The Economics of Liberty
The road to serfdom....everyone should read it. Thanks once again for another great article.
Maybe the most pernicious tool of the camp-following whores is the Circular Flow Diagram. It's taught to every high school and college kid, across the world. Once you adopt that as your overall model, you're primed to accept Keynes. Clearly, it's money, not production, which creates prosperity. Even free-market outfits like FEE teach it to kids as gospel.
Because it's visual, the brain grabs this picture and refers to it constantly. It takes volumes of text and months of work to dispel that visual image and its implications.
We're working to displace the CFD with our Austrian model, which we call LinKe. We show kids the Austrian view years before the Keynesians get their hands on them. And once you have the obviously correct picture in your head, the CFD really falls flat.
Feel free to share this model with any kids you care about. https://vimeo.com/828163972?share=copy
Thank you so much for this well written explanation. People need to understand this concept and the implications now more than ever. From an Austrian capitalist.
The universe is transactional, and runs on the marginal utility of those transactions. It seems only the Austrian School has figured that out.
Interestingly, my study based on balance sheets supports the same conclusion about liberty, despite approaching the analysis in a more Post-Keynesian way. The economy is essentially barter, except people can trade debts (both asset and liability sides) in addition to goods and services.
In my opinion, the biggest weakness of most economic theory is ignoring the critical importance of insolvency. For example, the government's negative net worth is an implicit liability of the private sector, and it's just being ignored as though it's unimportant.
If you want to see a simple economic model which reveals flaws in all sorts of economic theories, (and uses a rather nice arrow notation!), head over to https://economics21st.substack.com
P.S. The axioms I needed were:
1. People can own things.
2. People can be owed things.
3. People can owe things.
It seems like a lot of Americans who give lip service to the idea of freedom are quick to take government handouts and resent any discussion of reducing or eliminating these “freebies”. They don’t see any harm to their liberty as long as the government provides comfort and security. It is very sad to see that half of our country does not choose freedom but, rather, dependency (and do not see the slippery slope that inevitably follows). In a democracy, when people perceive themselves to be comfortable, is there any way to resurrect liberty for all?
Always feeling smarter after reading an article of yours.... thank you very much
Beautifully succinct. Thank you.
Love your writings and podcast. Just wish somehow we could get a transcript of your weekly podcast to read and not solely listen??
The thing is that most people have trouble grasping even the principle of the Broken Window, either as explained by Bastiat or by Hazlitt; and that's where it all starts.
Thanks Peter, great article.
I got my Econ doctorate at Penn in the late 80s-early 90s, when they were explicitly Chicago school. I remember waiting around outside to take the year-end prelim exams and talking to someone who mentioned their preference for the Austrian school. I’d not heard of it before, but it fit right in with the Ayn Rand novels I was chewing my way through....
I’m a student who has recently come back from a solo trip to front line Ukraine. I’ve just published a new piece on my experiences and thought readers here may appreciate it. Please do see what you think. https://irongoose.substack.com/
Great article! Thanks for the resource recommendations!
Lots of great pearls of wisdom. e.g. The best way to help people, the best way to build a society, is liberty.
And for the sake of arguing your point, even if SOME government economic intervention (say 15%) is beneficial, the fact that MOST of it is harmful is still enough to validate the logic that NO government intervention (unless for consumer protection) is much better overall than any -- because there's no way to know in advance, which of their interventions will end up having positive impacts that outweigh the unforeseen unintended consequences.