Thanks; not only did I really enjoy reading this, I also think it deserves to be published in major news papers. In some of my latest articles in Akal & Kehendak journal that I maintain I penned that the lessons of today’s America as well as the ‘official’ solutions taken by its government also serve as psychological as well as intellectual pressures to other countries. If laissez faire still remains grossly misunderstood after all this time and on land where it was exemplary, imagine its confusion and defamation in so-called “developing” countries like where I live now.

This article is right on point, summing up my feelings exactly. I thought that with the fall of the Soviet Union the world would finally begin waking up to the truth about capitalism. But apparently, most people haven’t yet learned their lesson about the harmful effects of democratic socialism, i.e. democratically increasing government intervention by degrees in an otherwise capitalist economy. If people believe that the government can “fix” alleged problems with the economy (as the great majority believes), then every fix they attempt will lead to two more problems requiring two more government fixes. This process continues until they’ve fixed themselves into full blown socialism and/or economic collapse.

Thank you professor Riesman, you’ve written yet another great article. The commonly held belief that we live in a laissez faire society is a particularly pernicious myth. This is because periods of economic crisis usually lead to drastic social changes. (For example: the Panic of 1907 played a large role in the founding Federal Reserve System and the Crash of 1929 led to the policies of the New Deal.) When most of the citizenry is convinced that our current system is laissez faire, then periods of economic turmoil inevitably results in the citizenry calling for more government. Drastic social changes will occur in the wrong direction towards a more socialistic society. The citizenry would call for less government if they’d realize that our current system is anything but laissez faire. If the citizenry would grasp the fact that we currently live in a socialist society, perhaps this current crisis would act as a catalyst leading us away from socialism and towards laissez faire. This would of course lead to more prosperity and freedom for all.

I can’t help but commenting on this hillarious article for a second time. It is just too good.
The style is outstanding. The sense of humor, the choice of sarcastic phrases and examples made me laugh in front of the computer and on the Caracas subway a while ago on my morning commute. At each subway stop, those huge red letters on the wagons advertise “Socialism of the 21st century means progress”. I kept smiling when I thought that the author of this article, when he enters a train at his city of residence in the U.S., somehow he manages to see exactly those same huge red letters even if they are not in red font print yet.
Please do not blame all journalists. I know of many, especially in countries oppressed by explicit socialism, who share your views on mainstream media lobbied by government media which confuse laissez-faire and the savage capitalism with rampant government theft. Many of them I am sure would love to get in touch with you or know that views such as yours do exist.

Um, can someone fix the extra “Is” in the title of the full article? I want to link to it in response to an article that specifically blames laissez-faire for the crisis: http://www.tulsaworld.com/opinion/article.aspx?subjectID=65&articleID=20081003_65_A13_Recent542857
Thanks!

A good link give any socialist who thinks this was a failure of the free market. Thanks,

One other thing, the bailout of LTCM in 1998 always bothered me. By having the Federal Reserve cover all counter-party risk, it basically punished investors who bothered to be prudent on their derivatives holdings, and hurt companies who bothered to research the credit worthiness of counter-parties. I don’t think it’s a coincidence that derivative usage expanded recklessly since then.

First of all, thank you Prof. Reisman for beating the drum of liberty.

“Very few of the professors and their students have read so much as a single page of the writings of Ludwig von Mises, who is the preeminent theorist of capitalism and knowledge of whose writings is essential to its understanding. Almost all of them are thus essentially ignorant of sound economics.”

Well said. At its core, economic myths rely on ignorance and continue persist by a public that acquiesces on matter of liberty. We all know what’s really going on with “Joe the Plumber” in the media. Here’s a guy who dared to challenge a politician on one matter of liberty: taxes. And it is Joe that bears the ire of the majority of the media. Never mind that they are protecting their guy for public office. We are witnessing liberty under attack yet again. He mentions “socialism” then the gloves come off. Joe is treated as a pariah or fool by the late night comics and daytime pundits. What he is…a hero of liberty.

Hi, I’m from the government and I’m here to help you. The funny money boys are running things. They started the forest fire and blamed it on the trees. Now they are hosing the fire down with gasoline and they are not going to “stand down” until they run out of gasoline or forest.

But as I write this that pretty yellow metal is so cheap and is waiting to preserve my capital. Eventually doctors of old gave up using leeches and bleeding patients for almost every ailment. One day these dummies just got to wake up.

Laissez-faire is really dead. See my reasoning:

Nowadays war is peace and
socialism is communism
capitalism is socialism
and therefore laissez-faire is nowhere to be found.
It must be dead!

Just to illustrate the perverse use of libertarian words, I am associated with a government military project that uses computer simulations to train officers. There is a new concept called laissez-faire combat – talk about military inteligence oxy-morons.

The concept has something to do with letting multiple network connected simulations each compute death and destruction counts on their own, reconciling later. I guess since it frees up one simulation to proceed by approximating the network wide totals that this justifies the use of the term.

Thankfully it seems unlikely that someone will fit some tortured phrase to an acronym using the letters in laissez-faire – another very popular gimmick found in the belly of the beast.

For years the government has maintained the myth that l.f. capitalism has existed in the USA. It was convenient to assert the contrast with the former Soviet Union so as to maintain the existence of the Cold War. With the take over of banks by governments around the world and bailouts of companies by governments the cat will be out of the bag as the inefficiencies of government control and operation of business becomes apparent under this command and control economy. One can only wonder what the ministers of propaganda will come up with next in explaining government failures.

Champions of Marxian theory, which is incorrectly and pejoratively characterized as Soviet-style central planning, suffer the similar fate as anarcho-capitalists, whose laissez-faire philosophy is incorrectly and pejoratively characterized as Reaganomics.
Both camps claim that “true” communism and “true” laissez-faire economics have not been realized. Ever.
The leftist who are confronted with the fall of the Soviet Union claim the fascism and repression under that regime was a perversion of Marx’s theory.
The conservatives are confronted with the Reagan-years’ credit spending and 1980s deficits. This was a return to small government??!

Both sides then seem to live in a fantasy world, hoping they can arrive at the (sorry for the adjective) utopian end game. Fair enough. And I’m on the side of sanity (i.e., not the Marx side).

Trotting out the Panic of 1909, and Hoover’s tariffs, and “WWII, not the New Deal(!) got us out of the depression…..,” and mandates for high-risk borrowing in Fannie-Mae, are all sound criticisms/arguments. That is what the libertarians must say to counter the “You had your chance with Reagan, Bush and Bush.” But at the end of the day, people live in the real world; i.e., we are where we are, and there are a ton of regulations, and they gain weight every year, and it expands with every Administration. Anywaym, I think it does; is this true? (I’m seriously asking) Has this been QUANTIFIED IN METRICS? People don’t want to hear a George Will-ian meandering historical anecdote. People need sound bites. Sadly, the talking heads on This Week, and Hardball, and even Greenspan himself (didja hear him today? Gawd!!!) state that there was deregulation and it ended in disaster.

For many others, the arguments are simpler:
“There was deregulation under Bush.”
“No there wasn’t.”
“Yes there was.”
“No there wasn’t.”
Cripe…..

How about a number? How about an objective figure, normalized for evolving populations, that shows how much regulation has been instituted, over time in our society? How about a relationship between government spending (which rises eternally) and numbers of regulations?

Then, a harder challenge:
How do we get out of it? Oh, if we just wipe away the spending, all will be right with the world, because what we need is “true” laissez-faire capitalism. I’m talking true, never-been-really-tried-before — wow, that campaign cry will go over big. (Sarcasm, folks).
Anyway, what is the roadmap to scaling back the government to 1% of what it is today? Who goes first? Which cabinet position is removed first? Which entitlement is trashed tomorrow? Which policy is stamped out immediately?

The entrenched bureaucracy is immovable, and growing. And I see no (and I mean no, none, nada) movement toward liberty.
Believe it or not, I’m an optimist. I believe there is an answer, which doesn’t include building Oceania in the middle of the Pacific, nor a nuclear disaster causing us to start all over.
But where does it begin? Which special interest will be the first to ante-up. And who after that? And after that?

I just don’t see the acceptable and politically feasible roadmap to get there. Nor, I fear, does anyone else.

Cheers.
F.

The small government Republicans (5 trillion in fresh debt +/- 1 trillion USD) are giving up on the election because they know that whoever gets elected will be a one termer regardless.

They are throwing John McCain under the bus because 1) he is to dumb to recognize that, and 2) he will be too old in 4 years and what better time to “vett” a governor from a state little known on the national stage for the reclaimation of the throne in 2012 by blaming the whole mess on the Democrats.

The Free Market has nothing to do with our current predicament, a classic liquidity trap, but this time we have dragged almost everyone else in with us. Hmmmm they sent us products and oil, we sent them paper. Who will run out first?

Palin’s the one: doesn’t know too much, doesn’t want to know too much, perfect for triumphant return to power in 2012 over what little will remain of Pax Aemricana. What a minute isn’t that what we did in 2000? How did that turn out? Victory Gin for everybody.

And Franklin pleads optimism!

Where is this optimism?

That being said, Franklin is painfully on point.

“I see no anger, no reaction, no indignation by true capitalists on any of the pop culture news shows. Where did they go?”

I suggest manufacturing some. Telegenic, articulate Austrians, able to speak fluent Soundbitese. Teach them Stanislavsky’s method, get them into flicks. Get them on the talk shows, clad in rumpled red Mises shirts beneath sleek, sharkskin suits. Courtside at Lakers games in, say, Luskin’s anti-Krugman hoodie. Mic check Austrian econ like Leonardo drops Global Warming cliches. Start an econo-punk band. Make it a pop culture phenomenon, like Che t-shirts.

I’ve been preaching this approach for years. Sorry to be a broken record. That’s how it works in a media-saturated culture.

Many thanks to professor Reisman for this clear and powerful refutation of the swirling confusion (and distortion) that permeates contemporary notions about economics.

Robert Brager said:

“And Franklin pleads optimism!

Where is this optimism?”

I suppose that in comparison to me he can be considered an optimist. I’m the pessimist.

Everybody in this country wants less government, but only if that means they get fewer of the programs they don’t like and more of those they do. Libertarians who refuse to believe that freedom ever existed in this country will never reach a position where we can reach the masses, since nobody wants to hear the truth. Telling an American that he isn’t free is like telling a religious man that there is no God, and he will fight tooth and nail to make you take that statement back.

Humans in general lack the intellect necessary to understand exactly how damaging the results are when you try to redesign the human race by force. I really don’t see any point in arguing with anyone about it anymore because I may at best convert about 10 people to the side of liberty by the time I die.

I say we should just go ahead and vote for the most statist maniac we can find in every election. Then we can all watch modern society collapse around us quickly, with one of two results:

Possible Result #1: Society collapses, and having no freedom left to blame it on, people finally decide to give real freedom a shot. With the guidance of the accurate prices and the profit motive, the world returns to its former prosperity within a decade, with chronic hunger and perpetual war fading away within a generation.

Possible, and more likely Result #2: Prosperity declines rapidly, and every government on earth blames the other governments as well as every domestic dissenter. World war breaks out and industry degenerates to the point where all that is produced is weaponry and just enough food to keep the workers and soldiers from dropping dead. I and everyone else who has posted on this forum gets arrested for sedition, and sent to a factory to produce guns and bullets until we get too tired to keep doing so. At that point, we will be shot with them.

In either scenario, the pain stops sooner than it would if we keep preaching to those who willfully ignore us.

I’ll be voting Lucifer 2008. God has clearly been asleep ever since the seventh day.

It’s a tough road to hoe, arguing for tiny government. And tough to be optimistic. But we must. Most people do not want to hurt others. Most people do not see spending tax money as theft. It’s for a “good cause.” Oh, well.

Years ago I was the chairman of the municipal budget committee in a small NH town, which decades prior had championed itself on age-old Yankee self-sufficiency, low taxes, individualism. Yeah, all that quaint stuff. Probably due to my own ineptitude, I was unable to curb the tide of expanding government — even in a measly town of 4,000 people. Months before the Town Meeting, argument after argument was heard for higher spending; the Budget Committee was overwhelmed by the needs of the citizenry, articulated through the cold winter months by all the different local committees, in the rinky-dink brown-paneled basement of the Town Hall. The School Committee, the Animal Control officer, the Road Agent, the Volunteer Fire Department….. one committee after another needed stuff. And most of the stuff received support from the majority of the Budget Committee; a majority of the seven Budget Committee members usually voted “Aye.”
Cops needed more bullets (as if we were in the Wild West or something), a new skating rink for the Recreation Committee, more money for Special Education (can’t touch that one because it’s State mandated and non-discretionary). At the hearing, I had proponents of the spending tell me about dire consequences to the town if we failed them.
Finally, on a sleeting day in March, the gymnasium was packed. The citizenry came out for its annual Town Meeting….

‘course the police chief’s pal on the Rec Committee talked about how the police needed to be well armed because they found some nutcase last Summer with an Uzi. Then a few minutes later, the Police Chief got up and said we needed the Rec Committee skating rink fence because this was a “children’s safety issue….” Safety was always a powerful term in a town with an increasing young-family population.

One final chance, I thought. The Warrant articles were argued, and (gulp) all passed, now it was time to move the entire budget. The citizenry would see how per-capita spending was out of control.
Skies were darkening, and Saturday evening was calling. Most were happy the three hour ordeal was nearing an end. I stood up, as Budget Chair, and said, “Ladies and Gentlemen, we will need a motion for the remainder of the Budget. Please note that this year’s budget reflects a….” (and I slowed my words and emphasized carefully) “… a forty-nine-percent, that is a four-nine percent INCREASE over last year.”
The audience of about 300 groaned. Some gasps were heard.
The Road Committee chair stood up and said, “Motion to accept.” A second was then heard. “All in favor?” asked the Moderator. Ayes throughout the gymnasium. “All opposed?” A couple of disgusted murmurs. The mallet came down and the meeting was over.

On the way out, a couple of the old Townies walked over to me and said, “In the past decade this town has gone from the most frugal to one of the most expensive.” I nodded in acknowledgment. They looked tired as they shook their heads.
Nobody wishes to do evil. Nobody views higher spending as taking from your neighbor’s wallet. It’s not in malice. People believe that a growing government is needed, because things are “more complex nowadays.” My oil delivery man walked to me and apologetically said, “Hey, I hope you understand, I wasn’t trying to argue with you. I just thought the skating rink was a good idea…” The Rec Committee chair wouldn’t even look at me. Her husband was right there, though, a good guy, shook my hand and spoke my words for me: “No hard feelings at all; we all understand this is the system and the process….”
Yup. The system and the process.
Anyway, the police chief and I usually got on pretty well, even though he saw me as a stingy SOB. Luckily he didn’t remember that years ago, long before my Budget Committee days, I was the guy who the wrote an Op Ed piece in the State’s major newspaper about Halloween. Halloween?? Yeah, I was bitching about the fact that Police chiefs in NH were designating the day of the week and the time for Trick or Treaters to go door to door. They usually set it to a Sunday in the early afternoon. You see, without the government, we might go out on the night of October 31, when it’s dangerous and dark. Safety issue and all that.

Cheers.
Franklin

Robert, Franklin,

It was fun reading you both. I think I love austrian economics for exactly the same reasons as you, Robert.

Sadly, I think the laissez-faire proponents have only themselves to blame for not being popular.

Of course they’re right about almost everything, as we all know, but they have no sense of marketing, are pathologically unable to lie and manipulate people, and seem to expect every listener to be smart and open minded.

Even worst, some of my LF friends are openly pleading for things like the privatization of the police; are seeing Marxism everywhere; tend, for some unknown reason, to hate with much more passion leftists than conservative (this is probably what I have the most difficulty to understand: while I’d say that both liberals and conservative are against LF, at least most liberals have brains and are able to hold a decent conversation, and many LF are former liberals); are obsessed with guns…

Basically, to the average Joe and Jane, they look like scary radicals, paranoid gun-toting nerds…

Franklin and others:

Doctor Reisman’s analysis is correct. As a man of limited means, I want to point out a few things about government services:
1) Our Government have a keen knack for creating all sorts of agencies to help people and then not funding them.
2) Having a minimum wage law actually causes people to *not* be hired. My experience is that it has been the practice of my past employers to lay off some of the minimum wage workers and then have the rest work overtime, to make up for the reduced manpower.
3) Subsidizing public transportation actaully makes it more expensive. In the small town I live in, the city government subsidizes the bus service by means of a sales tax. Since the ridership is so low, the cost per bus rider is really high.

The tragedy of Austrian Economics is that most American citizens will realize that it is true too late. By the time they realize they have been “had ” by the government, it will be to late to undue the damage

Economic Hell is realizing the truth too late.

Professor Reisman writes:

“[6] If the creation of checkbook money in excess of currency holdings is in fact an attempt at cheating, as I described it earlier, then it follows that a free market would actually require a 100 percent reserve.”

Would someone please explain the exact mechanism by which fractional-reserve lending (via checking deposits) would be prevented under laissez-faire?

The die-hard communist: There is nothing wrong with the idea of communism as such, it has just never been implemented properly. If it were ever implemented fully and correctly, rather than the flawed and impure implementations that have been tried so far the world would be a utopia.

The die-hard capitalist: There is nothing wrong with the theory of laissez-faire capitalism, it has just never been implemented properly. If it were ever implemented fully and correctly, rather than the flawed and impure implementations that have been tried so far the world would be a utopia.

George,

Thanks for posting a great article, which embodies much of what I believe in. I have a comment (which in no way contradicts the main thesis of the article but that I hope will add nuance to it) in the paragraph that refers to the media:

“As I say, this, and more like it, is the intellectual framework of the great majority of today’s professors and of several generations of their predecessors. It is equally the intellectual framework of their students, who have dutifully absorbed their misguided teachings and some of whom have gone on to become the reporters and editors of such publications as The New York Times, The Washington Post, Newsweek, Time, and the overwhelming majority of all other newspapers and news magazines. It is the intellectual framework of their students who are now the commentators and editors of practically all of the major television networks, such as CBS, NBC, ABC, and CNN.[9] And it is this intellectual framework within which the media now attempts to understand and report on our financial crisis.”

I propose that it is not necessary for media outlets to be Marxist for their content to be what it is. Media outlets are businesses like any other and are looking for content and rhetoric that will maximize their audience and thus the value of their on-air time. From that perspective, it appears to be the audience that prefers to hear Marxist content along with inflamatory rhetoric – and this is probably a tougher problem to deal with than if Marxism were confined to journalists and editors. Further, in the latter case, there would be a business opportunity in owning a media outlet that broadcast libertarian views. Thoughts?

Cheers,

Rodrigo

And we enlightened 21st century folks look back at the era of witchcraft and wonder how such ignorant beliefs could take hold – it’s difficult to even imagine the stupidity of those medieval morons.

Such silly ideas could never take hold today. After all, we live in a modern free market society. In order that we remain free, we need to help the protectors of freedom find all the blasphemers and burn them at the stake before all the world is infected by the false religion of capitalism.

Show them the instruments of truth!