Posted tagged ‘Patrick Barron’

Private Property vs. Collective Ownership: One Deals With Scarcity Better Than The Other

November 5, 2015

The first rule of economics is scarcity. There are not enough resources to satisfy peoples desires. Economic systems don’t create this scarcity, it is the natural state of our world. The two questions that economic systems have to answer are, 1) How can limited means satisfy unlimited wants? 2) Which economic system does a better job of dealing with scarcity?

Private ownership of the means of production is the definition of free market capitalism. State ownership of the means of production is the definition of socialism. The economic system that exists in the U.S. today is not free market capitalism. It is a system hampered by Government rules, regulations and taxes. These Government interventions take decisions about the means of production out of the hands of private owners and places them in the hands of bureaucrats.

No economic system that exists today is purely free market or centrally planned. Since change is constant, the direction an economic system is moving is what is important. So economic systems are either moving toward collective ownership or toward private ownership of the means of production. Or as F. A. Hayek said, “moving toward serfdom and poverty or freedom and plenty.”

 

PRIVATE PROPERTY DEALS WITH SCARCE RESOURCES

In this article titled, Why We Need Private Property To Deal With Scarce Resources, Patrick Barron does a great job explaining how private property deals with scarcity better than collective ownership. Here are some excerpts from the article.

The existence of scarcity is true of all resources (such as time, human energy, and natural resources). However, it is not necessarily intuitive that allowing scarce resources to be owned privately is the solution to this problem.

Consequently, socialism appears attractive to many and they turn to having all resources owned collectively for the “common good.” Unfortunately, a society which spurns private property…. often learns the terrible lessons of central planning and the tragedy of the commons (i.e., commonly held resources will be plundered to extinction)

Throughout history, most of mankind has been divided into a hierarchical system of masters and slaves with some gradations between the two extremes. The masters…. devised complex rules-based systems for resource distribution….. And ultimately, these plans depended upon pure terror for enforcement. But this so-called solution to the problem of scarcity — restricting the people’s liberty through the use of force — does not work.”

Problem 1: We Can’t Economize Without Effectively Ordering Our Preferences First

“.… Modern economics explained that without private ownership of resources, there was no mechanism for observing or acting on ordinal preferences in which persons prioritize desires from highest to lowest. Without a way to allocate goods according to ordinal preferences, there is no rational means to economize for the betterment of society.”

In other words, without markets and prices, there is no way to know what people really want or need, so the masters never really knew what to order the slaves to produce, what technical means to use, what alternative materials to use, the quality desired, or how much to produce. Thus, the commissars of the Soviet Union ordered the production of inefficiently produced, shoddy goods. The Soviet empire collapsed, despite the fact that Russia is blessed with vast natural resources and an industrious population.”

Problem 2: Few Raw Materials Are Ready To Consume

A second fatal problem with common/government ownership of resources is that few readily available, consumable resources actually exist. There are no resources on the planet that do not require at least a minimum of effort to transform into a consumable product……Of course, most natural resources require much more effort to convert to consumable products, passing through many stages of production.”

…. Consider a hiker lost in the wild. It matters not at all to him that great stands of timber lie within easy reach or that valuable minerals lie under foot. These natural resources require great effort over very long time periods to be converted into something consumable….. A lost hiker does not have the knowledge, time, or previously produced means to convert these basic resources into consumable products to ensure his survival. All this is far beyond anyone’s autarkic abilities.

Now let us assume that someone did harvest trees by felling them, transporting them to a lumber mill, milling them, storing them in a ventilated and dry place for many months before kiln-drying them….. advertising their availability to contractors, keeping sales records, sending out bills, and collecting the bills, only to have a socialist call him a plunderer and confiscate his lumber for free distribution to whomever the masters deemed to be politically advantageous to their continued privileged position. No one other than the favored cronies of government would ever harvest another tree….. production of usable lumber would be monopolized…. prices would increase and quality would decline. Moreover, with no voluntary market at work…. there would be no means of knowing if these resources were being used in a way valued by those who valued them most.”

Problem 3: We Need Private Property To Build Capital

Without the ability to profit from privately owned property, there would be no incentive to provide or withhold capital for any endeavor. Also, a system of private ownership is necessary to determine if that capital is being used in a way the consumers value. The consequences of ignoring this fact of economic science is most evident today in China’s ghost cities, where resources, both natural and human, have been expended for no observable benefit except to advance the careers of politicians….”

The opposite case of resource waste comes from special interest groups…use the state and prohibit exploitation of resources by private individuals…. modern environmentalists have convinced the political class that most progress is unsustainable, dangerous to our health, etc… Society is prevented from benefiting from their conversion to consumable products. The poor suffer the most from these policies as the prices of raw materials — and thus finished consumer goods — are driven up.”

“Private ownership insures that valuable resources will never be plundered to extinction, because their value will have been capitalized. Instead, private owners will seek to make resources as widely available as possible without endangering the long-term prospects for future harvesting of resources. The process of determining a resource’s capitalized value is impossible absent free-market capitalism with strict defenses of property rights.”

Despite both the theoretical and empirical evidence to the contrary, socialists tell us the opposite; i.e., that state ownership of all resources will prevent their plunder and ensure prosperity for all. As Ludwig von Mises explained, though, socialism is not an alternative economic system of production. It is a system of consumption only, and a system of economic ignorance and economic plunder.”

Related ArticleMilton Friedman -Socialism Is Force!, at austrianaddict.com.

Related ArticleWhy Socialism Won’t Work? Human Nature, at austrianaddict.com.

Related ArticleWealth Can’t Be Redistributed If It Doesn’t Exist, at austrianaddict.com.

Must Reads For The Week 8/2/14

August 2, 2014
The pen is mightier than the sword...

 The pen is mightier than the sword… (Photo credit: mbshane)

Happy 102nd Birthday Milton Friedman, by Mark J. Perry, at aei-ideas.org. Although not a favorite of Austrian economists, reading his book Free to Choose started me on the correct road. This article has many great quotes, like this one: President Kennedy said, “Ask not what your country can do for you — ask what you can do for your country.”… Neither half of that statement expresses a relation between the citizen and his government that is worthy of the ideals of free men in a free society. “What your country can do for you” implies that the government is the patron, the citizen the ward. “What you can do for your country” assumes that the government is the master, the citizen the servant.

The Invisible Hand Of Government, at libertypenblog.blogspot.com. More Milton Friedman. Short video about incentives that exist in the market vs. incentives that exist in politics. It is our fault government has taken away so much individual freedom. We are the only ones who can restore this freedom, it can only happen from the bottom up.

More Evidence That Competition Breeds Competence, by Mark J. Perry At aei-ideas.org. Because Uber and Lyft are providing quality service to customers, Taxi companies are losing business. As a result cab drivers are taking a Hospitality Management program at South Seattle College. Consumers win in a free market, businesses win in a crony capitalist system.

DC’s Gun Restrictions Takes One Between The Eyes, by Ross Kaminsky, at spectator.org. Gun grabbers will be going crazy over this ruling.

The Worst Comment On Economics That You’ll Read All Day, by Chris Rossini, at economicpolicyjournal.com. Washington Post Columnist E. J. Dionne said, “..curtailing SNAP would be devastating…. food stamps also offer an immediate economic stimulus at moments when the economy is losing purchasing power“. Money that is taken {stolen} from me and given to another person doesn’t stimulate the economy, it merely transfers purchasing power. As Chris Rossini says, “Does theft now provide “economic stimulus”? What an interesting point of view. Remember that if you’re ever confronted by a mugger on a city street. His stealing of your money provides an “immediate economic stimulus”! He should be praised, and not cast as some sort of villain! You’re the villain should you seek to curtail him.”

What’s Wrong With Global Warming, by Greg Morin, at economicpolicyjournal.com. The “settled” science on global warming is becoming a bit unsettling for the true believers, because reality isn’t cooperating with what their scientific models have been predicting.

DHS Seizes Land Rover Over EPA Regulations, at foxnews.com. The lady in this video is in disbelief that something like this actually happened. She sums it up saying,  “I’m surprised that someone can come in and take your property“. Read article here. Can we all agree that this an example of Government being to big. They stole her vehicle, under the protective umbrella of EPA regulations. Things like this can’t happen to you; can they?

Cartoon Explaining Israeli-Arab Conflict, I saw this at tammybruce.com. This is a good, for a more in depth explanation read previous post, Define Winning and Losing In The Israeli-Arab Conflict.

Six Current Economic Myths And Realities, by Patrick Barron, at patrickbarron.blogspot.com. Austrian economist Patrick Barron lists six economic myths that the main stream media reports as truth.

Must Reads For The Week 7/26/14

July 26, 2014
The pen is mightier than the sword...

 The pen is mightier than the sword… (Photo credit: mbshane)

‘Guns Are Welcome”  At One Restaurant, Bucks A Trend, by Zach Noble, at theblaze.com. After seeing a story about a restaurant being robbed two days after posting a ‘No Weapons Allowed’ sign; Sharma Floyd posted a ‘Guns Are Welcome’ sign at her restaurant. The result was an increase in business.

Psych Patient Shoots Two At Hospital, Doctor Returns Fire And Stops Shooter, at philly.com. Here is an excerpt from the article, “It was not clear why Silverman, a doctor for nearly 25 years, was armed at the office. Bernice Ho, a spokeswoman for Mercy Fitzgerald, said Thursday it was against hospital policy for anyone other than security guards to carry weapons.”  Yeadon chief of Police Donald Molineux said Silverman, “without a doubt saved lives.”  Thank God Dr. Silverman disobeyed hospital policy and had a weapon. I bet it’s a 50/50 chance the Dr. will get in trouble for breaking the rule, because the anti gun crowd lacks any common sense.

White House ‘Quietly’ Exempts 4.5 Million People In 5 “Territories” From Obamacare, at zerohedge.com. American Samoa, Guam, Puerto Rico, Northern Marina Islands, and Virgin Islands were exempted from Obamacare because the cost of health care in these U.S. Territories was rising due to Obamacare. How can a State become a territory of the United States? It seems to be a much better deal.

To Make Elite Schools ‘Fair”, City Will Punish Poor Asians, at economicpolicyjournal.com. The admission process at New York’s specialized High Schools is being challenged by the NAACP in a civil-rights complaint against competitive admissions testing that has been around for 70 Years. The group that will be hurt most will be the growing  poor Asian-American immigrants whose kids do very well on the tests. When will these social engineers understand that people’s abilities can’t be made equal. You can’t produce a photo finish in a race by starting slower runners in front of faster runners, or by making faster runners wear a weighted vest. Can’t the social planners let each individual succeed or fail to whatever degree he chooses to define success or failure? Read the C.S. Lewis quote in my quote section.

The Administration Wants Economic Patriotism From Companies Dodging Taxes, at lasvegassun.com. Here is an excerpt from the article. “The President demanded ‘economic patriotism’ from U.S. companies who use legal means to avoid taxes and regulation through overseas mergers. “I don’t care if it’s legal”, Obama said, “It’s wrong”. The corporate tax rate in the U.S is one of the highest in the world. Of course these companies are going to try to legally pay as little tax as possible just like every other red blooded American does every April 15. The treasury is estimated to lose $17 billion over the next decade if the policy continues. That’s not even $2 billion a year, which is nothing compared to the Feds open market money laundering policy of printing 100’s of billions of dollars and purchasing government debt.

Man Chocked To Death by NYC Police For Selling Illegal Cigarettes, by Liz Klimas, at theblaze.com. and Young Girl Assaulted by Three Cops For Breaking Curfew, at libertypenblog.blogspot.com. The breakdown of the rule of law starts when our politicians and bureaucrats don’t have to comply with the law. As a result citizens are not as willing to comply with orders given by people in positions of authority who are lumped in with the bigger group of political and bureaucratic law breakers. Situations like these result in citizens having less trust in cops, and cops having less trust in citizens. You’ll see more and more of this if Government, laws, and regulations aren’t rolled back. On a side note, shouldn’t the President be in front of the cameras saying these cops “acted stupidly”, like he did when his friend, Harvard scholar Henry Louis Gates Jr, was arrested by police (read here)?

Three Kansas City Cops Stop To Play Pick Up Game, After Seeing Boys Playing Hoops In Street, by Jonathon M. Seidl, at theblaze.com. Since I just blasted cops, it’s only right that I post this article. I’d like to think most cops are probably like these guys. Where are the  Andy Griffiths.

My Letter To The Financial Times, London re: Eurozone Needs Quantitative Easing, by Partick Barron, at partickbarron.blogspot.com. Patrick Barron torpedoes a few myths about the benefits of Quantitative Easing in one short paragraph.

Bordering On Madness, by Thomas Sowell, at jewishworldreview.com. Thomas Sowell’s analysis of the border situation, immigration policy, and cultures. This is Dr. Sowell at his best.

General Patton’s Summer of 1944, by Victor Davis Hanson, at victorhanson.com. I’ve always been interested in WWII because my Uncle was in the 82nd Airborne. He fought in the D-Day invasion, Operation Market Garden, and the Battle of the Bulge. This article brought back some memories of my Uncle, and of the movie Patton which, came out when I was in High School.

 

 

 

Must Reads For The Week 5/24/14

May 24, 2014
The pen is mightier than the sword...

 The pen is mightier than the sword… (Photo credit: mbshane)

Net Worth Of College Grads With Student Debt Is 20% Less Than High School Grads With No Debt, at zerohedge.com. We’ve been told that a college education is an investment in the student’s future. In reality a college education is simply a redistribution of a graduates present and future labor to the federal government who gave them the loan, and the college who received the loaned money. It’s similar to what happened in the housing bubble. But in this case, the university gets the immediate payment, and the Government gets a steady payment of interest, and principle which was probably electronically printed counterfeit money. Read, Young People Get Hooked Into Huge Debt When They Take The Student Loan Bait, and also, Follow Up To Student Debt Post.

Obama Administration Using Scare Tactics To Discourage Government Whistleblowers, at economicpolicyjournal.com. The most “transparent administration” doesn’t want the whistleblower to show what is behind the curtain. Politicians and bureaucrats want to be able to see everything we do, and hide everything they do, unless of course it can be used for political gain.

Mark Cuban: “I’m Bigoted In A Lot Of Different Ways, at economicpolicyjournal.com. You discriminate against everyone else when you choose certain people to be your friends. You discriminate when you choose which person to marry, which plumber to use, which players to keep on your basketball team, which restaurant gets your money. All of us discriminate daily.

Michelle’s: “Eat What I Tell You” Program Is Crashing, at economidpolicyjournal.com. Excerpt from the article, “Local nutrition directors are demanding more flexibility and freedom. Look no further than school districts in Los Angeles and Chicago.” If local directors want more freedom to make decisions, that must mean that The Health Hunger Free Kids Act took away these freedoms when it was passed. Every Government rule takes away individual freedom. In this case it’s the freedom to choose what you want to eat, and the freedom to provide what people want to consume.

Jaguar Attacks Crocodile, this video is unbelievable.

Super Cell Time Lapse 5/18/14  Wright to New Castle, WY. at Basehunters Chasing. Truly amazing video of a super cell forming and dissipating.

The Next Obamacare Scandal: A Taxpayer – Funded Bailout Of Insurers, at zerohedge.com. Now we know why insurance companies were for Obamacare. They were going to be the next, “too big to fail industry”, that would be bailed out by the tax payer. So let me get this straight, our insurance premiums go up, and we also have to pay for the insurance company’s potential bailout. The Affordable Care Act isn’t really affordable for us.

Housing More Unsound Now Than During The Last Bubble, at zerohedge.com. The Fed has been buying mortgage backed securities for some time now. They are taking bad paper off the market and hiding on their balance sheet. This has cleared the way for another round of bad mortgages to be created. The Fed is a one trick pony and that trick is electronically printing counterfeit money. Read Housing Recovery, Or Just Another Bubble.

Why Central Bank Stimulus Cannot Stimulate An Economic Recovery, by Patrick Barron, at patrickbarronblogspot.com. This is a really good article and will be our heavy lifting for the week. Here are excerpts  from the article, “…Keynes tried to prove that production followed demand and not the other way around……. Keynesian aggregate demand theory is nothing more than a justification for counterfeiting. It is a theory of capital consumption and ignores the irrefutable fact that production is required prior to consumption….The consequence of this violation of Say’s Law is capital malinvestment, the opposite of the central bank’s goal of economic stimulus. Central bank economists make the crucial error of confusing GDP spending frenzy with sustainable economic activity. They are measuring capital consumption, not production.” 

I saw these two pictures at libertariangirl facebook.

Photo

 

Hal Redden's photo.