are you going to deal with 50%
unemployment?”
In 1945, Keynes and his followers supported the continuation
of the war on the basis that if the troops were brought home, and if weapons
and tanks and warplanes were not made, there would be mass unemployment. They predicted an
economic depression. As they saw it,
there were simply no jobs for all these people to do, so there would be a
disaster. Contrary to the Keynesian predictions, after the war ended the U.S.
economy went into a massive boom, which is exactly as Austrian economics predicts. The U.S. economy had a relatively free labor
market, so it quickly adjusted to the influx of labor, and through the market
process of adjustments, jobs became available for everyone that wanted
one. So long as human needs and wants
remain unfulfilled, jobs can be done satisfying these desires.
Keynesians still use this old debunked framework and still
make predictions of disaster relating to the loss of jobs, or their creation. Paul Krugman said that the 9/11 attacks “could
do some economic good”, because of all the
jobs that were stimulated by the rebuilding effort. Larry Summers said that the 2011 tsunami “may
provide a jolt” to the Japanese economy.
These mistakes are an example of the broken
window fallacy, and are the logical consequence of Keynes' flawed framework. See The Parable of
the Broken Window.
Take this hypothetical.
Suppose someone invents a machine which overnight makes the role of
doctor obsolete. Some sort of amazing self-diagnosis
/ auto-treatment machine, which works as well as any doctor and is far more
convenient and cheaper too. All doctors
would be put out of work! That is a lot
of people that are now suddenly unemployed!
What will happen to them? Shall
we, like the Keynesians, predict that this mass unemployment will be a disaster
unless the government uses taxpayers’ money to pay them to do something (like
digging up buried bottles of money)? Should we fear this
amazing new machine for this reason?
The Austrians point
out that the economy will simply adjust, if individuals are free to do so. Those doctors will simply do something else, and what those
doctors produce when they are doing that ‘something else’ represents a large part of the real value
to society of the diagnosis machine.
Before the machine came along, thousands of people were doing something
that can now be automated, so they are freed up to
do something more useful, something that people want which can’t (yet) be automated. This diagnosis
machine should be welcomed and recognised as a great advancement – not feared!
This hypothetical is not at all difficult to imagine,
because history is filled with examples of it.
The effect of a new technology, which makes many jobs obsolete, is the
same as the effect mentioned above of the sudden influx of labor into the U.S.
after the war. It gives rise to an
economic boom, by freeing up labor. In
fact, the whole of human history could be described in terms of technological
improvements automating certain laborious tasks, and in so doing freeing up
human labor to be spent on other productive activities and thereby adding
wealth to society.
Pick any technological improvement, say, the printing
press. A lot of scribes were made
unemployed when their laborious job of copying old texts by hand could be
automated. Within a short space of time,
the whole scribe industry, a major sector of the economy, had vanished. Was
this a bad thing? Would we be better off
if the printing press never existed, so that people could be employed to this day as
scribes? I doubt Ben would try to claim
this.
Was there a disaster at the time the printing press was
invented? Not at all; why would there
be? The job of being a scribe
disappeared and was replaced by new jobs, as any Austrian would predict. Many of the former scribes became creators of
new texts; others became printing press operators; others went into different
fields entirely. The printing press
benefited society not just by making books cheap and widely available, but also
by freeing up the time of a large number of scribes to produce other things. Just as we benefit by having less people in
agriculture today than at any time in our past, we benefit by not having people
spending their time copying books by hand today. The exact same story can be told for every
kind of new technology.
The objection will no doubt be the canard that something is different this time. Ben will have to explain why this time is different if he is going to go down this road. He will have to point to some qualitative
change that has taken place in recent history which makes this time different
to all the other times throughout history when technology has taken over tasks
previously performed by labor.
The Ghost
of Marx
At 27:30, at the end of this first part of his talk, Ben
makes a howler that comes straight from the writings of Karl Marx, when he
says: “technology follows its own scientifically self-evident trend,
irrespective of the system surrounding it.”
I cannot believe Ben really believes this to be true. Does he really think that whether a man is
free or a slave makes no difference to whether he decides to develop a new
technology? That the impersonal
“material forces of production” (Marx’s term) carry on independent of human
actions and choices, constantly propelling our species forward? That there is no such thing as “incentives”? As this was a mere passing remark, perhaps he
did not mean to say what he did.
Problems
of ‘The Monetary System’
At 27:50, Ben summarises the “problems” that he attributes
to ‘The Monetary System’ (which he has still not defined): “Our core resources
are expiring; our economy needs to economize (a complete reversal of what it
does now); money (both [sic] in its present form of fiat-based debt and unpayable
interest) not only divides and impoverishes people but negatively impacts
innovation, takes the place of what is really important… and will fail by
design”.
He did not previously mention resource depletion, so it is difficult
to know what evidence he has for his claim that “our core resources are
expiring”, or what the relevance of it is.
Of course, fear-mongers have always said that resources are running out,
usually as a way of increasing the price, or getting people to support State
intervention to try and preserve resources.
For example, in 1882 it was estimated that 95 million barrels of oil
remain (so will run out within 4 years!).
In 1920 it was estimated that 6.7 billion barrels of oil remain; in
1932, it was estimated that 10 billion barrels of oil remain; in 1944 it was
estimated that 20 billion barrels of oil remain; in 1950 it was estimated that
100 billion barrels of oil remain; in 1980 it was estimated that 648 billion
barrels of oil remain; in 1993 it was estimated that 999 billion barrels of oil
remain; in 2000 it was estimated that 1016 billion barrels of oil remain. At some point, given these historical predictions
(listed
here), you would think that people who predict that oil is about to run out
would re-think their methodology. But
alas, we continue to be told that we are on the brink of disaster and something must be done (using violence,
no doubt).
Ben does not acknowledge the free market mechanism for
adjusting to dwindling supplies: namely an increase in price, stimulating
preservation, more efficient use of supply, more exploration, and a search for substitutes. Ben unfortunately falls for propaganda that
resources are running out and only State intervention – global management of
resources – can prevent disaster.
Ben has still not defined money, but if we assume he is
using the standard definition – a general medium of exchange – then his
statement that “money divides and impoverishes people” is obviously false. People use a general medium of exchange
because they expect to benefit from it, so it helps them achieve their goals
and brings them out of poverty. Money
does literally the opposite of divide people; it brings them together, enabling exchanges that could not take
place directly due to the limitations of barter; it enables a greater degree of
social cooperation and coordination than is possible without a general medium
of exchange.
Ben’s
Plan
“So what do we do?” he says.
“We need to manage our global household”. It is not clear at this point who “we” refers
to, but he later implies that he means some group of enlightened technicians
need to manage the world’s resources. It is not clear whether Ben considers himself
to be among this enlightened group. As
the first Zeitgeist film shows, the global elites have been pushing this view
for a long time: that the planet needs to be managed by scientific dictators
running a global government. Ben even
repeats the slogan of the New World Order at 28:48: “We need to consider global
solutions to global problems”. This slogan
may be familiar from global elitists like George Bush (talking about
terrorism), Al Gore (talking about environmentalism) and Gordon Brown (talking
about economic regulation). It is ironic
that Ben’s proposal and rhetoric resembles so closely the proposal and rhetoric
of the very people that are identified as ‘the enemy’ in the final third of the
first Zeitgeist movie.
Ownership
At 29:59, Ben explains that “We need to move from a general
method of consumption known as ownership to one of availability provided when
needed”. Ben unfortunately does not
define either consumption or ownership.
Frankly, I cannot fathom what he means by ownership being “a general
method of consumption”. What is a
‘method’ of consumption? As we have
seen, humans need to consume food, at least, and this requires food to be
produced. Ownership usually refers to an
association or link between an individual or group of individuals and a
particular scarce resource. The
individual, the ‘owner’, is the individual with ultimate decision-making
jurisdiction over the scarce resource, the ‘property’. Without some principles of ownership,
conflicts over scarce resources are unavoidable. I will give Ben the benefit of the doubt and
assume he means not “We need to move away from ownership” but “We need to move
away from X principles for determining ownership and towards Y principles for
determining ownership”. For more on this
point see this
post, which Ben responded to by saying “Good post. I agree.”
Communism?
At 30:08, Ben asks rhetorically “Who here owns a shopping
trolley?” and tells anyone who answers no that they are Communists! Is Ben implying that he thinks rental agreements
are somehow Communist in nature?! He has
misunderstood libertarianism if he thinks that the relationship between a
renter of a shopping trolley and the lender of a shopping trolley is somehow ‘unlibertarian’. It is a voluntary exchange, so is completely
compatible with libertarianism.
He says rental agreements are “systems which have in them the
seeds of a social design.” This
gives us a glimpse of the kind of world Ben is imagining: one in which all the
world’s resources are owned by some enlightened central planners, who then rent
out these resources to people “as they are needed”. Society is to be “designed” by this group of
social engineers. Ben’s ideal system is
literally communism, re-packaged and thinly veiled. Centralised ownership of resources is the
definition of communism, and here Ben all but says that he wants to live in a designed communist society, where
everything is owned and controlled centrally and rented out “if available” “as
needed”.
Road
Management
Ben goes on to discuss cars and roads. He is trying to imply that a system of car
rentals similar to the current system of trolley rentals would be a superior
form of social organisation. What he seems
to miss is that people are free right now to either buy or rent cars, and to
either buy or rent shopping trolleys.
That most people choose to rent shopping trolleys but buy cars shows us
that people prefer owning cars and
renting trolleys. Therefore if a
third-party were to use violence to prevent the purchasing of cars (or prevent
renting of shopping trolleys) clearly car users (trolley users) would be made
worse off. They would be prevented from
making a trade they really want to make, and forced to make a trade they
consider less satisfactory.
Ben criticises the management of the roads in society today, and he has good reason to do so. Roads
are currently managed by a monopoly; we can expect a free market in roads to deliver a far
superior service. State monopoly
ownership of roads is the cause of the problems of road pollution, congestion
and regular crashes. A road owner
operating in a free market would have the information (price signals) and
incentives to find the right balance between reducing pollution, improving
safety, preventing traffic jams and the price of the service. This is the same fallacy of composition once
again, where Ben assumes that the problems of road management are due to ‘the
monetary system’, when they are actually a symptom of a particular type of ownership – namely monopolistic ownership of roads by State central planners.
Adoption
of New Technology
Ben claims to have devised, or at least recognised, a ‘superior’
system of road management: based on rentals of cars that apparently drive
themselves. The question that Ben fails
to ask is what would be the cost of implementing such a system? If the costs exceed the benefits, then by
definition it is a waste of resources (the value of the inputs exceed the value
of the output). If the benefits exceed
the costs then it is good use of resources (since it would be value
adding). Why hasn’t it been done yet? Presumably it has so far not been considered
profitable for someone to do. So either 1)
its not profitable and would be a waste of resources, or 2) its not profitable
but actually is a good use of resources, in which case it must be that the
present system (monopolized management of roads) is distorting price signals in
such a way that it prevents the scheme from being profitable. If the latter, Ben should join the
libertarian call for freeing the road management industry from the grip of State
monopoly. If the former, I hope Ben
would agree that it should not be done at all (yet).
The general economic fallacy that Ben is making here is a
failure to recognize the costs involved in upgrading technology. Take a hypothetical. Someone invents a new type of X-ray machine,
which produces an image just slightly sharper than images from current X-rays
(this example is inspired by the movie The
Pursuit of Happiness). This new
machine costs twice as much to produce as the old X-ray machines. You are a central planner: should you dictate
the immediate replacement of the old machines by the new throughout your domain? Is it worth it? Think of all those old X-ray machines that
will be made obsolete by the new ones – they will go to waste. As always, the central planner is utterly
clueless about whether replacing the old machines is a wise or wasteful use of
resources. He has no price signals to
guide him.
On a free market, on the other hand, whether a new technology
is adopted, and how quickly, is ultimately determined by the consumer, and the
price signals that emerge from a system of voluntary trades. If the consumer is willing to pay twice the
price for a slightly better X-ray image, then owners of X-ray machines will
upgrade them; if the consumers are not willing to pay this much, the owners of
X-ray machines won’t upgrade them (yet).
This ensures that resources are neither 1) wasted through continual replacement
every time there is a small upgrade, nor 2) wasted through not being replaced
when valuable upgrades are available. As
always, the free market finds the optimal balance between these two
considerations. Unfortunately Ben seems
to think his supposedly ‘enlightened’ opinion is more important than the
opinions of individuals in society as a whole; he wants to speed up the pace of
technological change and upgrade technologies to the maximum, apparently without
any consideration of the costs involved.
Automation
(Again)
At 32:40, Ben says “We need to make an effort to embrace
automation”. This is an odd statement to
make considering the evidence he previously prevented showing that automation
is already happening very quickly, and has been happening since time
immemorial. He was worried about
so-called “technological unemployment” and even spoke of a coming “singularity”
concerning the pace of technological development. Ben appears to be worried about these trends,
but wants to accelerate them nonetheless, apparently.
He goes on to say that “It is socially irresponsible not to
employ the best, most safe, clean and efficient forms of production.” Unfortunately he does not define the term ‘socially
irresponsible’. If he means that it is a waste of resources to employ anything but “the best, most safe, clean
and efficient forms of production,” then that is clearly false. As explained above, it is not always the best
use of resources to embrace every small technological improvement and
continually upgrade machinery and methods.
It is often better for producers to stick to old machines for a while
before upgrading, and then possibly upgrade later when it is most efficient
overall for them to do so.
Jobs
Ben continues “The jobs aren’t coming back – stop chanting
in the streets – and nor would we want them to.” I applaud this statement for abandoning the
Keynesian view presented earlier that jobs-for-jobs-sake is a good thing. But it is still misleading. If the current system does not change (for
example, if the minimum wage is not abolished soon) then people will indeed remain
unemployed and requiring handouts. On
the other hand if free markets were to emerge, then people would be able to
find jobs. Although it would be nice
for everyone to be able to live without a job at all, as we have seen, we need
to eat, at least, and this requires production, and production always involves
some element of human labor – even if it is limited to the design, construction, maintenance or oversight of machines, as many jobs already are.
Thankfully, due to the relative freedom of the past two or three centuries (relative to what went before it), food and other basic goods are so incredibly
cheap today (despite rampant State interventionism returning in the 20th century) that it is possible for
most people to live a life mostly of leisure.
A lot of people spend their entire evenings and weekends at leisure: a
fact which should be celebrated, after millennia of everyone have to spend all
day 7-days-a-week toiling producing food.
And with increasing wealth in the future (provided freedom can emerge
from the coming breakdown of the State interventionist system), we can expect men to be able
to labor less and less going forward and still maintain a good standard of living. Of course, many individuals do and probably
always will choose to labor long hours, so that they can have an even higher
standard of living.
The fact of scarcity – and the need to eat – dictates that
everyone must spend some time producing
something, either for him to consume
directly, or to exchange with others for things he wants to consume. Anyone who does not produce something of value can necessarily only
survive on handouts from others, by the nature of things. The idea that people can live entirely without
laboring is utopian in that it assumes away the problem of scarcity, which is
what makes conflict possible, ownership principles necessary, and the idea of
“economizing” resources meaningful, in the first place. The promise of a world without scarcity –
where no one needs to work – is centuries old, having been promised by many
central planners and wannabe central planners throughout the centuries. Such a world can never be achieved, due to
the scarce nature of material things.
Decision-Making
At 33:10 he moves on to ask “how do we make decisions?” I am glad he acknowledges the importance of
this question, since it is the fundamental question of political
philosophy. At one extreme “we” could
have a highly centralised system of ownership, where a small group of central
planners control all of the planet’s resources – known as communism or
totalitarianism. At the other extreme “we”
could have a highly decentralised system of ownership, where each individual is
free to make decisions about resources and the structure of ownership is
determined voluntarily – known as libertarianism or voluntarism. What does Ben favor?
“So far we seem to vote for things, and we believe that that
is a decision, somehow. This needs to
change as well… We need to begin arriving
at decisions, rather than making
them… We vote in personalities who are not qualified for any scientific
understanding of social operation.”
As a libertarian, I won’t be defending democratic
decision-making within a monopoly system, but I note that Ben assumes without
argument that the people being voted in ideally
ought to have a scientific understanding of social operation. It’s unclear what he means by this. He gives the example of Ron Paul (who is arguably
is most learned man in politics in terms of the depth and breadth of
understanding of philosophy, economics and history) as a man is who does not
meet his requirement for scientific
understanding of social operation. Ben
points out that before Paul entered politics he delivered babies as his
specialization. Ben does not name any
individuals who do meet his
requirements, or even specify what his requirements are. A specialization like Ron Paul’s, plus great
knowledge of philosophy, economics and history, is apparently not enough to
qualify.
Is Ben looking for a superman – or group of supermen – to run
the world? An enlightened bunch who can
solve not only the economic calculation
problem faced by monopolies (see
Mises), but also the tacit knowledge
problem faced by monopolies (see
Hayek)? Ben seems to be unaware of
the importance of the division of knowledge (which is just as important as the
division of labor); it is impossible for any one individual or small group of
individuals to know all the relevant information they need to know in order to
make wise decisions about how resources are used. This is precisely why decentralised ownership
has better consequences than centralised ownership, and makes better use of
resources, no matter how ‘enlightened’ or ‘scientific’ the central planners consider
themselves to be.
When Ben asks how “we” make decisions in a ‘resource-based
economy’, it seems as though he does not mean all of us individually. He
is referring to a subset of enlightened technicians, of which Ben himself may or may not be a part, who will make the
decisions on behalf of everyone, based on 'scientific understanding'. I invite Ben to take a step
back and ask not how some undefined group (“we”) make decisions,
but who ought to be making decisions
about what, i.e. step back and consider what type of ownership works best, before making statements about how
owners should make decisions (i.e. ‘scientifically’).
It is particularly ironic that Ben would single out Ron
Paul, because he is just about the only politician who consistently tells us
that he does not want to run our
lives, does not know how to run our
lives, and does not have the authority
or moral right to run our lives, as
President. Paul actually agrees with
Ben that he lacks the knowledge necessary to ‘run the economy’ and to
centrally plan resource-usage. That is
his main point: no one has the
necessary knowledge. Mises and Hayek
explained why this must always be the case.
As Lew Rockwell said:
“I'm cheering on Ron Paul because he is exposing the nature of the whole
system. He is not running for president. He is running against the presidency
as it is currently understood.”
Designed
Cities
At 34:45 Ben talks about new cities designed
‘scientifically’, along the lines of The Venus Project, and renewable
energy. Just like with his cars that
drive themselves, Ben ignores the cost side of the equation. He sees only the benefits from achieving the
goal, not the costs involved to get there (this is the error Bastiat described in his essay What is Seen and What is Not Seen). If it really is a good use of resources to build new cities from scratch, or
produce energy from renewable sources – and it may well be – then it would be
profitable to do so, so it would be done, unless
such projects are prevented due to State intervention. So once again, it is not ‘the monetary
system’ that is preventing such visions being made into reality. It is either the State, or these visions just
don’t (yet) represent a good use of resources, as determined by society as a
whole demonstrating their preferences through making voluntary trades.
Conclusion
Ben’s video is described as “The case against money, and the
case for a resource-based economic system.”
Unfortunately, Ben does not define money, and spends most the time
criticising a particular form of ‘monetary system,’ a term he also leaves
undefined. Ben criticises the current
system of fiat money, fractional reserve banking and rampant State
interventionism and monopolisation, and assumes that his conclusions also hold
true of all other ‘monetary systems,’ even free markets, where there is no fiat
money, no fractional reserve banking, no State interventionism and no State monopolisation!
Ben’s goal is to move towards a situation of increased
central planning by an enlightened group of men with ‘scientific understanding
of social operations’. The goals and methods
of the Zeitgeist Project are remarkably similar to the goals and methods of the
global elites identified in the first Zeitgeist film: global governance of
resources, scientifically managed by an ‘enlightened’ group on behalf of
everyone else, with the promise of abundance for all.
To echo what Ben said at the end of his talk (40:12) about
the ideas in the Zeitgeist films, I consider myself lucky to have been exposed to Austrian economic ideas and libertarian
principles, and I humbly offer these ideas to Ben in the hope that he and
others will explore them further – a good start would be Henry
Hazlitt’s Economics
in One Lesson and Murray Rothbard’s For a New Liberty. Central planning does not and cannot work,
and should be rejected and consigned once-and-for-all to the scrap heap of
history.
I invite Ben to respond to my critique and hope that my comments move the great global conversation forward.
