The role of a jury is to apply the law to the facts

A trial ought to be, a fact-finding process, conducted in order to determine whether pre-existing legal principles are applicable to a specific case.  It should not be a religious, philosophical, or political discourse – that is, the rules by which guilt or responsibility is determined must be known beforehand.  It is not up to the judge or jury to determine what the law ought to be, only to apply it to the established facts.  If the law was determined rather than applied at trial, it would be impossible for anyone to obey it.  Furthermore, a just legal system should be uniform – people must have assurance that outcomes will not depend on the particular judge and juror they stand before.

We have a personal moral responsibility to treat other men with justice 

However, while it is not the job of the juror to determine whether the law is just, it is his moral responsibility to treat other men justly.  Someone who is hired to be a repo agent may not have a contractual obligation to determine whether the collateral he collects is for debts which are legitimately are in default, but he has a moral obligation to refuse his assignments if he suspects that he’s seizing legitimate property.  If he refuses assignments based on tenuous grounds, he may justly be fired, but if he has some certainty that he’s seizing legitimate property, he becomes as much a thief as his employer.  Likewise with the juror.

A law based on invalid principles is inherently unjust

One criticism of jury nullification is that a jury is not neither qualified to judge the law nor does it have any legitimacy in doing so.  And this is certainly true as a matter of law.  A juror who disagrees with the practical implementation of the moral principles behind a law ought to defer to the established process.  He can always exercise his disagreement and try to effect change in his role as a private citizen.

But, the situation is different when a juror disagrees with the moral principles behind a law.  A law based on incorrect moral principles is unjust regardless of the facts of the case.  The conviction of anyone based on such as law is necessarily an act of aggression.  Any participation in the process, even solely in the function of determining the facts, is an immoral act.  No judge can honestly ask a juror to breach his integrity, or blame him for refusing to do so.    Everyone, regardless of his role, has a personal moral obligation to treat others justly and refrain from willingly participating in injustice.

Jurors should refuse to enforce unjust laws

What should  a juror do if he objects to the morality of a law?  He should refuse to serve if he believes that the principles of a law are inherently unjust.  By doing so, he does not undermine the legal process, since another juror can be substituted, nor does he violate his own integrity.  A juror exceeds his role if he refuses to convict because he thinks that the punishment for an action is too harsh, but he acts properly if he refuses to serve because he does not believe the act being prosecuted to constitute an act of coercion at all.

If the court is unable to find enough jurors who accept the morality of the law, it has two choices:  either require the charges to be dropped, or offer the dissenting jurors to serve anyway.  If they do so, they cannot be blamed for acquitting the defendant based on their judgment of the law, in addition to their judgment of the facts. If laws are consistent with the basic moral principles of citizens, it should not be difficult to find sufficient jurors.

Further reading

• Wikipedia: Jury nullification

Usury originally meant the practice of charging interest on loans.  Sometime during Medieval times, the charging interest as such became politically acceptable and the term change to mean charging excessive interest rates.  However, there is no objective definition of what a “fair” interest rate is beyond the rate agreed to by the parties involved, so an attack on usury is an attack on interest rates as such.  There is no such thing as a single “just” interest rate because interest rates in a free market move towards an equilibrium determined by the time-preferences of individual debtors and lenders.

Traders have the right to trade by any terms they wish

The borrower of a loan voluntary enters into a contract. As long as the contract is voluntary, it is immoral for any third party to use coercion to prevent voluntary agreements.

Interest is essential to the investment process

Charging interest is essential to guiding the investment process, which cannot be sustained by charity even it were forthcoming due to the economic calculation problem.  Interest rates are required to direct investments to their most productive use.  Interest-driven investment is essential to economic growth, and therefore to the very existence of industrial civilization. If charging interest were outlawed, industrial societies would quickly collapse due to the inability to efficiently allocate savings.

“Loan sharking” is caused by government failure

Loan-sharking (charging high interest rates backed up by the threat of violence) reflects the fact that the loans are being given to creditors with a high risk of default. The need for violence is due to the failure of governments to see this fact, or to adequately enforce the loan contracts (such as with overly lax bankruptcy laws), rather than any immorality inherent in moneylenders.

Further reading

• The One Minute Case For “Price Gouging”
• The One Minute Case For Unrestrained Profit

Pressure groups are inherent in a mixed economy

In a populist democracy with a mixed economy, every group that participates in the political system is a “special interest”, with the incentive and the power to use the political system to extract benefits for its members at the at the expense of everyone else. Corporations, unions, disease-awareness organizations, “minority” groups, and anyone who organizes around a common cause has the power believes that their fate or cause is more legitimate, important, and “special” than that of everyone else.

In a mixed economy, the state functions as a redistribution mechanism

The welfare and regulatory systems are the primary means to coercively redistribute property and confer monopoly benefits to various groups. In a mixed economy, everyone is constantly on the defensive against organized groups extracting benefits from him, and on the offensive attempting to use the coercive power of the state to extract benefits from others. Interventionism creates a vicious cycle hardly unique to corporations: first a lobby tries to extract special privileges from some politically neutral group, the group hires lobbyists to defend itself, and ends up using the influence it has gained to extract privileges at the expense of another neutral group, which must defend itself in turn.

“Special interests” are a consequence of the coercive power of government 

The existence of “special interests” is just a symptom of the disease: the growth of government power to a degree that allows those in power to violate our rights and steal our property for the benefits of their constituents. Populist “maverick” politicians who claim that they will “fight special interests” and “change the culture in Washington” are just attempting to subvert the power of the state to favor their particular constituency. Campaign finance regulations are just monopoly privileges created by the political élite to hide corruption from the public and make it more difficult for those without political connections and money to get elected and in order to defend themselves or join in the looting.

The solution to special interests is to remove to interventionist power of the state

The only solution to the problems caused by interventionism is to end interventionism – to separate government and economy. Take away the power of the government, and you will remove both the incentive and the power of the “special interests.” As long as governments try to control people and businesses with laws that go beyond the protection of property rights, the “special interests” will have the incentive to control governments.

Further reading:

• Ludwig von Mises: Middle-of-the-Road Policy Leads to Socialism
• The One Minute Case Against Interventionism
• The One Minute Case For Capitalism

Philosophy is the field that looks at the most basic, universal questions about existence. While other sciences study certain aspects of things, or certain types of things, philosophy is concerned with the most abstract questions about existence and man’s role in it. Philosophy asks questions such as: How can we know what is true? What is our purpose in life? How should we act? How should we organize society?

Philosophy is inescapable

Why are you reading this? Do you want to learn something? Why value learning? Is it because you value knowledge or because you want to have a successful career? Why should those things matter to you? Is it because your parents said so, because you enjoy something, or because society needs it? Is your own happiness or obligation to others more important to you? How should you decide? If I tell you that something is good for me, does that also mean that it is good for you? Is the good the same for everyone or different because of culture or nationality or personality? Is something is true, is it true forever, or only for today? Are people good or bad? Are you? Why are some people more successful than others? Is happiness a matter of luck? What is a good life? How should you pick your friends? Can anyone know any of these things, with certainty, in the same way that we know that 1+1=2?

All these questions are answered by philosophy. You may never have thought about philosophy until today, but all conscious human action depends on a certain view of existence. All actions assume a certain view of existence, causality, and values. We have no choice about whether we have a philosophy. We can only choose what philosophy to adopt. We can subconsciously, passively, and uncritically accept the philosophy we are exposed to or, we can consciously, actively, critically, examine the ideas around us and accept them because they are true, not because we happened to live in a particular time and place.

Philosophy is the science of universal principles

Philosophy asks: what can we know and how can we know it? We re-examine the world as if discovering it for the first time and accept only that which we can prove to be true.

Why is this important? You might say that you know what is real because I can see and touch it. But not all knowledge is perceptual. If I tell you about an abstract idea, such as justice, how do you know if it is true? Because you feel it is true? Because others tell you it is true? Because you see it is true? But what can you point at to show what justice is? And can you be sure that something that is true to you is also true for everyone else and at all times?

The point of treating thinking as a science is to arrive at firm principles. You can live without an explicit philosophy if you live a primitive life and hunt animals in the jungle. But if you want to build an airplane to fly you across the world, you need a formal science of physics and engineering. And to live a successful life as a civilized human being and create a better future than the past, you need an integrated, scientific view of existence provided by philosophy. Philosophy has the power to make abstract concepts such as justice as clear as the things we can see and touch.

History is philosophy in action

The politics, culture, and economy of any society are formed by the ideas of the people who live in it. If most people believe that it is impossible for them to live without using violence against each other, than their society will be poor and violent. If people believe that whatever their ancestors practiced and believed is good enough for them, then they will continue to live just like their ancestors.

A few hundred years ago, most of the world believed that history was just an account of one ruling regime being replaced with another. If anyone believed in a better time, it was in the past, when great empires had existed and fallen. Today, people had a very different view of history. We believe in progress, in continuous improvement, in fundamental change in society and economy. These ideas have power: during the last 200 years, the world population increased from under 1 billion to over 7. Why did this happen? The world has embraced the technological and economic progress made possible by Western philosophy. A rational philosophy can offer a unifying explanation of man and his universe and a guide for people and societies to achieve values and peacefully coexist.

World human population (est.) 10,000 BC–2000 AD.

What is a moral code?

Morality is a code of rules or principles to guide one’s actions. Before deciding which principles man should live by, any moral theory must first explain why it is needed at all. Is it an arbitrary invention, or does it have some basis in reality? Is it universally true or different for every person? According to Objectivism, morality is objective: it is derived from our nature of human beings.

Life is the standard of value

All living entities must satisfy certain requirements (food, shelter, air, etc.) to remain alive. This is what sets life apart from inanimate matter. Life is a continual process of self-generated, goal-directed action. Only living things face the possibility of death and therefore the need to achieve values to remain alive. Only for living things can something be good or bad. The fact that life is conditional is the basis of values.

Values are automatic for non-volitional beings

The values needed for life are specific to the nature of each being: fish need water and worms; man needs food, clothes and shelter. Animals have claws, fangs, fur, and other traits to allow them survive in nature. These are their means of survival. For non-human animals, values are automatic: their instinct tells them that they must act in a certain way (hunt, run, reproduce) in order to remain alive. Animals neither need nor are capable of morals because they act according to instinct. Their instinct tells them that they must act in a certain way (hunt, run, reproduce) in order to remain alive.

For humans, our conscious, rational mind is our primary tool of survival

Human beings live by using our mind as the primary tool of survival. We pursue long-term goals to achieve the values needed for our life. Imagine a human being trying to live without choosing his values, like any animal: he would act on whatever he felt like doing from moment to moment. He would experience the drives to eat, reproduce, fight, and fear. But humans have urges, not instincts — it is up to our minds to decide how to achieve values. For a human being in nature, living without long-term goals is suicide.

Ethics provides a framework for long-term goal achievement

To consistently act towards long-term values, we need a consistent set of principles for living: a moral code. We need to recognize the facts relevant to our nature as human beings and live according to them over a lifetime. To recognize and act in accordance with reality is rationality. Morality is a means to an end — the end being life. If you want to live, then you must be rational.   The purpose of morality is to fulfill and enjoy one’s own life.

Rationality is the primary virtue 

The Objectivist ethics recognizes rationality as the primary virtue for man and productive achievement as his central purpose. To remain alive, we must focus on the facts and act accordingly. The choice to think and act rationally is the basis of virtue and life, and the choice to evade reality and abandon reason is the basis of evil. The primary virtue, from which all other virtues derive, is rationality, and the proper beneficiary of values is oneself.

Happiness is man’s highest moral purpose

According to Objectivism, each person should act to achieve the values required for his own life, neither sacrificing himself to others nor sacrificing others to himself. Productive achievement is the central purpose of life, which integrates all his other values. Virtues such as productivity, independence, honesty, integrity, and justice are aspects of rationality: living according to the requirements of life as a human being. Happiness is the result of successfully achieving values, and man’s highest moral purpose.

Further reading

• The Ayn Rand Institute: The Objectivist Ethics, by Ayn Rand
• The One Minute Case For Individual Rights
• The One Minute Case For Capitalism

The essential difference between these schools is in their solution to the problem of human values. Liberals see individuals as rational, self-interested, and autonomous beings who can best resolve their conflicting material and spiritual values through voluntary cooperation. This means advocating a free market with a free marketplace of ideas (i.e. a pluralistic society) being its essential corollary.

Conservatism and Marxism also sees the individual as self-interested, but therefore as fundamentally irrational, corrupt, and unable to resolve conflicting values independently. Conservatives believe that individual desire is inherently corrupting and therefore advocate centralized guidance and control of spiritual values, and prohibition of material goods which might lead to spiritual corruption. Marxists believe that the pursuit of material goods is inherently violent and conflicting, and the essential controls must be of material pursuits. Marxists belittle ideas as irrelevant and advocate control of self-interested motivates through centralized social structures such as compulsory state-run schools. Conservatives are explicitly opposed to the marketplace of ideas, while Marxists explicitly view ideas as irrelevant, but in practice ruthlessly suppress dissent when it conflicts with their policy goals.

Since man is an integrated being, both Conservatives and Marxists end up advocating the same policies in the downward spiral to prevent the perverse consequences of the controls they instrument. Unchecked, they both lead to tyranny.
It should be noted that these are only tendencies and the vast majority of people are some combination of these three perspectives.  Judging intellectuals means evaluating the particular combination of these perspectives. Furthermore, these perspectives are not primaries, but derivates of a basic perspective of human nature. This means that political views rarely change directly, but rather filter up through changes in a person’s basic view of human nature.

See Also

• Wikipedia: the development of Western conservatism
• Wikipedia: Marxism
• Wikipedia: Classical Liberalism

When the Obama administration talks about healthcare reform what they are really talking about is using the coercive power of the government 1) to force healthcare providers to provide services at lower costs 2) to force individuals to choose the least expensive healthcare and 3) to force people who are not receiving those services (aka taxpayers) to pay for them.

Does everyone have a right to healthcare?

Not in the colloquial sense. Everyone does have a right to healthcare, but not in the sense that the administration uses it. The right to healthcare means that man had the right to take the actions necessary (e.g. working) in order to earn money and spend that money as he sees fit – in this case, on his healthcare. It does NOT mean that other people (or the government) must provide him with healthcare.
Thus, we see that the administrations proposed actions will secure the supposed “right” of everyone to have healthcare paid for by other people by undermining the actual, moral, right of individuals to choose, and pay for, their own healthcare goods/services.
“The end does not justify the means. No one’s “rights” can be secured by the violation of the rights of others.”
“The Cashing-In: The Student Rebellion” Capitalism: The Unknown Ideal, 256.

Should the government use force against its own citizens?

No. The purpose of the government is to protect the private property of its citizens against other citizens (the police) and against foreigners (the army). Any further expansion of the governments power beyond this mandate is not only immoral, but unconstitutional. The simple fact that some group of people chosen by the government (in this case, those without healthcare) would benefit from the governments use of force does not create a moral right to use force. This precept is DeToqueville’s “Tyranny of the Majority” in a practical sense, and is exactly what the Founding Fathers intended to protect us against by founding the USA as a republic backed by a bill of rights, instead of as a direct democracy.

Why is the government’s initiation of force immoral, if the goal is to benefit the “public good”?

“Just as no individual has the right to initiate force against anyone, neither does any group of men, in any private or public capacity. It is immoral to initiate force against any individual for any reason. This includes the initiation of force for “the public good.” The “public” is merely a collection of individuals, each possessing the same rights, and each being an end in himself. Any attempt to benefit the “public good” is an immoral attempt to provide a benefit to one group of individuals at the expense of another. In a free society, no individual benefits at the expense of another: men exchange the values they create in voluntary trade to mutual gain. The rule of law in a free society has just one purpose: to protect the rights of the individual.”
The One Minute Case for Capitalism: HeroicLife

Regardless, can the government lower prices of healthcare services?

Prices are determined by the marginal value of a good/service, not a government edict. If the government forces providers to set the price of a good/service below its cost, providers will no longer provide the good/service. If the government forces providers to lower prices, but not to lower them below cost, the government will be redistributing the profits of the HC provider to the HC consumer – thereby starving the R&D engine of modern medicine of its much needed fuel, capital.

Well then, how can the prices of healthcare be lowered?

The price of HC, like any other good/service, can only be lowered through increased productivity and innovation. Productivity in the production of healthcare goods comes directly from the concerted rational effort of those companies who stand to profit from that productivity – big pharma, providers, payers, etc. Stripping away the reward for their productive achievements – profit – severely dampers the incentives for the companies who provide HC goods/services to continue improving productivity and driving innovation. Thus, the only way to properly incentivize lower HC costs is by allowing entrepreneurs and businessmen alike the freedom to fully profit from the risky investments they make in healthcare innovation and productivity improvements.

What will be the direct results of the governments actions?

First, on taxation. The increased taxes proposed to finance healthcare reform, especially those on the rich (who create most of the value in the USA) will serve to disincentivize productivity and innovation.
Second, on providing healthcare. The proximate result of the governments proposal will be rationing, in its purest sense put forward by Ayn Rand in a letter to a friend “[Rationing means] to distribute [goods and services] in a certain particular manner–by the decision of an absolute authority, with the recipients having no choice about what they receive.”
Rationing, it must be made clear, is not the same as the distribution mechanism that occurs in a free market – where the price of a good determines how it is distributed – primarily because in a free market distribution decisions are made by individuals volitional choices, whereas in a rationed market distribution decisions are made by government edict. The government’s actions, in this case, will effectively eliminate some (if not all) of the choices you have in determining the way in which you receive healthcare.

What, then are the real drivers of our health care problems?

Primarily, that no free market currently exists in healthcare. Massive amounts of regulation by the FDA and other government bodies result in dramatic increases in the cost of medicine. Using Big Pharma as an example, the government has two quantifiable impacts. Directly, the cost of developing a drug in compliance with FDA processes costs roughly ~$1 billion per drug, money that would otherwise be used to fund further innovation or be passed on to consumers in the form of lower prices. Indirectly, the extended time it takes for the FDA approval process (roughly 10 years from patent application to market introduction) cuts the effective life of a pharmaceutical patent in half – stripping the PharmaCo of half of its potential profitability. (Barrons, June 2, 2003 Editorial Commentary: Gary Hull: Patent Piracy.)

Further reading

• The One Minute Case Against Socialized Healthcare

The cosmological argument

Some religious individuals argue that whatever begins to exist has a cause and since nothing causes itself, there has to be a First Cause, namely God. There are several objections to this argument, some of them being as following;

• What caused the First Cause? By making use of the cosmological argument one presupposes that an uncaused effect exists, enabling it to cause a chain of effects without being caused itself. Seeing that the argument is reliant upon the premise that all effects have a cause it is in consequence invalid.
• The First Cause is by no means equal to a deity. Even though the origin of the universe remains scientifically unexplained, it doesn’t justify supernatural religious claims.

The Teleological argument [Intelligent Design]

This argument states that some phenomena are too complex, or too apparently purposeful, to have occurred randomly. Therefore, these phenomena must have been designed by an intelligent or purposeful being (God).

- Who designed the designer? If an intelligent designer only is able to design irreducibly complex units, then an even more intelligent designer is necessary to design the original designer. This entails an infinite chain of designers. To counter this counter-argument some individuals make use of the cosmological argument. However, as explained above, this argument fails because it omits why a designer can be undersigned while the universe cannot.

William Paley’s watchmaker analogy makes use of this argument, and is to this date one of the most famous teleological arguments. He argues that there are structures which cannot function unless all substructures are present. By asserting that each substructure constitutes no benefit alone, evolutionary theory is unable to explain the substructures presence. Since the substructures presence cannot be explained, the whole structures presence cannot be explained either. Counter-arguments are as following:

• There is a probability that all substructures came into existence simultaneously.
• Substructures may have changed in function. A gradual replacement by several advantageous substructures’ function can lead to the evolution of structures claimed to be irreducibly complex.

The omnipotence paradox

Most, if not all, monotheistic religions claim the existence of an omnipotent God. This argument leaves the concept of omnipotence as a mere paradox unable to exist in a logical universe. If a deity is in fact omnipotent, then he is able to create a rock he himself cannot lift. Since he cannot lift the rock he just created he is not omnipotent.

Argument from free will

All monotheistic religions claim their god to be omniscient, and at the same time claim to have been given free will by the very same god. These two concepts are incompatible. Here is why: An omniscient being knows everything, including the future will of his supposed free willed- designees. Since the will is already known, it cannot be free at the same time.

Other[inductive] arguments state that a complete being (God) must also be dead or non-existing in order to be fully complete. Furthermore, some conclude that since most theistic religions eventually were regarded as untrue, all theistic religions are most likely to be untrue. Stephen F. Roberts formulated this beautifully by saying:
“I contend that we are both atheists. I just believe in one fewer god than you do. When you understand why you dismiss all the other possible gods, you will understand why I dismiss yours.”

See Also

• The One Minute Case For Atheism

Parents ought to want healthy children

While there are many valid motivations to become a parent, in choosing to create a human being, parents assume a moral obligation to provide for and educate their children to become independent, mature adults. Beyond the legal obligation of providing minimum care, to the extent that parents love and value their children (and there is no reason to have children otherwise), parents ought to strive to maximize their child’s ability to become fully functional adult human beings – physically, spiritually, socially, romantically, etc. This means providing both appropriate education, and taking care of their physical needs.

Health can be objectively defined in relation to the requirements of human life

It is possible to make judgments about which mental and physical states are objectively superior in relation to other states. For example, a broken leg, a bout of flu, or a headache are undesirable because they prevent one from accomplishing a whole range of actions which are required for human life. We recognize this when we use technology (medicine) to help people overcome and heal from their injuries and illnesses. The same applies to genetic physical and mental deformities, which adversely impact one’s ability to accomplish his values. If someone suffers from clinical depression or schizophrenia, we offer them drugs that improve their ability to use reason to deal with reality and achieve the values they desire. If healthy, successful, productive human life is a value, then it is moral to use all available technology to maximize human potential to achieve the values they desire.

Biotechnology adds new tools to an ancient arsenal of genetic techniques for better offspring

If health is desirable and can be objectively defined, then parents ought to choose to have healthy children. They do this in a variety of means: Genetically, humans instinctively seek mates likely to produce healthy offspring – this is the basis of selective sexual attraction based on physical traits. Consciously, parents choose partners who share their child-rearing values. They also take measures to prevent child defects, such as abstaining from drugs during pregnancy and choosing to have children earlier in their life. Genetic counseling and prenatal screening are just two new tools for enhancing an ancient process.

The Gattaca objection confuses the potential for the actual

The Gattaca objection to screening undesirable traits is that people with undesirable traits have made many valuable contributions, and are capable of living fully productive lives. Supporters often give examples of great scientists like Albert Einstein or Stephen Hawkins with genetic or developmental abnormalities, or of people with serious impairments such as Down Syndrome who nevertheless hold jobs and assume most of the functions of normal adults.

This objection confuses between the seen and the unseen. What we see is that many people with undesirable traits are unusually successful, either in relation the average person, or to people with their symptoms. What we don’t see are all the people who failed to achieve their values because of their symptoms. If their genotype or embryo had been eliminated before birth, the unhealthy people would not exist, but an equal number of healthy people would. Unless the undesirable symptom itself contributed to their success, the percentage of unusually successful healthy people would be far higher than the number of extraordinarily successful unhealthy people. Certainly, healthy people would have a better chance at a normal life than someone with a chronic syndrome such as Down Syndrome, Tay-Sachs, or Spina bifida.

Genetic diversity is valuable – but only if it is used to enhance human life, not impair it

The “neurodiversity” movement opposes genetic screening on the grounds that atypical neurological development should be recognized and respected. The movement has a valid point insofar as neurodiversity has played a critical part in the development of human civilization. If every human being had exactly the same intelligence and developed in the same way, we would have no great scientists, artists, intellectuals, or entrepreneurs.

Unfortunately, the neurodiversity advocates only support “diversity” when it is due to ignorance, not conscious choice. They support a baby being born with Autism, Parkinson’s disease, dyslexia, or other disorders because the parents had no choice in the matter, but they oppose giving the parents the power to choose to have a child which is healthier than he would “naturally” be. If most parents could consciously choose what traits to give their children, they might prefer more intelligence, curiosity, a longer life, or stronger muscles. These are also varieties of genetic diversity.

Objections to genetic counseling and gene engineering are ultimately objections to technology

Few parents would choose to have their children be born blind, deaf, retarded, or crippled. Yet this is precisely what the “diversity” advocates want: to prevent parents from being able to improve on the “natural” forms of biodiversity.  Traits due to  sexual selection, random genetic mutation, and embryonic variation are acceptable to them, but traits due to conscious human choice are not.

Genetic screening via sexual selection has been practiced since the dawn of life itself.  No one suggests that we should pick a mate entirely at random, so the objection to genetic screening and engineering is due to the element of technology. Their objections are not to “designer babies” as such, but to the use of technology to improve the lives of human beings. They apply equally to a child whose genes are altered after birth, or to an adult. The logical conclusion of this neo-luddism is the opposition of all man-made improvements to human life as “unnatural.”

Bankruptcy is a financial state that occurs when a person or business can no longer repay its debts. In the legal sense, bankruptcy begins when a court recognizes that the financial state of bankruptcy exists. The bankruptcy court takes charge of the bankrupt entity and disposes of its assets or reorganizes it to pay off as much of the debts as possible.

A bankruptcy proceeding recovers money for the creditor, but both parties benefit.

The purpose of a bankruptcy proceeding is to facilitate the maximum recovery of the money owed to the creditor. But it also benefits the debtor. After the debtor pays off what he can, his remaining debt is extinguished. This is not a “get of jail free” card; the debtor, whether a person or business, must face the damage to its reputation and a greater difficulty in obtaining credit for a long time into the future. Rather, it is an acknowledgement that the debtor simply cannot repay his debt. For both parties, bankruptcy offers timely resolution to an otherwise unsolvable dilemma. The creditor regains a portion of the money owed, and the debtor, relieved from the burden of a debt he cannot pay, can move on with his life.

Bankruptcy is economically valuable.

In economic terms, a speedy and fair process of bankruptcy allows both assets and people to resume being productive as quickly as possible. The creditor regains cash that it can redeploy as it sees fit. If it is a bank, it has regained funds that it can loan out again to more productive businesses or creditworthy individuals. The creditor can also redeploy the assets of the bankrupt entity into the hands of a more capable manager.

Take the financial malaise of General Motors as an example. Although effectively bankrupt, there has been no legal recognition of this fact (as of this writing in March 2009). As a result, its factories and workers continue to be tied up inefficiently making mediocre cars. General Motors is a drag on the American economy.

Bankruptcy would free General Motors’ factories and employees to be more productive. Once a court legally acknowledges General Motors’ bankruptcy, it could allow General Motors’ new owners, its creditors, to appoint a more competent manager. Or the creditors could sell the plants to a superior car manufacturer, such as Toyota. Either way, after reorganization under bankruptcy, the plants would be used to make cheaper, more attractive cars that customers want to buy.

The creditors may also choose to shut down some or all of the plants and sell them for scrap. But recycling the old plants into new steel that becomes the girders of modern, efficient factories is a better use for those plants if they are obsolete. No party is in a better position to make these judgments than General Motors’ creditors, who have their financial self-interest at stake.

While General Motors is just a single, albeit enormous, example, speedy and fair bankruptcies end the bleeding of money-losing operations across the economy, and re-direct inefficiently utilized assets and capital to more productive activities. In sum, bankruptcy facilitates economic recovery. A failure to permit bankruptcy prolongs stagnation.

Some fallacies about bankruptcy

Bankruptcy always means shutting down a business. This is not true. Creditors, in consultation with the bankruptcy court, decide whether to shut down and liquidate, or to operate under new management. Creditors have every incentive to make the decision that maximizes their pay-out over time, not just the amount of cash that can be had right now.

Bankruptcy is bad for employees. Considered in full context, bankruptcy is good for employees. An economy with speedy and fair bankruptcy procedures is one where healthy, growing companies predominate. Healthy companies can pay employees more because their labor is worth more to them. Therefore, employees benefit from bankruptcy, even if someone occasionally faces dislocation or the uncertainty of working for new management. But, even if employees dislike such occasional dislocation, there is no alternative to bankruptcy if their employer is not financially viable.

Bankruptcy allows deadbeats to avoid meeting honest obligations. When bankruptcy laws are properly drafted and applied, this is the exception rather than the rule. Bankruptcy laws are designed to protect the rights of all parties, not to unfairly favor debtor or creditor. Bankruptcy acknowledges a fact, that the debtor cannot repay all his debts, and it facilitates the repayment of all debts that can be repaid.

Government should stop bankruptcies. During financial panics, governments sometimes try to prevent bankruptcies by putting moratoriums on them, subsidizing bankrupt entities, or changing the laws governing bankruptcy to favor debtors. Such interventions are both unjust and impractical. They are unjust because they deny the legitimate right of the creditors to collect what they are owed. The money they are owed is their property, and they have the right to collect it, to the extent it is reasonably possible. Such interventions are unjust and impractical because they attempt to deny reality. “Stiffing” the creditors or forcing innocent third parties to bail out the bankrupt entity through subsidies does not change the fact that the bankrupt entity cannot repay its debts.

Bankruptcy is moral.

Bankruptcy is just, if resolved through a fair and speedy judicial process. A bankruptcy proceeding acknowledges the actual state of affairs that exists, that the bankrupt entity cannot repay its debts. It resolves this dilemma for the maximum benefit of the creditor, but in so doing allows both parties – debtors and creditors – to resolve this matter with finality, and move on with their lives. Bankruptcy only involves the parties to the debt obligation. It does not require that innocent, third parties be forced to subsidize or bail out creditors or debtors. In doing so, it respects the rights of all concerned.

A just process of bankruptcy is also economically practical. Bankruptcy removes assets from those who have mismanaged them, and puts them into the hands of those who are most capable of putting them to productive and financially responsible use.  The institution of bankruptcy is an essential part of a prosperous and just capitalist society.

Economic growth is made possible by forgoing current consumption. For example, consider the case of a teenager considering whether to save money for his future. If he spends his salary on toys and trinkets, he will never accumulate any savings. If, on the other hand, he minimizes expenses and saves money for college, he will forgo current consumption and invest in capital improvements. The same tradeoff applies to all consumers and producers: capital improvements require a sacrifice in current consumption to invest resources needed to expand future production.

Production, not consumption drives economic growth

The lack of a consumer culture is not an impediment to economic growth, as resources that are not consumed are invested into new markets and production capital. If a consumer forfeits a new car now to buy a better car at some point in the future, his savings are not lost. Instead of being directed into present consumption, his savings become the investment capital for new factories and R&D into cheaper and better cars. This is why such high economic growth is possible in “Asian tigers” such as Hong Kong and South Korea – high rates of savings support rapid technological progress and investment into industry at the cost of a much more frugal lifestyle than in the West.

Capital has structure

Politicians and the media treat GDP as a single number, but it is crucial to understand that producers face a choice between producing consumer goods and investing in intermediate goods used to create consumer goods. Those goods differ as well: a factory owner can invest in merely maintaining his factory, building a similar factory to expand production, or engaging in a long-term research and development program in a new product or production process. Thus, the goods produced by an economy can be one, two, or more level removed from consumer goods.

Capital investments require savings and stability

Economic and technological progress requires that entrepreneurs make long-term investments in intermediate production goods many levels removed from the consumer. In order for this to happen, two things are necessary: that consumers forgo current consumption to invest in future production, and that reliable long term predictions can be made about future savings rates and demand patterns.

Monetary policy disrupts economic growth

Governments control over the currency allows them to use monetary policy to achieve short-term economic goals, such as increasing GDP. But the consequences of artificially manipulating interest rates are disastrous. By expanding the money supply through manipulation of interest rates or (as is happening now) sending money directly from the printing presses to banks and other corporations, the government is devaluing savings and redirecting them into increased consumer spending. This improves the economic statistics in the short run at the cost of wiping out the resources set aside for long-term capital improvements. Furthermore, the arbitrary nature of government intervention in the economy makes long-term predictions about future savings and demand impossible.

Let the market direct savings and investment or face financial ruin

There is no single right answer  to the tradeoff between current consumption and the savings available to invest in future production and increased economic growth. Every individual must choose for himself how to balance present spending with investments in his future. In a free market, the sum of individual savings rates becomes the real interest rate.

For the last few decades, America’s spending binge has been funded by foreign investment and rapid technological innovation, but ultimately, unless we drastically cut our consumption, and direct our income into savings and repaying our debts, we will find our money increasingly worthless both here and internationally.  The dire consequences of hyperinflation can be seen in Zimbawbe, where life expectancy has declined from 60 to 37/34 years, unemployment is at 80%, and as much as half the surviving population has left the country.

Further Reading

• The One Minute Case for the Austrian Business Cycle Theory
• Friedrich Hayek. The Paradox of Thrift 1929
• Ludwig Lachmann. Capital and Its Structure 1956
• Israel Kirzner An Essay on Capital 1966

What determines wages? Can employers pay workers whatever they want?

A wage is the price an employer pays for the services his employee. While the two may negotiate any wage they come to mutual agreement on, the mutual self-interest of both and market forces intersect at a market-set price that represents the intersection of their interests. Disregarding non-economic factors, an employer wishes to pay his employee as little as possible. The maximum amount he will pay however is the value of the marginal productivity a given worker provides. (The marginal productivity is the value per unit of time the worker provides to the employer.) If the worker refuses to work at or below his marginal productivity, then the employer will not hire him, since doing so will incur a loss. Conversely, disregarding non-economic factors, the employee wishes to be paid an infinite amount. The minimum wage he will actually accept is the marginal value of his labor. This can be measured in terms of the next-most useful value-producing activity the workers may engage in.

For example, suppose that my marginal productivity as a programmer is $30 per hour. I will accept any job paying above $30 an hour, but no job below it, since I can find an employer paying that much in another computer or tech-related industry. A fast-food worker might have a marginal productivity of say, $6 an hour – the value per hour that his labor creates for the business. From the employer’s perspective, I create $40/hour of value, and the fast food workers creates $7 of value, so he will be willing to hire us. (Assuming that no one is willing to provide the same value for a lower wage.) However, if I only provide $20 of value, the employer will not hire me, because he would incur an hourly loss of $10 in doing so. Similarly, if the fast food worker only provides $5 of value, he would not be hired either because he would cause a loss of $1 for each hour he works.

Can the government increase wages when employers don’t pay enough?

Suppose that the government imposed a minimum wage of $8. Would the fast food worker who provides a value of $7 per hour now be paid $8? No, he would lose his job – because keeping him would mean a $1 loss for each hour he works to his employer. All minimum wage laws have a similar effect – they cause everyone with a marginal productivity below the minimum wage to lose their jobs – most often teenagers and the very poor. Wage caps (including progressive income taxes) have a similar effect – they lead the most productive individuals of our society to retire early or forgo new opportunities — resulting in a lost opportunity for them, and for everyone who might have benefited from their ideas.

What if the government creates a job by paying an unemployed worker to do make-work such as digging holes in the ground?

Where would the money to pay for his wage come from? It would have to be taken by force from the remaining employed fast food workers and computer programmers. Everyone will be paid less to pay for the government workers, but has a job been created? No – now the fast-food employer has $1 less to pay to his other $8 employees, so he must fire some of them or go out of business. Each new $7 government worker costs at least one $7 privately employed worker. This is always a social loss because by definition, the government worker is less productive. If he were not, then the private business would voluntarily employ workers to perform his job.  While a minimum wage causes everyone who produces less than the marginal productivity of the minimum to lose his job, each new government job causes at least one more productive worker to lose his job.

If the government cannot raise wages, can it lower prices?

Prices are determined by the marginal value of a given good, just as a wage is determined by the marginal productivity of an employee. Attempts to regulate the cost of goods have the same effect as wage controls: if the price is set below the cost of a good, producers will be unable to make any.   Since different producers have different costs, lowering the prices of a good will decrease the percentage of producers able to supply them, until they can make none at all.

So how can prices be lowered?

The only way for prices to go down is to increase the productivity of workers.  Productivity in the production of a good comes from the application of mental effort to the production of values. A profit (the difference between the value of a good to a consumer and the cost to produce it) is the reward of an entrepreneur for bringing about the new wealth he’s created. In the absence of government coercion, profits can exist only as long as men continue to create new values ,or improving on existing ones.  The only to make goods cheaper is to allow entrepreneurs the freedom to invest in improvements in the capital and labor methods used in production

Doesn’t a more efficient product result in lost jobs for those who were replaced by automation or better processes?

When oil lamps replaced candles, the cost of producing affordable lighting greatly decreased. In the absence of a government monopoly, competing lamp-makers quickly started making their own lamps, which brought the price decrease to the consumer. In the process of transitioning from candles to laps, many thousands of candle-makers lost their jobs.  However, oil lamps did created a new industry of their own and increased the prosperity of society as a whole, just as electric lighting did in the 20th century.  Since consumers could buy cheaper lamps, they now had more money to spend on other things, ,creating new industries, and raising their overall standard of living.

Technological progress and capital accumulation has both created new careers made us enormously more productive – we not only have a wider range of vocations to choose from but work far fewer hours.

Can government “soften the blow” when all these candle-makers lose their jobs?

In today’s world, the government would probably try to subsidize the candle or lamp-makers when their chief product became outdated. What would that subsidy accomplish? It would save the candle-makers jobs – but it would cost the jobs of everyone who stood to benefit from the increase wealth that came from cheaper lights. In the short term, the candle-makers might benefit – but in the long term, they would lose too, since they would lose the new, higher paying jobs the could have making electric lights and the new products the cheaper lights would allow consumers to afford. Meanwhile, the Thomas Edison’s, Graham Bells, Thomas Moore’s, and Bill Gates’ would be too busy working to pay off taxes to have the time or money for research.

Of course, we know that these inventors and entrepreneurs succeeded. But how many didn’t because they never got their first break in the field because of a minimum wage, or gave up before they tried because the red tape was too much, or the taxes too high, or they knew that the old, outdated industries would use the government to tax and regulate them out of existence? The real tragedy is that we will never know.

A capitalist society is based on the recognition of individual rights, including property rights. Under capitalism, all property is privately owned, and the state is separated from economics just as it is from religion. Economically, capitalism is a system of laissez-faire, or free markets, where the government plays no part whatsoever in economic decisions.

Capitalism is the only social system compatible with the requirements of man’s life

To pursue the values necessary for his life a society, man requires only one thing from others: freedom of action. Freedom means the ability to act however one pleases as long as one does not infringe on the same and equal freedom of others.   In a political context, freedom means solely the freedom from the initiation of force by other men. Only by the initiation of force can man’s rights be violated. Whether it is by a theft, force, fraud, or government censorship, man’s rights can be violated only by the initiation of force. Because man’s life depends on the use of reason to achieve the values necessary for his life, the initiation of force renders his mind useless as a means of survival. To live, man must achieve the values necessary to sustain his live. To achieve values, man must be free to think and to act on his judgment. To live, man must be free to think. To be free to think, man must be free to act. In the words of Ayn Rand, “Intellectual freedom cannot exist without political freedom; political freedom cannot exist without economic freedom; a free mind and a free market are corollaries.”

Capitalism recognizes the inherent worth of the individual

In a human society – one that recognizes the independence of each man’s mind – each individual is an end in himself.  He owns his life, and no one else’s.  Other men are not his slaves, and he is not theirs.  They have no claim on his life or on the values he creates to maintain his life, and he has no claim on theirs.  In a free society, men can gain immense values from each other by voluntarily trading the values they create to mutual gain.  However, they can only create values if they are free to use their minds to exercise their creativity.  A man is better living off on his own than as a slave to his brothers.  Capitalism recognizes each man as an independent, thinking being.

The individual is an end in himself

Just as no individual has the right to initiate force against anyone, neither does any group of men, in any private or public capacity. It is immoral to initiate force against any individual for any reason. This includes the initiation of force for “the public good.” The “public” is merely a collection of individuals, each possessing the same rights, and each being an end in himself. Any attempt to benefit the “public good” is an immoral attempt to provide a benefit to one group of individuals at the expense of another. In a free society, no individual benefits at the expense of another: men exchange the values they create in voluntary trade to mutual gain. The rule of law in a free society has just one purpose: to protect the rights of the individual.

Capitalism leads to freedom and prosperity

A free, capitalist economy has never existed anywhere in the world. The closest the world came to a free market was during the Industrial Revolution in Great Britain and during the late 19th century in the United States. The Industrial Revolution was a period of unprecedented economic growth and unimaginable improvements in quality of life. In less than two hundred years, the life of most people in the Western world changed from a a short life filled with poverty, plague, and near-constant war to a modern, comfortable existence that  even the kings of medieval Europe couldn’t have imagined.  Since 1820, the leading capitalist nations have increased their wealth sixteen fold, their populations more than four-fold, their productivity twenty-fold.  Annual working hours went from 3,000 to less than 1,700 and life expectancy doubled from thirty to over seventy years. ¹

Yet despite the undeniable material superiority of capitalist societies, its critics continue to attack it as inhuman and selfish.  What the world lacks is not evidence of capitalism’s practical superiority, but a moral defense of a man’s right to his own life.

Reference

1. Angus Maddison. Phases of Capitalist Development, p4 (1982)

Further Reading

• Andrew Bernstein: The Capitalist Manifesto
• Ayn Rand: Capitalism: The Unknown Ideal
• The One Minute Case For Individual Rights
• The One Minute Case Against Interventionism
• The Capitalism Site

A free, capitalist economy has never existed anywhere in the world. The closest the world came to a free market was during the Industrial Revolution in Great Britain and during the late 19th century in the United States. The Industrial Revolution was a period of unprecedented economic growth and unimaginable improvements in quality of life. In less than two hundred years, the life of most people in the Western world changed from a a short life filled with poverty, plague, and near-constant war to a modern life that even the kings of medieval Europe couldn’t have imagined.¹ This miracle was made possible by the philosophical and political ideals formed during the Enlightenment, and the freedoms demanded and fought by the philosophers, statesmen, and entrepreneurs of Western civilization. Yet the Enlightenment also laid the sees for the collectivist and materialist ideology behind socialism, which struck the first major blow against capitalism with the Sherman Antitrust Act of 1890.

Capitalism declined with the rise of collectivism in the 20th century

The assault on free markets was intensified by Herbert Hoover, who imposed unprecendented regulations of Wall Street to eliminate “vicious speculation”, regulated labor markets, and created government works programs.² FDR inherited these programs and created numerous government agencies which made the financial industry is the single most regulated industry in the economy and turned an economic recession into the Great Depression.³ The Federal Reserve was supposed to stabilize the currency, The FDIC was supposed to prevent bank runs, the SEC was supposed to be stop shady investments, Fannie May and Freddie Mac were supposed to make homes affordable to everyone. Yet also these restrictions on capitalism had the opposite effect of their intended purpose: the dollar has lost 95% of it’s value, the SEC is the main cause of corruption in Wall Street^{4 5}, and housing prices are unstable and highly inflated.

Interventionism is a vicious cycle of wealth destruction

Economic interventionism, also known as statism, exists in every mixed economy – a society in which the government interferes with market economy. In a interventionist economy, the state takes wealth away from from some enterprises and transfers it to other organizations or individuals. Whether it does so through taxation, corporate welfare and bailouts, monopoly privileges, wage and price controls, trade restrictions and tariffs, currency inflation, antitrust regulations, state-ownership of businesses, or “make work” programs, the effect is the same: to punish virtue and competence and reward vice and waste.

All the values created by a business are possible only because its customers value them sufficiently to pay for them. To the extent that any individuals voluntarily exchange value for value without harming anyone else, their actions benefit themselves and harm no one. However, in an interventionist state, the product of those individuals is seized and transferred to those who did not earn it. This is a vicious cycle, because it rewards those in the public and private sector who manipulate the state to seize unearned benefits and punishes the productive individuals who focus on creating values and create products and services that consumers want.

The more the looters seize, the fewer wealth is available to producers. The more productive businesses fail or move elsewhere, the heaver the burden is on those who remain. The more money is taken from the producers, the greater the incentive for the lazy to skim from their labor. When the burden of stealing sufficient wealth outright becomes too unpopular, politicians resort to stealing it by printing money, until the currency of the country becomes worthless, trade becomes impossible, and productive activity grounds to a halt. Inevitably, it is the executives of the productive businesses who politicians blame for the crisis their own policies created.

Entrepreneurs and CEO’s are the unrecognized heroes of the modern world

Capitalism cannot guarantee that all our needs will be provided for – no system can turn mere wishes into reality. But it does give entrepreneurs the incentive to compete to provide the best possible service they can. The brief flowering of freedom during the 19th century created the wealthy, industrial society in which we now live in – but it is being destroyed from within by the collectivist ideology of interventionism. When political connections rather than consumers decide who is allowed what values should be created, entrepreneurs have no incentive to improve their products or to try bold new techniques, and instead spend their resources trying to bribe politicians.  Politicians can force prices to be artificially low, but they cannot lower costs or substitute for the creative risk taking that drives the economy – they can only drive the remaining wealth creators out of existence.

References

1. The Capitalist Manifesto, The Industrial Revolution Brings Advance by Andrew Bernstein, 2005
2. Hoover’s Attack on Laissez-Faire by Murray Rothbard, 1963
3. Robert Higgs: How FDR Made the Depression Worse
4. Robert P. Murphy: The SEC Makes Wall Street More Fraudulent
5. See the The One Minute Case against the SEC

Further Reading

• The One Minute Case For Individual Rights
• The One Minute Case For Free Trade
• The One Minute Case Against Socialized Healthcare
• The Bernstein Declaration by Andrew Bernstein
• Global Capitalism: The Solution to World Oppression and Poverty by Andrew Bernstein