Quote of the Day: Liberalism is No religion, No World View, No Party of Special Interests

Liberalism is no religion, no world view, no party of special interests. It is no religion because it demands neither faith nor devotion, because there is nothing mystical about it, and because it has no dogmas. It is no world view because it does not try to explain the cosmos and because it says nothing and does not seek to say anything about the meaning and purpose of human existence. It is no party of special interests because it does not provide or seek to provide any special advantage whatsoever to any individual or any group. It is something entirely different. It is an ideology, a doctrine of the mutual relationship among the members of society and, at the same time, the application of this doctrine to the conduct of men in actual society. It promises nothing that exceeds what can be accomplished in society and through society. It seeks to give men only one thing, the peaceful, undisturbed development of material well-being for all, in order thereby to shield them from the external causes of pain and suffering as far as it lies within the power of social institutions to do so at all. To diminish suffering, to increase happiness: that is its aim.

No sect and no political party has believed that it could afford to forgo advancing its cause by appealing to men's senses. Rhetorical bombast, music and song resound, banners wave, flowers and colors serve as symbols, and the leaders seek to attach their followers to their own person. Liberalism has nothing to do with all this. It has no party flower and no party color, no party song and no party idols, no symbols and no slogans. It has the substance and the arguments. These must lead it to victory.

This is from the great Austrian Economist Ludwig von Mises, excerpted from Liberalism: In the Classical Tradition, published at the Mises Institute Wire

Quote of the Day: Defense of Liberty Must Emphasize on Principle versus Expediency

What must be developed is a case for freedom that starts with a better demonstration and defense of the nature of man in the world and what is necessary for his survival and improvement. In an age in which religion has lost it hold and appeal for many, such a defense of freedom must have its basis in reason, logic and objective reality.

Central to such a new defense of liberty must be its emphasis on principle versus expediency; that freedom is a tightly woven tapestry of principles that when compromised “at the margin” between individual liberty and political paternalism has the risk of incremental loses of freedom that cumulatively run the danger of an unplanned but no less serious “road to serfdom.”

As Friedrich Hayek argued, minor or marginal “exceptions” to advance seemingly “good causes” through government regulation, redistribution, or planning, always threaten to become a slippery slope:

“The preservation of a free system is so difficult precisely because it requires a constant rejection of measures which appear to be required to secure particular results, on no stronger grounds than that they conflict with a general rule [of non-government intervention], and frequently without our knowing what will be the costs of not observing the rule in the particular instance. A successful defense of freedom must therefore be dogmatic and make no concessions to expediency, even where it is not possible to show that, besides the known beneficial effects, some particular harmful result would also follow from its infringement. Freedom will prevail only if it is accepted as a general principle whose application to particular instances requires no justification. It is thus a misunderstanding to blame classical liberalism for having been too doctrinaire. Its defect was not that it adhered too stubbornly to principles, but rather that it lacked principles sufficiently definite to provide clear guidance . . .

“People will not refrain from those restrictions on individual liberty that appear to them the simplest and most direct remedy of a recognized evil, if there does not prevail a strong belief in definite principles. The loss of such belief and the preference for expediency is no part the result of the fact that we no longer have any principles that can be rationally defended.”

As Hayek argued on another occasion, if the cause of liberty is to prevail once again, it is necessary for friends of freedom to not be afraid of being radical in their case for classical liberalism – even “utopian” in a right meaning of the term. To once more make it a shining and attractive ideal to imagine a world of free men who are no longer slaves to others, whether they be monarchs or majorities.

It would be a world of sovereign individuals who respect each other, who treat each other with dignity and who view each other as an end in himself, rather than one of those pawns to be moved and sacrificed on that chessboard of society to serve the ends of another who presumes to impose coercive control over his fellow human beings.

This is an excerpt from a speech by American libertarian author and Northwood University economics professor Dr. Richard Ebeling published at the Northwood Blog (hat tip Bob Wenzel)

UK’s Blossoming Libertarian Movement?; The Clash of Generations

The libertarian movement seems to be blossoming among English youths.

The Economist observes:

Polls show that the young are more relaxed than others about drugs, sex, alcohol, euthanasia and non-traditional family structures. They dislike immigration, but not as strongly as do their elders. And they are becoming ever more liberal. The BSA has tracked attitudes for three decades. It shows that the young are now far more tolerant of homosexuality, for example, than were previous generations at the same age.

Experimenters with new technologies, fashions and ideas, young people in Britain and elsewhere have long tweaked established social institutions. But their iconoclasm goes further than this. Young Britons are classical liberals: as well as prizing social freedom, they believe in low taxes, limited welfare and personal responsibility. In America they would be called libertarians.

Here is where it gets interesting:

More than two-thirds of people born before 1939 consider the welfare state “one of Britain’s proudest achievements”. Less than one-third of those born after 1979 say the same. According to the BSA, members of Generation Y are not just half as likely as older people to consider it the state’s responsibility to cover the costs of residential care in old age. They are also more likely to take such a hard-hearted view than were members of the famously jaded Generation X (born between 1966 and 1979) at the same stage of life.

The above shows of the intensifying generational conflict brought about by the welfare state.

People “born before 1939” have been the primary beneficiaries of UK’s welfare programs which originated during the 1906-1914 Liberal Welfare Reforms era.  In a Ponzi scheme, they represent the initial investors whose "return" “are “paid out of the investments of new entrants”.  

The new entrants in today’s Ponzi-welfare programs are the young generation, who plays the role of funding the entitlements of the Liberal Welfare generation, which has been intermediated by UK’s welfare state. 

The fragile state of UK’s fiscal conditions reveals that welfare expenditures account for the 25.9% of GDP according to the Wikipedia.org.  This has substantially contributed to the UK’s deteriorating debt conditions now at 90% of GDP. The above chart reveals of the breakdown of UK’s government spending budget

Given the increasing burden from entitlements which has been shouldered by today’s youths, welfare programs are getting to be less appreciated. The wider the generation gap, the more likely resistance on welfare policies.

Add to this globalization and the deepening of the information age,  the rise of UK classical liberals would seem like a natural outgrowth

Yet should libertarian politics deepen, this will likely worsen generational conflict at the risks of triggering social upheaval. Parasites will struggle to resist from losing their hosts.

Nonetheless UK classical liberal-libertarians seem as gaining significant grounds in terms of politics. 

The UK’s Independence Party (UKIP) said to be a democratic libertarian party headed by Nigel Farage may win next year’s European Parliament elections.

From Daily Mail

David Cameron expects the UK Independence Party to win next year’s European Parliament elections despite his pledge to hold an in/out referendum on Europe.

A senior Conservative source said it was now taken as a ‘reasonable assumption’ in Downing Street that UKIP would top the poll next May – sparking a fresh round of Tory bloodletting on Europe just 12 months before the General Election.

The UKIP also performed strongly in the latest local elections.

From the Telegraph:

Nigel Farage, the party’s leader, was jubilant after it emerged that one in four voters supported Ukip in the elections in 35 councils in England and Wales.

The rise of the party cost the Conservatives three local authorities, although Ukip did not win control of any councils.

So the rising politics of decentralization or the renaissance of classical liberalism likewise chimes with the deepening of the information age.

Incidentally, in the latest protest against the Turkish government, this headline seem to herald the spreading of classical liberal-libertarian movement across the world (hat tip Cato’s David Boaz)

Protesters are young, libertarian and furious at Turkish PM, says survey

Remembering Ludwig von Mises on his 131st Birthday

My regular followers know how much my perspectives have largely been influenced by the school of economic, political and philosophical ideas and principles inspired by the great Professor Ludwig Heinrich Edler von Mises and his colleagues and disciples at the Ludwig von Mises Institute where the former is the acknowledged leader.

Although largely unappreciated by the politically brainwashed mainstream. much of Professor von Mises’s views, theories, predictions and warnings are being validated today. Aided by the information age, more and more people are getting to recognize this. 

From Google Trend

Today marks Professor von Mises’ 131st birthday (September 29, 1881- October 10, 1973). 

Professor von Mises set as a personal mission to educate the public from the evils of Socialism.

His life long motto was tu ne cede malis, sed contra audentior ito which comes from Virgil's Aeneid, Book VI; the motto means "do not give in to evil but proceed ever more boldly against it."

Here is the great Mises on the struggle against Socialism

Society lives and acts only in individuals; it is nothing more than a certain attitude on their part. Everyone carries a part of society on his shoulders; no one is relieved of his share of responsibility by others. And no one can find a safe way out for himself if society is sweeping towards destruction. Therefore everyone, in his own interests, must thrust himself vigorously into the intellectual battle. None can stand aside with unconcern; the interests of everyone hang on the result. Whether he chooses or not, every man is drawn into the great historical struggle, the decisive battle into which our epoch has plunged us.

Validating Bastiat: France’s Hollande Scales Back on Wealthy Taxes

Perhaps in the realization that many of the wealthy French, whom have been targeted by the President François Hollande’s “soak the rich” policies, have been exploring overseas refuge, the French government appears to have signaled the softening, if not a subtle backtracking of the proposed repressive taxes on the wealthy.

These mostly through the insertions of many loopholes that essentially enervates the proposed populist statute.

From the CNBC,

News reports in France today say the tax has been tweaked so that it will only effect 1,000 households. And that’s if it passes – which remains a big question.

The French newspapers Les Echos and Le Figaro both say today that the tax being considered would only be levied on income of more than 2 million euros. That’s double the original cut-off.

There may also be other changes. Rather than applying to all income, the tax may only apply to ordinary income from salaries. If investment income or capital gains is excluded, the wealthy French who make their money from investments need not worry.

The tax also makes special provisions for athletes and artists, carves out social security taxes and ... you get the idea. Pretty soon, it’s not anything like a 75 percent tax on million-plus earners.

Considering the precarious state of the French fiscal conditions, it would amount to absurdity for politicians and their imbecilic followers to think that tax increases by in itself would solve the looming risks of a debt crisis. The idea that people will behave like automatons, and fawningly submit to edict, is sheer fantasy.

chart from tradingeconomics.com

Taxes are always political.

They are instruments to what the great French classical liberal Frederic Bastiat called as “Government is the great fiction through which everybody endeavors to live at the expense of everybody else”

Yet people’s subjective take on taxes will mean a change on incentives to save, produce and consume or economic activities, as well as changes, in the approach towards treatment of taxation.

At certain levels, people may find taxes to become an unbearable burden and thus would work to preserve on their savings through circumventing actions, such as the employment of accountants and tax lawyers to exploit on loopholes, seek refuge elsewhere, bribe authorities, influence policies or even incite or join revolutions.

The inherent structural self-contradiction through promises of undeliverable benefits from the limitations of resources the state can generate from taxation, as wonderfully explained by the great Frederic Bastiat [Government, 1848] (bold added)

There is the public on one side, Government on the other, considered as two distinct beings; the latter bound to bestow upon the former, and the former having the right to claim from the latter, all imaginable human benefits. What will be the consequence?

In fact, Government is not maimed, and cannot be so. It has two hands - one to receive and the other to give; in other words, it has a rough hand and a smooth one. The activity of the second necessarily subordinate to the activity of the first. Strictly, Government may take and not restore. This is evident, and may be explained by the porous and absorbing nature of its hands, which always retain a part, and sometimes the whole, of what they touch. But the thing that never was seen, and never will be seen or conceived, is, that Government can restore to the public more than it has taken from it. It is therefore ridiculous for us to appear before it in the humble attitude of beggars. It is radically impossible for it to confer a particular benefit upon any one of the individualities which constitute the community, without inflicting a greater injury upon the community as a whole.

Our requisitions, therefore, place it in a dilemma. If it refuses to grant the requests made to it, it is accused of weakness, ill-will, and incapacity. If it endeavors to grant them, it is obliged to load the people with fresh taxes - to do more harm than good, and to bring upon itself from another quarter the general displeasure.

Thus, the public has two hopes, and Government makes two promises - many benefits and no taxes. Hopes and promises, which, being contradictory, can never be realized.

Mr. Bastiat also shows that unrealizable political promises leads towards unsustainable debt and bankruptcy…

These two promises are for ever clashing with each other; it cannot be otherwise. To live upon credit, which is the same as exhausting the future, is certainly a present means of reconciling them: an attempt is made to do a little good now, at the expense of a great deal of harm in future. But such proceedings call forth the spectre of bankruptcy, which puts an end to credit.

…as well as, the perpetual search for the elusive “something from nothing” elixir by the gullible public on promises made by politicians.

What is to be done then? Why, then, the new Government takes a bold step; it unites all its forces in order to maintain itself; it smothers opinion, has recourse to arbitrary measures, ridicules its former maxims, declares that it is impossible to conduct the administration except at the risk of being unpopular; in short, it proclaims itself governmental. And it is here that other candidates for popularity are waiting for it. They exhibit the same illusion, pass by the same way, obtain the same success, and are soon swallowed up in the same gulf.

Events in France and the Eurozone have simply been upholding Bastiat’s predictions, and mostly importantly, his classical liberal principles.

Classical Liberal and Libertarian Legacies: Ludwig von Mises and Murray Rothbard

The classical liberal and libertarian legacies of Ludwig von Mises and Murray N. Rothbard in the account of Professor Gary North (at the LewRockwell.com)

Ludwig von Mises

My only meeting with Mises came in the fall of 1971. I had been hired by the Foundation for Economic Education. I was invited to attend a special ceremony. F. A. Harper had edited a second collection of essays honoring Mises. The first book of essays honoring Mises had been edited by Mary Sennholz and was published in 1956. The meeting was held in a nice hotel in New York City. After the meeting, I was able to talk with Mises about a number of things, including his connection with the German sociologist, Max Weber. Weber referred to Mises's 1920 essay on Economic Calculation in the Socialist Commonwealth, in a footnote in a book that Weber did not complete. He died in 1920. Mises told me he had sent the essay to Weber.

Mises left a legacy that has steadily grown since his death in 1973. He was one of those rare men who had two phases in his career. The first phase, beginning in 1912 and ending after the publication of John Maynard Keynes's General Theory (1936), established his reputation as a major economic theorist. His 1912 book on money and banking, his 1922 book on socialism, and his many articles on specialized topics in economic theory identified him as a major theorist. But his opposition to all forms of fiat money gained him a reputation as a 19th-century Neanderthal in the world of fiat currencies, which began with the abolition of the gold standard at the outbreak of World War I in 1914. His hostility to socialism also contributed to his status as a pariah. He was clearly resisting what was regarded in academic circles as the wave of the future. Academics want to be trendy. Mises was not trendy.

The triumph of Keynesianism after 1936, coupled with the outbreak of World War II in 1939, led to an eclipse in Mises's career. When he came to the United States in 1940 as a refugee, he was virtually unknown here. He had no teaching position. He was 59 years old. He had never been known in the United States. He was dependent on occasional writing assignments, and also on donations from friends, including Henry Hazlitt.

He served as a free market voice crying in the Keynesian wilderness for the next 30 years. He presided over a graduate seminar at New York University which went on for a quarter-century. Murray Rothbard was one of the regular attendees, although as an auditor. He was not paid by the university, which relegated him to the status of visiting professor. He was supported by donors. Yet there was no one on the NYU economics faculty who is remembered today. They were nonentities, and they left no legacy.

The publication of his book, Human Action, by Yale University Press in 1949 did begin to establish his reputation in America. The book sold far better than anyone had expected. This book was the first comprehensive, integrated theory of free market economics that had ever been published. Very few people understood this in 1949, but anyone who has studied the history of economic thought finds in this book the first comprehensive application of economic theory to the entire market-based economy. The analysis is integrated in terms of the Austrian economic defense of subjective value theory and methodological individualism.

He continued to write after 1949. His books were sold by the Foundation for Economic Education, which brought him to the attention of readers who were in favor of the free market. His articles appeared in the Foundation's magazine, The Freeman. The Freeman did not circulate widely in academic circles, but it was a widely read magazine on the Right.

I bought a copy of Human Action in 1960. I was aware of Mises's importance in the history of economic thought, but at my university, I was probably the only student who knew about him. I suspect that the only professor who knew about him was Carl Uhr, who taught a course in the history of economic thought.

Mises was tenacious in his commitment to free-market principles. Probably more than any other major scholar of the 20th century, he was known to his peers as uncompromising. He was regarded as ideological by Chicago school economists. They were correct. Because of his consistency in applying the principle of nonintervention into every nook and cranny of the economy, but above all in his opposition to central banking, free-market economists regarded him as eccentric. "Eccentric" for them was a word for "rigorously consistent."

He was known to the Left as the West's most implacable opponent of economic intervention. When the Nazis marched into Austria in 1938, they confiscated his library. He had left it behind when he left the country to go to Switzerland in 1934. He feared that the Nazis would take over in Austria, and he was correct. As a free market economist and a Jew, he would not have survived in Austria.

The Soviets also recognized who he was, and they confiscated the library from the Nazis, and sent it to Moscow. It was not discovered there by any Western economist until the 1980s. That was a great irony: Western economists did not know who he was, but Soviet economists did. This became increasingly true in the 1980s, as the Soviet economy began to disintegrate, exactly as Mises had predicted it would.

Mises's great advantage over almost all of his peers was this: he wrote in English as a second language. Most economists write in English as a third or fourth language. He did not use equations. He did not use a lot of jargon. He developed paragraphs based on sentences that were developed consecutively. You could begin on page 1 of any of his books and, if you paid attention, you could get to the end without becoming confused.

This was an advantage because average people who were interested in economics could follow his logic. His reputation spread by way of "The Freeman" throughout the late 1950s and the 1960s. That magazine had a circulation as high as 40,000 in some years. There were not many economists who could reach an audience that large.

He really did stick to his knitting, and he really did stick to his guns. He stuck to his guns with such tenacity that for decades he had no influence whatsoever in the academic community. They wrote him off. But, after his death in 1973, his influence began to grow. In 1974, his disciple F. A. Hayek won the Nobel Prize in economics. Bit by bit, his reputation spread. Because of the Mises Institute, his name is now more widely known than almost any other economist of his generation, either before World War I or after World War II. The average person would be unfamiliar with the name of most economists in the first half of the 20th century, and he would be unable to read the works of almost any economist in the second half.

So, because Mises was unwilling to compromise, especially in the area of methodology, refusing to use equations, his legacy has been greater than most of his long-dead peers. His legacy is growing, and theirs is almost nonexistent.

Murray Rothbard

Much of Mises's influence is the result of Murray Rothbard's voluminous writings, in powerful, captivating, and flawless English, from the late 1950s until his death in 1995. Rothbard became the primary interpreter of the works of Mises, even though he did not share Mises's commitment to 19th-century limited government. It is possible to read Human Action, but it is a lot easier to read Man, Economy, and State. Rothbard never found full-time employment in a college or university that had an economics department until late in his career. He taught engineering students, who were not interested in economics and surely did not know who Rothbard was. If he had any legacy from his classes at Brooklyn Polytechnic, nobody has been able to discover it.

He gained his reputation as an economist mainly through the publications that appeared in a 12-month period from 1962 through early 1963. Columbia University Press published his doctoral dissertation on America's first depression: The Panic of 1819. It read like a dissertation, unlike anything else Rothbard ever wrote. It had some minor influence in the economic history, but it was a narrow topic.

Then came Man, Economy, and State in the fall of 1962. Then, the following spring, came America's Great Depression. That book was a study of the statist policies of the Hoover Administration. It applied the Austrian theory of the trade cycle to the economic and political events of the Hoover Administration. Because it was based on Austrian economic theory, academic economists rejected it. Because it was hostile to Herbert Hoover, any conservative who found out about it probably rejected it before even looking at the table of contents. It was almost a perfect book for alienating everybody. Then came the acceleration of the Vietnam War and the development of the antiwar movement. Rothbard became actively involved in the antiwar movement, and he ceased writing books on economic theory. This continued until the early 1980s, when he wrote the best upper division textbook in money and banking that has ever been written, and which has probably never been assigned in any university in the United States: The Mystery of Banking. It is totally hostile to fractional reserve banking, central banking, and all forms of fiat money. It is the primary task of all university-level courses in money and banking to establish the students' confidence in all three of these. Rothbard once again had painted himself into a corner.

Only at the very end of his life did he begin to do a detailed academic study in economics. He wrote two volumes on the history of economic thought. He died before the third volume was completed. There has never been any history of economic thought to rival it in terms of a mixture of minute details of the lives of economists, coupled with careful analyses of their economic doctrines.

His legacy stems from the power of his economic analysis and the cogency of his writing style.

He left another legacy in the area of early American history: his study of colonial America up to, but not including, the American Revolution. Sadly, he took his notes on a piece of audio recording technology that disappeared, so he was never able to finish the fifth volume.

Then there is his legacy as the most literate defender of economic and political anarchism in the history of anarchist thought.

He stuck to his knitting. He never stopped writing. He did not compromise in his hostility to economic intervention by the state. He did short articles, midsized articles, fat books, heavily footnoted books, pamphlets, newsletter articles, movie reviews, political analysis, and whatever else interested him, which was everything except possibly nuclear physics. The huge volume of his writings, the clarity of his writings, the ideological consistency of his writings, and the fact that he got Lew Rockwell on his side, established a legacy which has been leveraged by the power of the World Wide Web. He is reaching a larger audience today than he could have imagined. He died in 1995, the year that the Netscape browser was introduced. He could not have foreseen the impact of this event.

His skills were ideally suited to this new technology. His skills in written communication are exactly what people doing Web searches are looking for. He was a print-media person, and while the Web is equally geared to video, for those who are looking for cogent writing, Rothbard's body of material is vast.

Quote of the Day: Understanding Classical Liberalism

Liberalism is no religion, no world view, no party of special interests. It is no religion because it demands neither faith nor devotion, because there is nothing mystical about it, and because it has no dogmas. It is no world view because it does not try to explain the cosmos and because it says nothing and does not seek to say anything about the meaning and purpose of human existence. It is no party of special interests because it does not provide or seek to provide any special advantage whatsoever to any individual or any group. It is something entirely different. It is an ideology, a doctrine of the mutual relationship among the members of society and, at the same time, the application of this doctrine to the conduct of men in actual society. It promises nothing that exceeds what can be accomplished in society and through society. It seeks to give men only one thing, the peaceful, undisturbed development of material well-being for all, in order thereby to shield them from the external causes of pain and suffering as far as it lies within the power of social institutions to do so at all. To diminish suffering, to increase happiness: that is its aim.

This is from the great Professor Ludwig von Mises, The Future of Liberalism, in Liberalism in the Classical Tradition

Austrian Capital Theory and the Market Process

The beauty of Austrian economics is of its emphasis on the nitty-gritty of the market process. And capital theory, which has largely ignored by the mainstream, plays a sine qua non role in the market process

Professor Peter Lewin eloquently discusses the Austrian Capital Theory at the Freeman Online (outside titles, all bold emphasis are mine; green brackets my comments)

The Austrian Theory

The best known Austrian capital theorist was Eugen von Böhm-Bawerk, though his teacher Carl Menger is the one who got the ball rolling, providing the central idea that Böhm-Bawerk elaborated. Böhm-Bawerk produced three volumes dedicated to the study of capital and interest, making the Austrian theory of capital his best-known theoretical contribution. He provided a detailed account of the fundamentals of capitalistic production. Later contributors include Hayek, Ludwig Lachmann, and Israel Kirzner. They added to and enriched Böhm-Bawerk’s account in crucial ways. The legacy we now have is a rich tapestry that accords amazingly well with the nature of production in the digital information age. Some current contributors along these lines include Peter Klein, Nicolai Foss, Howard Baetjer, and me.

The Austrians emphasize that production takes time: The more indirect it is, the more “time” it takes. Production today is much more “roundabout” (Böhm-Bawerk’s term) than older, more rudimentary production processes. Rather than picking fruit in our backyard and eating it, most of us today get it from fruit farms that use complex picking, sorting, and packing machinery to process carefully engineered fruits. Consider the amount of “time” (for example in “people-hours”) involved in setting up and assembling all the pieces of this complex production process from scratch—from before the manufacture of the machines and so on. This gives us some idea of what is meant by production methods that are “roundabout.”

(The scare quotes around time are used because in fact there is no perfectly rigorous way to define the length of a production process in purely physical terms. But, intuitively, what is being asserted is that doing things in a more complicated, specialized way is more difficult; loosely speaking it takes more “time” because it is more “roundabout,” more indirect.)

More Roundabout Production

Through countless self-interested individual production decisions, we have adopted more roundabout methods of production because they are more productive—they add more value—than less roundabout methods. Were this not the case, they would not be deemed worth the sacrifice and effort of the “time” involved—and would be abandoned in favor of more direct production methods. What are at work here are the benefits of specialization—the division of labor to which Adam Smith referred. Modern economies comprise complex, specialized processes in which the many steps necessary to produce any product are connected in a sequentially specific network—some things have to be done before others. There is a time structure to the capital structure.

[my comment business people or entrepreneurs specialize on the products and services they provide and the markets they sell into]

This intricate time structure is partially organized, partially spontaneous (organic). Every production process is the result of some multiperiod plan. Entrepreneurs envision the possibility of providing (new, improved, cheaper) products to consumers whose expenditure on them will be more than sufficient to cover the cost of producing them. In pursuit of this vision the entrepreneur plans to assemble the necessary capital items in a synergistic combination. These capital combinations are structurally composed modules that are the ingredients of the industry-wide or economy-wide capital structure. The latter is the result then of the dynamic interaction of multiple entrepreneurial plans in the marketplace; it is what constitutes the market process. Some plans will prove more successful than others, some will have to be modified to some degree, some will fail. What emerges is a structure that is not planned by anyone in its totality but is the result of many individual actions in the pursuit of profit. It is an unplanned structure that has a logic, a coherence, to it. It was not designed, and could not have been designed, by any human mind or committee of minds. Thinking that it is possible to design such a structure or even to micromanage it with macroeconomic policy is a fatal conceit.

[my comment:

The term “economy” has truly been a misrepresentation.

In the real world, there are millions of heterogeneous interactions, distinctive moving parts, and complex and variegated supply chains, which means commercial activities represent mass spontaneity of people’s actions. They are not centrally organized actions as the word “economy” projects.

Think of it, does the government tell you whom to sell? Does the government dictate upon you on what (and how many) to produce or what services to provide? Does the government tell you which stock to buy or which investment to take?

If none of this applies, then why the heck, the popular impression that government “runs the economy”? Well the answer is that these have long been impressed upon to us by current political institutions meant to ensure our docility to our political masters]

The division of labor reflected by the capital structure is based on a division of knowledge. Within and across firms specialized tasks are accomplished by those who know best how to accomplish them. Such localized, often unconscious, knowledge could not be communicated to or collected by centralized decision-makers. The market process is responsible not only for discovering who should do what and how, but also how to organize it so that those best able to make decisions are motivated to do so. In other words, incentives and knowledge considerations tend to get balanced spontaneously in a way that could not be planned on a grand scale. The boundaries of firms expand and contract, and new forms of organization evolve. This too is part of the capital structure broadly understood.

[my comments:

Statistics signify as information based on aggregates. They do not account for the “knowledge of circumstances” that are “dispersed” “incomplete” or often “contradictory knowledge” or knowledge why people people have chosen through “incentives” to take such actions. Knowledge acquired from interpreting statistics constitute as presumptions and are manipulable to suit veiled agendas.

Statistics and econometrics are instruments mainly used to bamboozle or to overwhelm on the ignorant and the gullible public of the supposed omniscience of central planners. The only thing political actors know is to gorge and lavishly spend on other people’s money, as well as to exercise control over the population under the cover of the farcical “social justice”].

Division of Knowledge

In addition, the heterogeneous capital goods that make up the cellular capital combinations also reflect the division of knowledge. Capital goods (like specialized machines) are employed because they “know” how to do certain important things; they embody the knowledge of their designers about how to perform the tasks for which they were designed. The entire production structure is thus based on an incredibly intricate extended division of knowledge, such knowledge being spread across its multiple physical and human capital components. Modern production management is more than ever knowledge management, whether involving human beings or machines—the key difference being that the latter can be owned and require no incentives to motivate their production, while the former depend on “relationships” but possess initiative and judgment in a way that machines do not.

The foregoing provides the barest account of the rich legacy of Austrian capital theory, but it should be sufficient to communicate the essential differences between the Austrian view of the economy and that of other schools of thought. For Austrians the whole macroeconomic approach is problematic, involving, as it does, the use of gross aggregrates as targets for policy manipulation—aggregates like the economy’s “capital stock.” For Austrians there is no “capital stock.” Any attempt to aggregate the multitude of diverse capital items involved in production into a single number is bound to result in a meaningless outcome: a number devoid of significance. Similarly the total of investment spending does not reflect in any accurate way the addition to value that can be produced by this “capital stock.” The values of capital goods and of capital combinations, or of the businesses in which they are employed, are determined only as the market process unfolds over time. They are based on the expectations of the entrepreneurs who hire them, and these expectations are diverse and often inconsistent. Not all of them will prove correct—indeed most will be, at least to some degree, proven false. Basing macroeconomic policy on an aggregate of values for assembled capital items as recorded or estimated at one point in time would seem to be a fool’s errand. What do the policymakers know that the entrepreneurs involved in the micro aspects of production do not?

[my comment:

Macro economics has truly been about heuristics and or of our innate biases that have been embellished by mathematical formalism than about law of scarcity and opportunity costs or about economic reality.

Macro economics understates the ‘economic’ value provided by the market process.

On the other hand, macro economics overstates the illusion of hydraulically driven “economy”.]

Capital and Employment

The folly is compounded by connecting capital and investment aggregates to total employment under the assumption that stimulating the former will stimulate the latter. Such an assumption ignores the heterogeneity and structural nature of both capital and labor (human capital). Simply boosting expenditure on any kind of production will not guarantee the employment of people without jobs. How else to explain that our current economy is characterized by both sizeable unemployment numbers and job vacancies? Their coexistence is a result of a structural mismatch: The structure (that is, the pattern of skills) of the unemployed does not match those required to be able to work with the specific capital items that are currently unemployed.

In fact the current enduring recession is basically structural in nature. It is the bust of a credit-induced boom-bust cycle, augmented by far-reaching production-distorting regulation. The Austrian theory of the business cycle was developed first by Ludwig von Mises, combining insights from the Austrian theory of capital with the nature of modern central-bank-led monetary policy. The theory was later used, with some differences, by Hayek in his debates with Keynes. Over the years its popularity and acceptance have waxed and waned, but it appears to be highly relevant to our current situation.

[my comment:

The market process represents the immensely intertwined and deeply interdependent relationships of methodological individualism, profit-loss tradeoffs, capital theory, consumer sovereignty, property rights, coordination-discoordination of resource allocation, division of labor, specialization and roundabout production, division of knowledge, entrepreneurship, speculation, voluntary exchange, pricing system, spontaneous order, rule of law, market institutions and everything else under the capitalistic or classical liberalism order.

Whereas boom bust cycles signify as symptoms of imbalances brought upon by government inflationism, as well as, distortions emergent or as consequence from various production regulations and mandated proscriptions]

Glancing at the political prescriptions for today’s crisis management, one would notice that “capital” for the mainstream represents a homogenous lump called currency. Print money and everything is supposedly solved. Unfortunately after trillions of printed money, the global crisis has been worsening instead of abating.

Yet little is understood that money is NOT wealth, but a medium of exchange.

And wealth is about purchasing power of money. From this we understand that popular prescriptions of money printing have been economically unrealistic or unfeasible, and therefore, are bound for failure.Worst they are redistributive which favors political actors and their clients (the cronies).

It is not what gullible masses think that matters, rather it is the limitations of economic reality. That’s what Austrian Capital Theory talks about.

Jeffrey Tucker on the 5 Pillars of Economic Freedom

I previously posted the 10 principles of classical liberalism.

The outspoken Jeffrey Tucker of the Laissez Faire Books reduces them into 5 (emphasis original)

Here are five core elements to this idea of market freedom, or whatever you want to call it. It is my short summary of the classical liberal vision of the free society and its functioning, which isn’t just about economics but the whole of life itself.

Volition. Markets are about human choice at every level of society. These choices extend to every sector and every individual. You can choose your work. No one can force you. At the same time, you can’t force yourself on any employer. No one can force you to buy anything, either, but neither can you force someone to sell to you.

This right of choice recognizes the infinite diversity within the human family (whereas state policy has to assume people are interchangeable units). Some people feel a calling to live lives of prayer and contemplation in a community of religious believers. Others have a talent for managing high-risk hedge funds. Others favor the arts or accounting, or any profession or calling that you can imagine. Whatever it is, you can do it, provided it is pursued peacefully.

You are the chooser, but in your relations with others, “agreement” is the watchword. This implies maximum freedom for everyone in society. It also implies a maximum role for what are called “civil liberties.” It means freedom of speech, freedom to consume, freedom to buy and sell, freedom to advertise and so on. No one set of choices is legally privileged over others.

Ownership. In a world of infinite abundance, there would be no need for ownership. But so long as we live in the material world, there will be potential conflicts over scarce resources. These conflicts can be resolved through fighting over things or through the recognition of property rights. If we prefer peace over war, volition over violence, productivity over poverty, all scarce resources — without exception — need private owners.

Everyone can use his or her property in any way that is peaceful. There are no accumulation mandates or limits on accumulation. Society cannot declare anyone too rich, nor prohibit voluntary aestheticism by declaring anyone too poor. At no point can anyone take what is yours without your permission. You can reassign ownership rights to heirs after you die.

Socialism is not really an option in the material world. There can be no collective ownership of anything materially scarce. One or another faction will assert control in the name of society. Inevitably, the faction will be the most-powerful society — that is, the state. This is why all attempts to create socialism in scarce goods or services devolve into totalitarian systems.

Cooperation. Volition and ownership grant the right to anyone to live in a state of pure autarky. On the other hand, that won’t get you very far. You will be poor, and your life will be short. People need people to obtain a better life. We trade to our mutual betterment. We cooperate in work. We develop every form of association with each other: commercial, familial and religious. The lives of each of us are improved by our capacity to cooperate in some form with other people.

In a society based on volition, ownership and cooperation, networks of human association develop across time and space to create the complexities of the social and economic order. No one is the master of anyone else. If we want to succeed in life, we come to value serving each other in the best way we can. Businesses serve consumers. Managers serve employees just as employees serve businesses.

A free society is a society of extended friendship. It is a society of service and benevolence.

Learning. No one is born into this world knowing much of anything. We learn from our parents and teachers, but more importantly, we learn from the infinite bits of information that come to us every instant of the day all throughout our lives. We observe success and failure in others, and we are free to accept or reject these lessons as we see fit. In a free society, we are free to emulate others, accumulate and apply wisdom, read and absorb ideas and extract information from any source and adapt it to our own uses.

All of the information we come across in our lives, provided it is obtained noncoercively, is a free good, not subject to the limits of scarcity because it is infinitely copyable. You can own it and I can own it and everyone can own it without limit.

Here we find the “socialist” side of the capitalist system. The recipes for success and failure are everywhere and available to use for the taking. This is why the very notion of “intellectual property” is inimical to freedom: It always implies coercing people and thereby violating the principles of volition, authentic ownership and cooperation.

Competition. When people think of capitalism, competition is perhaps that first idea that comes to mind. But the idea is widely misunderstood. It doesn’t mean that there must be several suppliers of every good or service, or that there must be a set number of producers of anything. It means only that there should be no legal (coercive) limits on the ways in which we are permitted to serve each other. And there really are infinite numbers of ways in which this can take place.

In sports, competition has a goal: to win. Competition has a goal in the market economy, too: service to the consumer through ever increasing degrees of excellence. This excellence can come from providing better and cheaper products or services or providing new innovations that meet people’s needs better than existing products or services. It doesn’t mean “killing” the competition; it means striving to do a better job than anyone else.

Every competitive act is a risk, a leap into an unknown future. Whether the judgment was right or wrong is ratified by the system of profit and loss, signals that serve as objective measures of whether resources are being used wisely or not. These signals are derived from prices that are established freely on the market — which is to say that they reflect prior agreements among choosing individuals.

Unlike sports, there is no end point to the competition. It is a process that never ends. There is no final winner; there is an ongoing rotation of excellence among the players. And anyone can join the game, provided they go about it peacefully.

Summary. There we have it: volition, ownership, cooperation, learning and competition. That’s capitalism as I understand it, as described in the classical liberal tradition improved by the Austrian social theorists of the 20th century. It is not a system so much as a social setting for all times and places that favor human flourishing.

The way to peace and prosperity is only through economic freedom.

Video: The Ideas Behind the Ron Paul Revolution

(hat tip Lew Rockwell Blog)

Nassim Taleb Endorses Ron Paul

My favorite iconoclast Nassim Taleb goes for Ron Paul.

From Benzinga.com (hat tip Bob Wenzel)

Nassim Taleb, the best-selling author of The Black Swan, endorsed the presidential aspirations of Ron Paul. "From the risk vantage point, Paul is the only candidate that represents my values," he told CNBC earlier today.

"There are four key issues that no one else is addressing," said NYU Politechnic Institute and Oxford University professor, the first three of which he identified as the deficit, the Fed, and US militarism. "Then there is the notion that America is about resilience. You do not achieve that through bailouts," he told CNBC.

"I want a system that gets better after every shock. A system that relies on bailouts is not such a system," he said, noting that Ron Paul is the only candidate willing to take the risk to talk about the hot button issues.

"He is doing the equivalent of chemotherapy on the fundamental issues," said Taleb. "It may hurt, but that is the only choice you have. You cannot advocate for novocaine when in fact you need a root canal."

It is interesting to see an intersection of views with people of different backgrounds.

Here is Nassim Taleb in Davos 2009,

It was effortless to talk about complexity and its effect on risk: how redundancy, diversity, and such properties were central in avoiding collapse.

In short both believe in forces of decentralization in dealing with a complex world. That’s fundamentally the opposite of all standing US presidential candidates out there.

My preference for Ron Paul is not only because he represents the Classical Liberal-Austrian School of Economics and libertarian perspective, but he is for me, the ideal freedom fighter.

A Ron Paul victory will resonate for the cause of (individual) freedom around the world. But even if he loses, the Ron Paul revolution has been emblematic of the political trends of the information age era.

I may be wrong, but I think the establishment will do everything it can to block a Ron Paul presidency. And even if Ron Paul does win the presidency, I fear that he may target for assassination as a Ron Paul regime (that’s if he keeps up with his ideals and promises) will be devastating to entrenched vested interest groups (both from the interests of the left-the welfare class, and the right-the warfare class).

Video: Ron Paul: A Victory for the Cause of Liberty

Mr. Ron Paul has had a remarkable showing at the New Hampshire Republican primaries. In contrast to other opponents whose surge and fall has been abrupt, Mr. Paul's rise has, so far, been surprisingly consistent.

Here is Mr. Paul's fantastic speech after a strong second place finish (hat tip Bob Wenzel)


Despite mainstream media's blatant blackout in the coverage of Mr. Paul in the recent past, the apparent snowballing of the Ron Paul revolution have been symptomatic of the marginal changes in the way forces of decentralization have been upending traditional media and the way conventional top down politics has functioned. As mainstream personality the former chief economist of the IMF Simon Johnson said, despite his flawed criticism, Ron Paul must be taken seriously.

Yet unknown to most, such phenomenon has partly been facilitated or amplified by the advances of technology.

Importantly, Mr. Paul in the above video underscores on what has been a growing or deepening trend: the emerging receptiveness of the public to the cause of liberty as previously discussed.

Ron Paul's campaign, even if he loses the nomination, will serve as showcase to inspire, not only in the US but around the world, the importance of civil liberties and economic freedom.

Interesting signs of times.

Signs of Emergent Classical Liberalism Revolution: Ron Paul tops Iowa Polls

From Christian Science Monitor,

Rep. Ron Paul of Texas is now leading the pack in Iowa as Newt Gingrich's support fades.

Paul now has the vote of 23 percent of 597 likely Republican caucus voters, according to Public Policy Polling, in a survey taken from Dec. 16-18. Mitt Romneyis close behind at 20 percent, while Gingrich as slipped dramatically to 14 percent. Fourth place is a dead heat between Rick Santorum, Michele Bachmann, and Rick Perry at 10 percent. While Jon Huntsman is gaining traction in New Hampshire, in Iowa he's only got 4 percent of the likely voters. Gary Johnson comes in at 2 percent.

I still don’t expect Ron Paul to win the GOP nominations as I have said earlier here.

But there is always the black swan phenomenon—low probability high impact event—which has been a conventional feature of human action dynamics, where even some distinguished mathematicians acknowledge or admit as a key source of randomness or uncertainty or unpredictability.

Importantly, my hope is that my earlier expectations have vastly been misplaced.

Nevertheless, Ron Paul’s amazing performance can be construed as signs of the progressing diffusion of the classical liberal creed.

And despite all the attempts by mainstream media to censor and dismiss Ron Paul as a credible candidate, current developments seem to show how Mr. Paul has been incredibly defying the odds.

Perhaps signs of these seem evident in Ron Paul’s warm reception at an interview with Jay Leno

When Jay Leno asked about Ron Paul’s remarkable drawing of the young voters given Mr. Paul’s platform and despite his age, I would add to Mr. Paul’s answer—freedom represents an everlasting principle with fresh applications.

Canada Deepens Free Market Policies

It’s time to be bullish Canada. Here is why.

From Reuters (hat tip Mark Perry)

Canadian Finance Minister Jim Flaherty said on Sunday the government would eliminate tariffs on dozens more products used by Canadian manufacturers, aiming to lower their costs and encourage more hiring.

The initiative would scrap custom duties on 70 items used by businesses in sectors such as food processing, furniture and transportation equipment.

Flaherty, who estimated the tariff cuts would save Canadian businesses C$32 million ($30.5 million) a year, said the cuts were part of the Conservative government's overall free trade policy.

"We believe in free trade in Canada," Flaherty said on CTV's "Question Period" program. "Some of these old-fashioned tariffs get in the way. So we're getting rid of them."

As part of its Economic Action Plan to pull Canada through the global slowdown of 2008-09, the government has eliminated more than 1,800 tariff items, providing about C$435 million a year in tariff relief. Its stated goal is to make Canada a tariff-free zone for manufacturers by 2015.

The tariff move comes as Canada and the European Union negotiate a deal to knock down trade barriers on goods and services and boost two-way trade by 20 percent.

Cheers Mr. Flaherty!

Again, free markets seem to be gaining political headway at the margins.

New Zealand’s John Key’s Victory, A Win for Free Markets

Despite all the troubles confronting the world today, forces of globalization and economic freedom appear to be getting some headway in the realm of politics.

From Bloomberg,

New Zealand Prime Minister John Key’s re-election with his party’s biggest mandate in 60 years will strengthen a government push for free-market policies as he pursues welfare cuts and asset sales to balance the budget.

Key’s National Party won 48 percent of the vote on Nov. 26, up from 45 percent three years ago, allowing him to form the next government with support from political allies in parliament. Electricity companies Mighty River Power Ltd. and Genesis Power Ltd. may be among the first considered for share sales, the prime minister signaled today, as his administration focuses on divesting some state assets.

A second term allows Key to expand policies aimed at reducing the economy’s reliance on government spending, an effort that was slowed in the past three years by the need to help the country recover from the global financial crisis and New Zealand’s deadliest earthquake in 80 years. The leader, whose popularity survived a credit-rating downgrade, has pledged to return the budget to surplus by 2014-15 or sooner as soaring borrowing costs imperil indebted European nations.

Information and education are the only means where free market/classical liberalism forces can generate political following. Nevertheless today’s technology enabled connectivity platforms (social media) should help facilitate the campaign for liberty.

John Key’s win plus the recent defeat of the Socialist government or a victory by Conservatives in Spain are refreshing examples of marginal changes in the political sphere that has been happening across the world.

GOP CNN Nevada Debate: The Unflinching and Remarkable Ron Paul

Watch Ron Paul's remarkable consistency, detailed and candid responses in the GOP CNN Nevada Debate (hat tip Lew Rockwell Political Theater)

Quote of the Day: On Ron Paul’s Growing Influence

From Cato’s David Boaz, (bold emphasis mine)

In 2007 (which is when he got the most attention in the last cycle) Ron Paul warned that an economy based on debt and cheap money from the Federal Reserve was not sustainable, but the economy was booming and nobody wanted to listen. After the crash, they started listening. In 2007 he said we should replace the Federal Reserve and fiat money with the gold standard, and even some libertarians said things like, “What’s the beef with the Fed? They’ve dramatically reduced the volatility of the business cycle while achieving low, reasonably constant inflation.” Nobody’s scoffing at criticism of the Fed now. In 2007 Ron Paul criticized excessive federal spending, but with a Republican in the White House Republicans weren’t so interested. With even more excessive spending by a Democratic president, that’s become a central issue of the era. In 2007 Ron Paul criticized endless military intervention, but most Republicans were content to repeat, “The surge is working.” Now even Republicans are getting weary of war. In 2007 Ron Paul said that Congress and the president should not act outside their powers under the Constitution, but Republicans didn’t want to hear about unconstitutional acts by a Republican president. Now, after the bailouts and the health care takeover and the unauthorized war in Libya, all the Republican candidates are talking about restoring the Constitution.

It’s not that Ron Paul has moved closer to the center but rather that the center of American political discussion has moved closer to him.

Gandhi's law applies to Ron Paul (even if this might not apply to his presidential aspirations)

First they ignore you, then they laugh at you, then they fight you, then you win

Is Slovakia’s Classical Liberal Party the Last Stand Against the Euro Bailout?

Today the Slovakian parliament will vote to ratify on the rescue mechanism for the Eurozone.

However, there seems to be a complication—a party of libertarian-classical liberals led by Richard Sulik, leader of Slovakia’s libertarian Freedom and Solidarity (SaS) party—are opposed to its passage.

From Sunday’s Financial Times (bold emphasis)

A hardline libertarian party in one of the newest, smallest and poorest members of Europe’s single currency looks set to throw a spanner in the machinery of expanding the eurozone’s bail-out fund – seen as crucial to restoring market confidence in the bloc.

Despite pressure from across the continent, Richard Sulik, leader of Slovakia’s libertarian Freedom and Solidarity (SaS) party, repeated on Sunday that his party would reject the measure.

A last-minute meeting of the four-party ruling coalition is set for today in an effort to persuade Mr Sulik to back down and support the extension of the European financial stability facility at a crunch vote on Tuesday.

Mr Sulik made clear that his 21 MPs will reject the EFSF expansion if the other coalition parties do not agree to his proposals. Without those votes, the 77-member governing coalition has no chance of a majority in the 150-seat parliament.

Last week SaS offered to support the EFSF, but in return for a Slovakian veto on how its contribution would be spent and an outright refusal to participate in the permanent European stability mechanism, due to replace the EFSF next year….

The quiet-voiced Mr Sulik looks more like a demure bureaucrat rather than what he is – a self-made millionaire and one of the last of central Europe’s true believers in economic liberalism. Free market doctrine was hugely fashionable in the 1990s across the region, when ministers who had gained most of their experience from economic texts found themselves in power. They pursued radical solutions to eliminate the last remnants of state socialism.

“We are a classical liberal party. We are defenders of the Austrian school of economics,” says Juraj Droba, an SaS MP, describing his party’s relationship with the neoliberal school.

If the Slovakian parliament fails to garner the required votes, then whatever gains that we’ve seen in the financial markets lately—mostly based around expectations of political promises—will turn out to be fleeting.

Anyway even if the rescue package gets ratified, the EFSF is no guarantee of success. Bailouts incentivizes moral hazard or reckless behavior, which is why we are seeing this continuing crisis which began to unravel in 2008.

Hopefully Slovakia’s classical liberals will remain steadfast in their quest to champion sound money policies and continue to fight against tyrannical redistributionist policies that favors the political and banking elites. (hat tip Angel Martin, David Boaz).

Quote of the Day: Underlying Social Contract

From the ever eloquent George F. Will:

Society — hundreds of millions of people making billions of decisions daily — is a marvel of spontaneous order among individuals in voluntary cooperation. Government facilitates this cooperation with roads, schools, police, etc. — and by getting out of its way. This is a sensible, dynamic, prosperous society’s “underlying social contract.”

Read the rest here

Classical Liberalism: Towards A Less Violent World

Steve Pinker at the Wall Street Journal brings us a good news: there has been a declining trend of violence worldwide.

Mr. Pinker writes,

Believe it or not, the world of the past was much worse. Violence has been in decline for thousands of years, and today we may be living in the most peaceable era in the existence of our species.

The decline, to be sure, has not been smooth. It has not brought violence down to zero, and it is not guaranteed to continue. But it is a persistent historical development, visible on scales from millennia to years, from the waging of wars to the spanking of children.

Mr. Pinker attributes the “six major declines of violence” as the process of pacification, civilizing process, the Humanitarian Revolution, the Long Peace, the New Peace and the cascade of "rights revolutions.

He further notes that 3 peacemakers are responsible for the deepening trend towards greater peace.

1. the pacificist state

2. commerce

3. cosmopolitanism or the expansion of people's parochial little worlds through literacy, mobility, education, science, history, journalism and mass media.

In my earlier posts, I showed Hans Rosling in two videos explaining how people have become remarkably wealthier over the past 200 years, through the division of labor (how washing machine enhanced out lives).

Today, I quoted Matt Ridley saying that the successful evolution of the homo sapiens came from trade.

In short, liberalism has been the primary force responsible for bringing about civilization, wider access to information and knowledge, increasing wealth, vastly improved quality of life and charity, all of which has led to lesser appetite for violence.

In the words of the great Ludwig von Mises, (emphasis added)

Liberalism aims at a political constitution which safeguards the smooth working of social cooperation and the progressive intensification of mutual social relations. Its main objective is the avoidance of violent conflicts, of wars and revolutions that must disintegrate the social collaboration of men and throw people back into the primitive conditions of barbarism where all tribes and political bodies endlessly fought one another. Because the division of labor requires undisturbed peace, liberalism aims at the establishment of a system of government that is likely to preserve peace, viz., democracy.