When Libertarians Do History…

When Libertarians do history, it is a mess most of the time. Typically what ends up happening in the work of some libertarian scholars is some kind of conspiracy theory of the mainstream trying to hide the truth, and usually these things turn out to be assertions. Nothing but statements without evidence and this is bad. Case in point is the lecture by Jack Chambless on Alexander Hamilton.

Starting at 0:13:10 Chambless says :

In the Federalist Papers, it appeared much of what Hamilton wrote was in support of a limited government, and warned the American people of a government that was given too much power, but before the ink on the parchment was dry, Alexander Hamilton took a completely different course to undermine everything what limited government was supposed to stand for…

Alexander Hamilton was a genius in that the only way he could ever achieve the objective of a monarchy… was to have a Constitution ratified filled with enough clauses that could be interpreted by future governments in their own way so as to slowly bring about the objective that he wanted to achieve. The five hour speech failed to established anything that he wanted done in the Constitutional Convention. So why not support the Constitution as its written and then bit by bit, whether it was in support of Supreme Court justices, or the support of the Bank of the United States. Why not go bit by bit if you can’t get it all done.

I am not really sure what Chambless means by ‘limited government’ so I can’t really go ahead and rebut this claim that The Federalist Papers supported such a position. What I can tell you though is how The Federalist Papers and how the Constitution came about. In short, the Constitution was written as a new form of government to improve the system that we had, which was in the Articles of Confederation. All three of the authors in The Federalist Papers agreed that the powers of the central government were too limited in the Articles of Confederation. So, at least given this, all three authors had the intention to have a greater sized government than in the Articles. And this is exactly the position they defended in their 85 articles in The Federalist Papers. The reason for the advocacy of the Constitution was so that the Union would be preserved, and if it meant to give more power to the central government, so be it. This was the purpose of the government in the Constitution and in The Federalist Papers. To have a united nation, and not some confederacy where each State can make their own rules ignoring the rules listed in the central government. If this is what is implied in Chambless’ “limited government” label, then yes, The Federalist Papers support such a position, but I have a feeling that this is not what he is talking about when he means “limited government”.

And of course The Federalist Papers contain passages criticizing the role of “too much government”. But this criticism can be made by people in multiple political positions. Is Chambless implying that the only people who talk of “too much government” comes from those who are active in praising themselves in support of “limited government”? To apply this in historical context though, Americans were bothered from the fact that Britain failed to give the American colonies some type of representation in Parliament. So when Britain enacted taxes on the colonies, Americans felt that this was unjust because we didn’t have a representative giving “our side of the story”, we were just ordered to pay the taxes or else… This is an example of government going beyond its limits and its the type of government that the Americans at the time rebelled against, hence The Revolutionary War.

And it is equally puzzling when he mentions Hamilton’s advocacy for a Bank of the United States or support for supreme court justices and implying that this was just some steps made by Hamilton to transform the United States into this “monarch” system. I could only assume that he thinks of Jefferson and Madison as people who opposed such measures and considered them unconstitutional. But I’ll just give one example, which shows why these claims are without merit.

Here is James Madison in one of his most popular anti-bank quotes:

History records that the money changers have used every form of abuse, intrigue, deceit, and violent means possible to maintain their control over governments by controlling money and its issuance.

I am sure Chambless looks at this and goes, “Right on, the author of the Constitution was against central banking, see its unconstitutional!” Though, it was the same James Madison who signed into law the Second bank of the United States in 1816. It took the aftermath of a war, the War of 1812, to show to Madison that banks were needed for an economy. So maybe, it was Madison, not Hamilton, that envisioned the future state of the United States to be a monarchy for his signing of the 2nd Bank of the United States! Or (even better) Madison and Hamilton had this plan all along to blind people and make them believe that they were political rivals but in reality, they thought exactly the same! Of course the last two claims are absurd but that is exactly how Chambless views Hamilton when he states that Hamilton was a genius in making believe people he was anti-monarchy but in reality thought of monarchy as a supreme system and slowly implemented it by his support of the 1st Bank of the United States among other things. Like I said in the beginning of the post, many libertarians feel like they have to incorporate some type of conspiracy theory, for reasons that I can only speculate on. It is very horrible scholarship to do this and I really question FEE if they really believe that this guy is giving a true historical account of Hamilton, and not some libertarian fairy tale of Hamilton.


Chambless on Hamilton


I will do this critique of Chambless’s research on Hamilton in parts. Judging by this first post, it seems like this might be a long series of post. I will critique his lecture starting from 0:07:30 and ending in 0:13:20. There is just so much wrong with his research that I feel like Chambless did the error of starting from a bias conclusion and then try to support this conclusion. The conclusion being that Alexander Hamilton was a curse. Any serious scholar of Hamilton would know that this is of course false, at least historically speaking. Hamilton was essential in the creation of the Constitution and essential in its ratification. It would simply be hard to imagine the Constitution as it is today without the influence of Hamilton. The main point that I want to get across in this post, a point which Chambless either does not know or chooses to ignore, is that Madison was very much in line with Hamilton during this time. This is to say, during the time when Madison attended the Constitutional Convention, wrote the bulk of the Constitution and participated in The Federalist Papers, he and Hamilton were philosophical allies. They understood that if America was to survive as a nation, it needed a stronger role for the central government. Madison gradually converted to a Jeffersonian point of view but this was after he wrote the Constitution and The Federalist Papers. The pre-Jeffersonian Madison was a proto-Federalist. This even makes sense by just looking at the people he worked with at the time. Look at the work he did with Hamilton and John Jay. Look at the close ties he held with the Virginian Governor Edmund Randolph. All of which were strong Federalists when the party emerged. There is clearly more evidence to support this but I am merely pointing out that it is easy to see Madison’s ‘Federalist’ side. And this fact is crucial because it shows that Madison held two major opposing views in his lifetime, so this affected how he interpreted the Constitution. I choose to hold Madison’s proto-Federalist interpretation of the Constitution as more valid than his later Jeffersonian interpretation because when he wrote the Constitution or The Federalist Papers, he was hardly a Jeffersonian.


First off, Thomas Jefferson had no part in the construction of the Constitution. To appeal to what he said about it is pointless. This is a clear example of appeal to authority. Now I understand that appeal to authorities isn’t a fallacy per se, but when one points out that this ‘authority’ did not know what the hell he was talking about, then it becomes a fallacy. Jefferson envisioned the Constitution as one that provides strict rules on how the Federal Government should be handled. If it does not say that the Government should specifically do X, then the Government should not do X. But this is not how the Constitution was meant to be interpreted. I cannot stress this enough, but the Constitution was meant to provide for implied powers, powers that are not specifically mentioned in the Constitution. The best source for this would be The Federalist Papers, and specifically read James Madison’s article number 44. Keep in mind that Madison at this time was aligned philosophically to that of Hamilton, which is why they work together to produce The Federalist Papers, the main defense of the Constitution (Chernow 2004: 223). Not only this, but I really do not see why we are still having this debate on ‘what the Constitution really means’. The Federalist Papers, as papers written to persuade people to support the Constitution, should be the main source as to what the Constitution means.


The letter mentioned here written by Madison was written in April 20, 1831, Madison died five years later. The year of which Madison wrote the letter is important here because (as I said in the introduction) I am of the position that the Madison that wrote the Constitution and provided several articles in its defense is almost completely different, philosophically, from the Jeffersonian Madison. To merge these two different Madison’s together is a fallacy because Madison changed his thinking when he started to become the head of the Democratic – Republican Party. But this is important because this means that Madison’s meaning of the Constitution changed for him. The late 1770’s Madison recognized that the United States had to have a strong central government in order for the Union to be preserved. This idea he shared with Hamilton and Jay when writing The Federalist Papers. It is the same Madison that wrote the justification to implied powers in article number 44.


It is also worth saying something of that Madison quote on how charity is not the duty of Government. First off, it is funny to state that Madison would contradict himself approximately 2 decades later. When Madison said this, he was debating one of the leading Federalists at the time, Elliot Boudinot, on whether aid should be provided for St. Domingo Refugees. Madison cried, “NO!” there are not explicit powers mentioned in the Constitution for this and stood his ground on the principle that Government was not a charity. Though, Madison would approve aid to Venezuela in 1812, a year that Madison was president. Secondly, this is one of many debates with Boudinot that Madison had. Another more important debate was on establishing a national bank. Of which, Madison (again) responded that the rights to establish a bank is not granted in the Constitution, therefore it should not be done. Boudinot in response quoted Madison from The Federalist Papers article 44, which shows Madison providing justification for implied powers. The bill was passed and Madison had to have felt defeated by his very own words. This is one of several examples of how Madison’s visions of Government changed drastically over time. Again, the Madison that wrote the Constitution and The Federalist Papers is not the same Madison that was aligned to the Democratic – Republican Party.


Also, yes, Hamilton disagreed with Madison’s Virginia Plan and the New Jersey Plan. But disagreements were common at this convention. I thought this fact would be common sense. This convention was about starting the structures of Government from scratch. I could only imagine several different propositions on the ‘right’ structure which to follow. Nevertheless, what good is it in pointing this out? By the time the Constitution was in its final form, Hamilton was a fierce supporter; why else would he write 50+ articles out of the 85 articles in support of the Constitution in The Federalist Papers? Nevertheless, Chambless makes it sound like the rest of the people at the convention had a similar view of how Government should operate while Hamilton was the odd man out and had a different view when he states, “Hamilton disagreed with the other founding during the convention.” The truth is, is that there were several ideas put on the table as to how the newly formed government should operate. And yes, this implies much debate.

It should also be noted that yes, no one supported Hamilton’s plan but that does not mean it wasn’t influential. For example, Hamilton’s plan introduced the idea that supreme judges should be there for life to minimize conflicts in regards to politics, this is to say, so they did not have to fear to be elected. The Articles of Confederation provided no such authority for federal judges.  It is also worth pointing out that just because no one agreed with Hamilton’s plan full heartedly does not mean that the other delegates just ignored what Hamilton had to say. Gouverneur  Morris (a founding father that wrote parts of the Constitution) stated of Hamilton’s speech as “the most able and impressive he had ever heard”.  William Samuel Johnson stated that Hamilton’s plan won “praise by everyone.” Though I am sure Johnson exaggerated a bit (Chernow 2004: 233).

Also believing that the executive should serve for life does not mean that he supported a monarchy. This does not follow at all. Sure it might be a description out of many of a monarchy but to support a life term executive is completely different than supporting a monarchy, which Hamilton never did. Actually, this criticism (that the executive was equal to a King) was used by the Anti-Federalists when talking about the Constitution. They felt that the President’s powers extended too far in the Constitution, so far that they saw no difference between a President and a King. Starting at Article 67 of The Federalist Papers (which Hamilton wrote), the Federalists discuss the nature of the executive power, and they also try to make clear that to consider the executive the same as a King is a gross misrepresentation. As Hamilton states early in the article:

Here the writers against the Constitution seem to have taken pains to signalize their talent of misrepresentation. Calculating upon the aversion of the people to monarchy, they have endeavored to enlist all their jealousies and apprehensions in opposition to the intended President of the United States; not merely as the embryo, but as the full-grown progeny, of that detested parent.

It is also worth pointing out that Madison, George Mason, and Edmund Randolph approved of Hamilton’s presidential proposal during the Constitutional Convention (Chernow 2004: 234).

It seems that Chambless mentions the point that Hamilton never returned to the convention because of the lack of success of his speech.  But it was pretty common for delegates to return home.  Only about 30 of the 55 delegates were present much of the time (Chernow 2004: 229). It was typical for delegates to return home for business.  Though there is another explanation for why Hamilton had a small influence in the convention.  Hamilton was part of the committee that made the rules for the convention. Hamilton proposed that every individual vote be recorded, but instead the small committee denied his proposal and decided to have a one vote one state policy (Chernow 2004: 228). This was a problem for Hamilton since the other two delegates from New York were John Lansing Jr and Robert Yates, both political rivals of Hamilton. Thus, Hamilton’s voice would not be heard because both Yates and Lansing disagreed with Hamilton about 99.9% of the time. So it was pointless for Hamilton to stay at the convention because his vote was always outnumbered. Though keep in mind that Hamilton was the only one of the three delegates from New York to sign the Constitution.

And I am not quite sure that Chambless knew Madison’s position on states’ rights at the time. I say this because Chambless makes the claim that Hamilton disagreed with the other founders on states’ rights (as if the delegates all thought the same on states’ rights). But if we look at some of Madison’s work, Madison, too ,had the opinion that federal authority dampens states’ rights. For example, look at Madison’s piece “Vices of the Political System of the United States” and specifically part 4. Here is Madison:

Paper money, instalments of debts, occlusion of Courts, making property a legal tender, may likewise be deemed aggressions on the rights of other States. As the Citizens of every State aggregately taken stand more or less in the relation of Creditors or debtors, to the Citizens of every other States, Acts of the debtor State in favor of debtors, affect the Creditor State, in the same manner, as they do its own citizens who are relatively creditors towards other citizens. This remark may be extended to foreign nations. If the exclusive regulation of the value and alloy of coin was properly delegated to the federal authority, the policy of it equally requires a controul on the States in the cases above mentioned. It must have been meant 1. to preserve uniformity in the circulating medium throughout the nation. 2. to prevent those frauds on the citizens of other States, and the subjects of foreign powers, which might disturb the tranquility at home, or involve the Union in foreign contests.

Please Chambless, if you are going to down play Hamilton on states’ rights, then at least to the same with Madison. Or what about this statement by Madison (I take this from Bowen’s book Miracle in Philadelphia):

“Let the national government be armed with a positive and complete authority in all cases where uniform measures are necessary. Let it have a negative, in all cases whatsoever, on the legislative acts of the states,  as the King of Great Britain heretofore had,” (Bowen [1966] 1986: 14).

“… as the King of Great Britain heretofore had?!” What a nasty monarch that Madison was, huh.


Again, Chambless appeals to the claim that the Constitution was meant to only provide those rights that are only explicitly mentioned, even though it was Madison that wrote the defense for implied powers in article 44. General Welfare was meant to be loosely interpreted. Though finally Chambless makes his first correct statement about Hamilton (and one of the purposes of the Constitution), that current powers of the Government granted by the Constitution should not restrict future Governments to improve the lives of its citizens.


Chambless claims that The Federalist Papers were written to seem it was in support of a limited government, and that Hamilton differed from the other writers. This is not so. I highly doubt that Chambless has even read The Federalist Papers now. The whole point of The Federalist Papers was to give support for a much larger authority for the central government to do its duty than what was proposed in the Articles of Confederation. I seriously do not know where Chambless makes this assertion. He is either pulling stuff out of his ass or a really bad scholar on Hamilton (or The Federalist Papers for that matter). He makes it seem like there is this Hamiltonian conspiracy for a return to a monarchy and total power to a central government. Chambless is ultimately trying to make the Constitiution into a libertarian document, but as the facts show us, the Constitution is a Republican document (thank god).

That is enough for now. This lecture is going to make me pull out my hair if I keep listening to this, and I have a lot of hair.


Bowen, Catherine Drinker. [1966] 1986. Miracle at Philadelphia: The Story of the Constitutional Convention, May to September 1787. Boston: Little Brown.

Chernow, Ron. 2004. Alexander Hamilton. New York:The Penguin Press.

Hamilton, Alexander, John Jay, and James Madison. [1787] The Federalist Papers. New York: The Modern Library.

Madison, Hamilton, and Implied Powers

I just finished reading Alexander Hamilton (2004) by Ron Chernow and it is by far one of the best biographies I have ever read. Chernow is a writer that makes one feel like they have a personal connection to the particular person he is writing about.

What is particular interesting is the fact that even back then, the founding fathers of this country debated on what was constitutional. At least for me it is interesting because we had statesmen and politicians that had direct influence on the development of the Constitution, and yet there were debates on what the Constitution meant and what we can imply from its meaning.

In this video, Chernow talks very vaguely about his book and of Hamilton, which is worth a watch. But I have a little quibble, at 17:42, Chernow contradicts himself in saying, “He [Alexander Hamilton] comes up with the so called theory of implied powers.” Hamilton did no such thing, if anything, he can be seen as a person to use implied powers of the Constitution quite often. It was James Madison to actually develop the theory of implied powers, and Chernow makes this claim in his book, here is Chernow:

Later defined as a ‘strict constructionist’ of the Constitution, Madison set forth the doctrine of implied powers that Hamilton later used to expand the powers of the federal government. It was Madison who wrote in Federalist number 44, ‘No axiom is more clearly established in law or in reason than that wherever the end is required, the means are authorized.’ At this juncture, they could make common cause on the need to fortify the federal government and curb rampant state abuses (Chernow 2004: 252). (my emphasis)

It is important to note Madison’s Jeffersonian interpretation of the Constitution (what would make Madison a strict constructionist of the Constitution) only came after he wrote the Constitution and The Federalist Papers. So while Madison and Hamilton did have a huge feud on what was constitutional later on, it is clear that during the time of the development of the Constitution, the two were similar philosophically (Chernow 2004: 223). It follows that it was Madison that changed his views about what the Constitution implied and Hamilton staying the most consistent of the two on the view of a strong central government. The change in views later on was a personal blow to Hamilton. Once good friends and political allies, now bitter rivals that represented opposing views on just about everything. In other words, Hamilton saw Madison’s opposition as “a perfidious desertion of the principles which [Madison] was solemnly pledged to defend,” (Chernow 2004: 306).

What is funny is that Madison’s own defense of the necessary and proper clause in paper 44 came to bite Madison “in the behind” when he switched to his Jeffersonian stance. Madison, in opposition to a national bank, stated that after reviewing the Constitution, ‘it was not possible to discover in it the power to incorporate a bank.’ Elias Boudinot, a Federalist Congressman, responded by reading the “necessary and proper” clause and how paper 44 of The Federalist Papers defends the clause (remember, Madison wrote that paper), and explicitly stating the ‘No Axiom is more clearly established…” quote (Chernow 2004: 350). One could only imagine that Madison felt embarrassingly defeated by his very own words.


Chernow, Ron. 2004. Alexander Hamilton. New York:The Penguin Press.

Hamilton, Alexander, John Jay, and James Madison. [1787] The Federalist Papers. New York: The Modern Library.

Hermeneutics… My Thoughts

I got asked over email by a reader what I thought about hermeneutics and how it applies to economics. Personally, I have not read too much on the subject, but I think I know enough about it to generally comment on it. I have read some articles on it but the one book, actually a collection of articles, that I have read that provides a good amount of information on the subject is Economics and Hermeneutics edited by Don Lavoie, which the book is dedicated to Ludwig Lachmann. It also contains one of Lachmann’s last essays (maybe the last?) “Austrian Economics: A Hermeneutic Approach.”

I really have mixed feeling about this. If I was to come up with an example it would be that of a Post Keynesian (PK) viewing MMT. MMTers, for example, don’t consider themselves radicals of the PK school but PKs that don’t fully agree with MMT think otherwise and thus, feel it is necessary to make a distinction between PK and MMT.

In a similar fashion, hermeneutians claim that they are not too far off what Austrian framework is all about. Many would claim that the Austrian framework is indeed a hermeneutic framework, given its strong appeal to Max Weber. Lavoie even claims that Mises’ aprioriism should reinterpreted to appeal to a hermeneutic perspective. Lachmann even makes the claim that there are many who do not know they follow the hermeneutic philosophy, such as Shackle, Knight, and Keynes, given passages:

Ultimate unifying simplicity is the aim or the dream of natural science in a sense which is not permissible for the study of human affairs. For the disciplines which envisage human conduct, policy, history and institutions, or art in all its forms, are directly and essentially concerned with the manifestations themselves, the manifoldness, the richness and the detailed particular variants and individual facts of these facets of humanity, rather than with dismissing them as the contingent outcomes of some original, general and essential principle which it is the real purpose of science to identify. The science of Nature and the science of Man stand in some sense back to back, the one looking inward at the Origin and the other outward at the Manifestation – Shackle

The whole subject matter of conduct—interests and motivation— constitutes a different realm of reality from the external world, and this fact gives to its problems a different order of subtlety and complexity than those of the sciences of (unconscious) nature. The first fact to be recorded is that this realm of reality exists or ‘is there’. This fact cannot be proved or argued or ‘tested’. If anyone denies that men have interest or that ‘we’ have a considerable amount of valid knowledge about them, economics and all its works will simply be to such a person what the world of color is to the blind man. But there would still be one difference: a man who is physically, ocularly blind may still be rated of normal intelligence and in his right mind. Second, as to the manner of our knowing or the source of knowledge; it is obvious that while our knowledge (‘correct’ observation) of physical human behavior and of correlated changes in the physical objects of nonhuman nature plays a necessary part in our knowledge of men’s interests, the main source, far more important than in our knowledge of physical reality, is the same general process of intercommunication in social intercourse—and especially in that ‘causal’ intercourse, which has no important direct relation to any ‘problem’, either of knowledge or of action—which has been found to play a major role in our knowing of the physical world. – Knight

It is, I think, a further illustration of the appalling Scholasticism into which the minds of so many economists have got which allows them to take leave of their intuitions altogether. Yet in writing economics one is not writing a mathematical proof or a legal document. One is trying to arouse and appeal to the reader’s intuitions; and if he has worked himself into a state where he has none, one is helpless.

I also want to emphasize strongly the point about economics being a moral science. I mentioned before that it deals with introspection and with values. I might have added that it deals with motives, expectations, psychological uncertainties. One has to be constantly on guard against treating the material as constant and homogeneous. It is as though the fall of the apple to the ground depended on the apple’s motives, on whether it was worthwhile falling to the ground, on whether the ground wanted the apple to fall, and on mistaken calculations on the part of the apple as to how far it was from the center of the earth – Keynes

Indeed, these are passages that demonstrate their subjectivist side. There is indeed room for subjectivity to be talked about in economics, this is not metaphysical jargon as some critics might claim. It is an empirical observation of the real world. Human action implies a means-ends framework, thus implying choices (cost and decisions) that can only be explained subjectively. We cannot measure these costs and the decisions made by these actors. The way we can make human action intelligible is strictly by the means-end framework, and our interpretation of the action, which of course, may be highly likely that there will be different interpretations of the same action.

If this is what hermeneutians mean by applying this philosophy to economics, then I guess I am one. But what makes this different than looking at economics through a subjectivist lens?

It’s different in the sense that hermeneuticians stress that when authors write a text, that they should be analyzed separately. As David Prychitko states*, the ideas of the text should be analyzed, given what knowledge we have today. he uses the example of the invisible hand, famous by Adam Smith, and suggests that the meaning of the invisible hand may indeed be different than what the author intended its meaning to be. But what is the purpose of this? To justify, for example, that the invisible had may be an example of unfettered markets? I am, for one, against the claim that we should analyze the text minus the author. Indeed, the invisible hand example quite needs to be under the context of what the author intended it to mean. Considering the author with the text is important.

Hermeneutics originated in trying to interpret the bible. This philosophy might be a reason to why there are so many different interpretations of the bible. Should we look at its meaning literally, symbolically, a text in favor of science, a text completely rejecting science, etc. Indeed, one can find a Christian to defend each one of these categories. Also each one of these positions can be justified by using the hermeneutic method, by separating the author from the text. But what good does this do? We end up with more problems than we started. now this problem isn’t necessarily bad but the point is is that they give us unnecessary problems. For example, a rejection of rational expectations may gives us more problems than we started with, given that a lot of mainstream models use rational expectations. But if rational expectations weren’t introduced to begin with, it would have saved us some trouble with the nonexistence of models that depend on rational expectations

Indeed, hermeneutics is a far more radical framework than the basic Austrian framework, and thus, I think, there does need to be a distinction between subjectivists and hermeneuticians

* The Prychitko article is titled “Toward an Interpretive Economics”

A Passage By Carl Menger on The State

“Why Mises (and not Hayek)?” by Hoppe is probably one of the worst articles at Mises.org. The whole point of the article is to show that Mises is above Hayek because of his views on the State. Mises is seen as the ‘true’ classical liberal, while Hayek is seen as a social democrat.

First off, I really don’t get why advocating public works beyond basic defense, court systems, etc. makes one a social democrat. Keep in mind that Hoppe uses some of Hayek’s Constitution of Liberty to ‘prove’ that Hayek was a social democrat, even though Mises thought the same book was a work that resulted from Hayek’s studies in the philosophy of freedom, and said nothing negative about it. Second, Mises thought the State as a necessary institution, and one that goes beyond providing basic defense.

But I really don’t want to continue on criticizing Hoppe’s horrible article. The title of this post implies a passage by Menger on the State, one that I haven’t provided yet. So here is Menger from one of his lectures* :

Important roads, railways and canals that improve the general well-being by improving traffic and communication are special examples of this kind of enterprise and lasting evidence of the concern of the state for the well-being of its parts and thereby its own power; at the same time, they are/constitute major prerequisites for the prosperity of a modern state. The building of schools, too, is a suitable field for government to prove its concern with the success of its citizens’ economic efforts. (p 121)

Are we to assume, by using the same Hoppeian logic, that Menger, the founder of the Austrian school, is a social democrat too?

The truth of the matter is is that while classical liberalism may critique certain aspects of the State, this does not necessarily mean that all classical liberals are critical of all it’s interventions, in fact, as Menger states, some it’s interventions “constitute major prerequisites for the prosperity of a modern state.” a modern state in which Menger never wanted to see its abolition in. Keep in mind that later on in the lecture, he provides his justification for intervention to prevent deforestation (p 131-133) and also laws to improve worker conditions (in fear that if workers weren’t happy in the job they are in, that this would result into a communist type rebellion) (p 127).

So in light of the debate between Kuehn and Murphy over what a ‘free market’ label entails, was Menger a free market economist, given what he states about the State and it’s role in society?

*Carl Menger’s Lectures to Crown Prince Rudolf of Austria

My Views on Government

I have received a couple emails from different people criticizing me, for lack of a better term, because I fail to give a nice clean version of what I think Government should do as far as policy is concerned. Do I believe in small government, big, free trade or protectionism, do I believe in social programs etc. Let me first start by saying that I have not really blogged about this kind of stuff because explaining government policy is not my main concern as a studying economics student. At the moment, I am much more interested in ‘how’ to think about economics than ‘what’ to think, this is to say, I am interested in methodological issues at the moment and I want to expand those ideas to critique more of the neoclassical economics that we see today. Another reason why I have refrained from explicitly expressing my views on the topic is that I only generally know what I think government should do. I really do not have an ideal amount of government I want, and ideally, what programs I see my ideal government having. But because I have been asked to say something about my thoughts on government, I will express my general views on government.

First off, I believe a government is necessary. I am not an anarchist or an anti-statist and I do think it is really hard to justify that position.  Sure, they can point to certain points in history of societies where they thought it was anarchist with some capitalistic aspects (and we can see some of the failures, even in their own literature (look at the conclusion of ‘Not So Wild Wild West‘)) , but what of modern times where we have complex financial systems? It seems like these anarcho types ignore this capitalistic aspect of the economy when theorizing their anarcho society. I leave what I have to say about anarcho types at this, for it is not the purpose of this post to critique anarcho types.

So what policies do I believe a government should pursue? I do agree that in a recession, a government needs to spend and decrease taxes. How much or how little of each, I do not know. At the same time though, I do think in all times, whether recession or  not, to cut inefficient government programs. I believe in this because I do not believe in creating programs because the program in itself creates jobs, I believe in programs because of the possibility that it will benefit society.

For example, one of my greatest influences is my grandfather, who worked for social security for decades. During the Clinton administration, there was some type of bill that basically forced government programs to hire certain unemployed people, like low income people or former Armed Forces people. Well many of those new people he hired made his social security office more inefficient because most of these people did not do anything, and my grandpa, as a head, couldn’t fire these people, as it was very difficult to fire people that got jobs because of this bill. The only thing he could do was to tell these people to stay out of the way and stay in their cubicle. So while we did increase employment here, these newly employed made the office less efficient and the end result was a waste of government money because they were paying these people for doing nothing! This is wrong, in my opinion and we cannot just increase the size of social programs because we need to increase employment.

Another example of absurd social program polices is section 8 housing, especially in Dallas, which is where I am from. I was raised in what I consider lower middle class. I lived ok but I lived in a one bedroom/one study apartment with my mother in Dallas. I really cannot say we lived paycheck to paycheck, since we had some money to spare for some entertainment on occasions, but we lived close to it. What always angered me though were the section 8 houses a few blocks down.  Most, if not all, these places had relatively new renovations and the spaces were huge (in Dallas there are several two story houses/town homes that are part of section 8). This to me, is absurd. Here is my mother and me, both working and me going to school too, and not part of social programs where the government paid certain stuff for us (aside for my Pell Grant), and we lived in a one bedroom apartment, while there are people across the street that may not have jobs (highly possible actually), are not tax payers, and just brings property value  down and crime up and at the same time, get nice housing paid for by government.

I am not saying I consider these programs to be illegitimate, but that there needs to be some restructuring in these programs. Take the section 8 housing for example,… do these people really need two story houses and newly renovated equipment, or just a basic place to live? Benefits shouldn’t increase because of lack of responsibility, this is to say for example, one should receive a bigger home or more money because they up’d their family size by one. Housing provided by the government is not so poor people can live in luxury, it is so they can have basic shelter.

How big would I like to see government? I don’t know. I generally see myself as a classical liberal, thus implying that I believe in a limited government but how limited, I do not know. Obviously, I do not want a government so limited that it cannot engage in policies to help in recession or the marketplace. That said though, I put the same amount  of uncertainty to the government as I do in markets. Post keynesians, at least most of them, agree that governments reduce uncertainty, but I do not see that as true, at least in a theoretical perspective. If we look at the markets, we both can agree that there is ontological uncertainty and is non-ergodic. But to me anyway, this applies to governments as well, thus they both have similar problems because of reality. And thus, I do not see how governments limit uncertainty, especially in a world of change. The post Keynesians essentially fall into the same trap as (some) Austrians when they claim that increase of knowledge = less uncertainty. (more on this by a ‘post’ austrian, here and here )

One thing I completely agree with libertarians is how government should treat social issues. Stuff like marriage, what kind of dog breed you can own, what you can or cannot see on the internet, abortions, requirements for adoptions, etc. are stuff that government shouldn’t get involved in. And if there are things that people do not like about the government, they should have the right to protest about it and practice civil disobedience (though there can be limits on civil disobedience. )

So hopefully by this, at least some of you will get where I am coming from. Again, I tried not to put too much detail into this because I do not really have a set in stone ideal picture of government, nor is it currently something that I am putting a lot of time into because as I said, I want to discuss methodological issues than policies, this of course is not to say that I wont do research on policies, it is just that I wont do it at this time.

-Isaac Marmolejo

Government Working Around It’s Own System

Not too long ago, the Department of Justice (DoJ) sued a 90+ year old lady for failing to report the sale of a product (in this case suicide kits) in her taxes. Keep in mind the DoJ has made it clear that they are not suing her because of the sale of the suicide kits. But I think it is clear that the main reason that the DoJ sued this lady is because she is selling something that the government feels wrong to sell. The police department in San Diego know of at least four people in the last year that have committed suicide using these kits and one of them happens to be a 19 year old kid. This at least provides the incentive for government officials to get this product off the streets, even though it is not illegal to sell suicide kits.

But then one might say to me so far, “Well you are just being suspicious of the government. Clearly, she has done something wrong (not reporting the sales in her taxes) and she has to pay for it. The government just wants the taxes, nothing more, nothing less.” And I would agree with this criticism, maybe the government only wants the tax money and could care less about the product she is selling, if it wasn’t for the court’s ruling on this case. The court’s ruling states that she has to work for the IRS to pay back her debt, and she has to agree that she would not sell these suicide kits again. The first part of the ruling is pretty common in cases like these, ‘ You fail to pay your taxes, so you have to work to pay back the debt you owe us,’ but the second part is clearly not, ‘You failed to report the sale of suicide kits in your taxes, so you must agree to never sell these suicide kits ever again!’ Clearly the government wanted these suicide kits off the streets, and since there is no law restricting people to sell such objects, they have to work around the system. Wow, the system working around its own system, how ironic.

This is even more absurd if we were to substitute other objects instead of suicide kits For example:

  • ‘You failed to report the sale of used televisions in your store, therefore you must pay back your debt, and agree to never sell used televisions again’
  • You failed to report the sale of homemade candles at this swap meet, therefore you must pay back your debt, and agree to never sell your candles again!’

This is an obvious case of the government breaking its own laws. Don’t get me wrong, I want a government, I believe that in order to have a stable decent society, the society must have a government (which I know my ideas of the government differs from those of other libertarians, maybe it is more correct to call me a classical liberal), but I want a government that knows its laws and is consistent in how it looks after its society.

– Isaac Marmolejo