What if robots take all the jobs? Hint: They can't.

"People have it all wrong" about AI and robots, says philosopher Harry Binswanger. 

Robots are going to take your job? No doubt.

What if robots take all the jobs?  Hint: They can't.

You may not keep this job. But your next one will pay so much more.  How can we know that?  Because, he argues, "We’re all going to get richer. The more that AI and robots can do for us, the richer we will get."

How so? Because AI and robots makes everyone’s labour far more productive -- and the result will be more goods produced, and hence "more wealth in the whole economy."

More wealth means more savings. More savings means more investment. And "more investment means more goods produced, which means a drop in the cost of living, which means a rise in the standard of living."

But how can he be so sure that if your job is replaced you'll be able to find a new one and "take part in this bonanza?"

The temptation is to answer by finding things robots won’t ever be able to do. “Robots will never be great chefs.” “Robots will never be venture capitalists.” “Robots will never write a first-rate symphony.”

That’s irrelevant. The point is that even if AI and robots could do everything better than any human being, that would enhance, not undermine, the value of human labour.

Why? The explanation comes from applying here an important truth discovered two centuries ago. In 1817, the great English economist David Ricardo identified “The Law of Comparative Advantage.”

Ricardo's Law of Comparative Advantage explains that no matter how poor you country may be at producing stuff, if both you and others specialise in what they each do best then, at the end of the day, we are all better off. It's best, for example, if Scotland trades whisky with France for claret and burgundy, rather than the other way around. ("It is the maxim of every prudent master of a family,"explained Adam Smith, "never to attempt to make at home what it will cost him more to make than to buy.")

Equally, the best way for New Zealanders to get cars and electronics is not to try making cars and electronics ourselves, but to process grass into milk powder, meat and wool so that New Zealanders can trade for those fancy devices. And when we do, we're all better off. ( If you're struggling with the concept, because it is remarkably subtle, PJ O 'Rourke's short explanation is one of the funniest on record, and undoubtedly the only one using Courtney Love to help explain things.)

Recognising that self-same principle of Comparative Advantage applies between people as it does to countries, economist Ludwig Von Mises expanded Ricardo's Law to make it "one of the most beautiful laws of the universe." Calling it the Law of Association he showed that specialisation allows even the less productive to benefit from working with the more productive -- or what his student George Reisman characterises as 'what the productive cleaner gains from the genius inventor.'

Even if the inventor can clean faster than a given cleaner, it still pays him to hire that cleaner because off-loading the cleaning work saves him time. He can then use that saved time in the area of his comparative advantage: inventing and selling more stuff.

Likewise, even if there comes a time when the robots can do everything better and faster than human beings, [even] more wealth will be produced if robots and humans each specialise in what they do best. Super-robots would produce more for us if we save them from having to do things that are less productive [for them].

(Of course we won’t be trading with robots: robots own nothing. Robots are owned by people, and those people will be paid for selling robots or for renting them out, just as you can rent power tools from Home Depot today.)

The Law of Comparative Advantage means humans will never run out of productive work to do. There will always be tasks that you don’t want to waste your rented or owned robots’ time in doing.

If you’ve got a robot building you a swimming pool, you don’t want him to stop to cook you dinner.

A chainsaw is a lot more efficient than a knife at cutting. But you don’t use a chainsaw to slice a loaf of bread. Particularly not if that chainsaw is being used by a robot to clear a place for a tennis court in your backyard.

So, rather than panic over “the rise of the machines,” let’s bear in mind the Law of Comparative Advantage ....

And let's recognise that "even with science-fictional super-robots, there will still be money changing hands and a price-system, just as now. You will still be paid for working in the field of your own comparative advantage.

New kinds of jobs will appear, as they always have when technology advances. Ironically, most of the jobs people are afraid of losing -- such as programming jobs or truck-driving jobs -- were themselves created by technological advances. There used to be an American saying: “Adapt or die.” Having the same kind of job as your father and grandfather did is not the American dream.

What new types of job will be created? I can no more project that than a man in 1956 could have projected that today there would be jobs in something called “social media”; or that money can be made by driving for Uber and by renting out living space through AirBnB.

The robots will make work much easier, more interesting, and much better paid.

Prepare to be enriched.

CUE CARD ECONOMICS: Economic Harmonies, and The Miracle of Breakfast

FRENCH EXISTENTIALIST PHILOSOPHER Jean Paul Sartre famously stated “Hell is other people,” and he wrote many books attempting to prove it. 

Unfortunately, all he proved to most readers was that Hell is reading Jean Paul Sartre books.

A century earlier his countryman Frederic Bastiat discovered, argued and helped to prove something very different; that other people are the very opposite of hell. Said Bastiat in his own magnum opus Economic Harmonies:

“All men’s impulses, when motivated by legitimate self-interest, fall into a harmonious social pattern.”

This is the big lesson that economics can give to philosophers: that the world is not made up of the “fundamental antagonisms” between people that some philosophers find everywhere; antagonisms alleged to be ...

Between the property owner and the worker.
Between capital and labour.
Between the common people and the bourgeoisie.
Between agriculture and industry.
Between the farmer and the city-dweller.
Between the native-born and the foreigner.
Between the producer and the consumer.
Between civilization and the social order.

And, to sum it all up in a single phrase:

Between personal liberty and a harmonious social order.

What economics can teach philosophers (and what Bastiat can still teach economists) is that other human beings need neither be a burden nor a threat, neither a hell nor a horror but a blessing.

This is the greatest lesson economics can teach: that in a society making peaceful cooperation possible we each gain from the existence of others.

What a great story to tell!

TO START TO TELL THIS long story, a story that all of economics really serves to show, let’s begin with a short story—an excerpt, from a short story by a great short story writer: O. Henry. As his characters sit down in their wilds to break their fast with something “composed of fried bacon and a yellowish edifice that proved up something between pound cake and flexible sandstone,” they begin to reflect on The Perfect Breakfast:

Such a breakfast, they sigh, might only be possible in New York. "It's a great town for epicures,” they say. As is virtually every city.  We take for granted now that in virtually every cafe in every city in the country we can sit down to the perfect breakfast. We reach over to Brazil or Kenya for our coffee and down to Christchurch for our mushrooms and rolls; to Pokeno, or Vermont, for our bacon and head further down to the Waikato to dig a slice of butter out of a Te Rapa urn and then turn over a beehive near a manuka patch in Nelson for our honey.

This is the Miracle of Breakfast: that we can eat like the gods for the cost only of a few dollars thanks to the freedom to trade, the division of labour and the 'invisible hand' of the market. And we take this for granted.  We take it so much for granted that, rather than celebrate sharing the meal that gods eat on Olympia, we complain if our eggs are too cold.

And we don’t need long arms to enjoy it: we need the arms and minds of other people who are free to produce, free to trade, free to enjoy the fruits of their own labour by trading those fruits with others.

This is the lesson integrated by all of economics:  that when you remove force and fraud people are a blessing rather than a curse. Thanks be to the freedom to trade, the division of labour and the 'invisible hand' of the market that makes it possible.

This is the great lesson of Economic Harmonies hinted at by Adam Smith, made explicit by our friend Frederic Bastiat, and developed in specific areas by the likes of Friedrich Hayek and Ludwig Von Mises. Bastiat first noticed it in a visit to Paris. Paris gets fed, he observed, yet no-one celebrates the miracle:

A light we term self-interest. It is this, says Bastiat, that is at the root of all the Harmonies.

Think about it. On our own we can produce barely anything in a single day.  If we were to permanently endure self-sufficiency or life in the wilds not only would the meal of ambrosia perpetually elude us, our lives would be one long round of much labour for very little reward.  (That's the point of Robinson Crusoe if you remember.) We need others to keep us supplied as we now take for granted—with food, with drink, with iPods, iPads and the very roofs over our head—but how to enlist those others in our aid? Simple: we rely on trading with those others. On voluntary cooperation. In short, we offer them their own profit in return for ours. 

We appeal, in short, to their own self-interest, a point made by Adam Smith in the part of his famous book where he invokes his most famous metaphor:

And so we do. By pursuing our own self-interest, through our production, our trade, our enterprise, we ensure “Paris gets fed.”

But there is no central planner here. That is the second part of this miracle: the “resourceful and secret power that governs the amazing regularity of such complicated movements” is not the result of government planning but the opposite: it is a naturally developed “spontaneous order” regulated by this “inner light” of self-interest and the power of free exchange.  That power, that light,  “is so illuminating, so constant, and so penetrating, when it is left free of every hindrance” it produces the order we take so much for granted.

This, Bastiat’s great lesson of spontaneous order, was taken up by Friedrich Hayek, observing society relies on the spontaneous order arising out of our voluntary cooperation.

This great miracle can only happen when each of us is free to follow our own road, to make use of our unique knowledge and circumstances to pursue our self-interests,  so promoting that of the society more effectually than when we really intend to promote it.

SO WHAT EXPLAINS THIS Miracle of Breakfast then? Bastiat’s own conclusion is summed up in three points:

• Free exchange
• Self-interest
• Spontaneous order

Or in one idea:

“That the legitimate interests of mankind are essentially harmonious.”

This, then, is the great lesson integrated by economics, if we are willing to hear it:

• That human interests do not require acts of sacrifice…
• That bettering the condition of one person does not necessitate the worsening of someone else’s…
• That one person’s wealth does not necessitate another person’s poverty….
• That the creation of wealth requires only that everyone mind their own business and get the hell on with it. ...
• That the interests of all members of society are harmonious if and insofar as private property rights are respected; or, in modern parlance, that the unhampered market can operate independent of government intervention.

Mind you, it takes all of economics to prove the point. And most philosophers are unable to read, or integrate, that much. 

But so too are so many of today’s economists.

* * * * 

* Reposted from 2012, based on a post from 2005. The title comes from a lecture by the late John Ridpath.

The Individual and Society

Mises: "...society is nothing but the combination of individuals for cooperative effort."
[Pic: Jan te Horst, Market Traders]

"Society is cooperation; it is community in action.
    "To say that Society is an organism, means that society is division of labour. To do justice to this idea we must take into account all the aims which men set themselves and the means by which these are to be attained. It includes every interrelation of thinking and willing man. Modern man is a social being, not only as one whose material needs could not be supplied in isolation, but also as one who has achieved a development of reason and of the perceptive faculty that would have been impossible except within society. ...
    "Historically division of labour originates in two facts of nature: the inequality of human abilities and the variety of the external conditions of human life on the earth. ...

 

Bastiat: "In the state of isolation, our wants
exceed our productive capacities. In society,
by virtue of exchange, our productive
capacities exceed our wants."

"Once labour has been divided, the division itself exercises a differentiating influence. The fact that labor is divided makes possible further cultivation of individual talent and thus cooperation becomes more and more productive. Through cooperation men are able to achieve what would have been beyond them as individuals, and even the work which individuals are capable of doing alone is made more productive. ...

    "The greater productivity of work under the division of labour is a unifying influence. It leads men to regard each other as comrades in a joint struggle for welfare, rather than as competitors in a struggle for existence. It makes friends out of enemies, peace out of war, society out of individuals. ...

    

"Society is not mere reciprocity. There is reciprocity amongst animals, for example when the wolf eats the lamb or when the wolf and she-wolf mate. Yet we do not speak of animal societies or of a society of wolves. ... Society exists only where willing becomes a co-willing and action co-action. To strive jointly towards aims which alone individuals could not reach at all, or not with equal effectiveness — that is society.

    "Therefore, Society is not an end but a means, the means by which each individual member seeks to attain his own ends. That society is possible at all is due to the fact that the will of one person and the will of another find themselves linked in a joint endeavour. Community of work springs from community of will. Because I can get what I want only if my fellow citizen gets what he wants, his will and action become the means by which I can attain my own end. Because my willing necessarily includes his willing, my intention cannot be to frustrate his will. On this fundamental fact all social life is built up.

"The principle of the division of labour revealed the nature of the growth of society. Once the significance of the division of labor had been grasped, social knowledge developed at an extraordinary pace ... The doctrine of the division of labour as put forward by eighteenth-century economists ... But the Doctrine of the Harmony of Interests had already anticipated its far-reaching application to social theory. ...

    "Once it has been perceived that the division of labour is the essence of society, nothing remains of the antithesis between individual and society. The contradiction between individual principle and social principle disappears."

~ Ludwig Von Mises, from the essay 'What is Society?' excerpted from his book Socialism: An Economic and Sociological Analysis

"What a free society offers to the individual ... "

"What a free society offers to the individual is much more than what he would be able to do if only he were free."

~ Friedrich Hayek, from his 1960 book The Constitution of Liberty

 

Some Fundamental Insights Into the Benevolent Nature of Capitalism

Just what it says on the label--the book the heart of which F.A. Hayek reckoned
every "fully trained commentator ought to read if he wants to talk sense" [PDF copy here]

"By the 'benevolent nature of capitalism,' I mean the fact that it promotes human life and well-being and does so for everyone. There are many such insights, which have been developed over more than three centuries, by a series of great thinkers, ranging from John Locke to Ludwig von Mises and Ayn Rand. I present as many of them as I can in my book 'Capitalism.'
    "I'm going to briefly discuss about a dozen or so of these insights that I consider to be the most important, and which I believe, taken all together, make the case for capitalism irresistible. I'll discuss them roughly in the order in which I present them in my book. Let me say that I apologise for the brevity of my discussions. Each one of the insights I go into would all by itself require a discussion longer than the entire time that has been allotted to me to speak today. Fortunately, I can fall back on the fact that, in my book at least, I think I have presented them in the detail they deserve.

"1) Individual freedom—an essential feature of capitalism—is the foundation of security, in the sense both of personal safety and of economic security. Freedom means the absence of the initiation of physical force. When one is free, one is safe—secure—from common crime, because what one is free of or free from is precisely acts such as assault and battery, robbery, rape, and murder, all of which represent the initiation of physical force. Even more important, of course, is that when one is free, one is free from the initiation of physical force on the part of the government ...
    "The fact that freedom is the absence of the initiation of physical force also means that peace is a corollary of freedom. Where there is freedom, there is peace, because there is no use of force: insofar as force is not initiated, the use of force in defence or retaliation is not required. ...

"2) A continuing increase in the supply of economically useable, accessible natural resources is possible as man converts a larger fraction of the virtual infinity that is nature into economic goods and wealth, on the foundation both of growing knowledge of nature and growing physical power over it. ...

"3) Production and economic activity, by their very nature, serve to improve man's environment. This is because from the point of view of physics and chemistry, all that production and economic activity consist of is the rearrangement of the same nature-given chemical elements in different combinations and their movement to different geographical locations. The guiding purpose of this rearrangement and movement is essentially nothing other than to make the chemical elements stand in an improved relationship to human life and well-being. ...

"4) The division of labour, a leading feature of capitalism, which can exist in highly developed form only under capitalism, provides among other major benefits, the enormous gains from the multiplication of the amount of knowledge that enters into the productive process and its continuing, progressive increase.

"5) At least since the time of Adam Smith and David Ricardo, it has been known that there is a tendency in a capitalist economy toward an equalisation of the rate of profit, or rate of return, on capital across all branches of the economic system. ... The operation of this principle not only serves to keep the different branches of a capitalist economy in a proper balance with one another, but it also serves to give the consumers the power to determine the relative size of the various industries, simply on the basis of their pattern of buying and abstention from buying ...

"6) As von Mises has shown, in a market economy, which, of course, is what capitalism is, private ownership of the means of production operates to the benefit of everyone, the non-owners, as well as owners. The non-owners obtain the benefit of the means of production owned by other people. They obtain this benefit as and when they buy the products of those means of production. To get the benefit of General Motors' factories and their equipment, or the benefit of Exxon's oil fields, pipelines, and refineries, I do not have to be a stockholder or a bondholder in those firms. I merely have to be in a position to buy an automobile, or gasoline, or whatever, that they produce....

"7) A corollary of the general benefit from private ownership of the means of production is the general benefit from the institution of inheritance. Not only heirs but also nonheirs benefit from its existence. The nonheirs benefit because the institution of inheritance encourages saving and capital accumulation...

"8) Under capitalism, not only is one man's gain not another man's loss, insofar as it comes out of an increase in overall, total production, but also—in the most important cases, namely, those of the building of great industrial fortunes—one man's gain is positively other men's gain. This follows from the fact that the sheer arithmetical requirements of building a great fortune are a combination of the earning of a high rate of profit on capital for a prolonged period of time, and the saving and reinvestment of the far greater part of the profits earned, year after year....

"9) As von Mises has shown, the economic competition that takes place under capitalism is radically different than the biological competition that prevails in the animal kingdom. In fact, its character is diametrically opposite. The animal species are confronted with scarce, nature-given means of subsistence, whose supply they are unable to increase. Man, by virtue of his possession of reason, can increase the supply of everything on which his survival and well-being depend. Thus, instead of the biological competition of animals striving to grab off limited supplies of nature-given necessities, with the strong succeeding and the weak perishing, economic competition under capitalism is a competition in who can increase the supply of things the most, with the outcome being practically everyone surviving longer and better. ...

"10) And now, once more with credit to Mises, so far from being the planless chaos and 'anarchy of production' that is alleged by Marxists, capitalism is in actuality as thoroughly and rationally planned an economic system as it is possible to have. The planning that goes on under capitalism, without hardly ever being recognised as such, is the planning of each individual participant in the economic system. ...

"11) I turn now to the subject of monopoly. Socialism is the system of monopoly. Capitalism is the system of freedom and free competition....

"12) Capitalism is a system of progressively rising real wages, the shortening of hours, and the improvement of working conditions. ...

"13) Finally, my last point: a one-hundred-percent-reserve, precious-metals monetary system would make a capitalist society both inflation-proof and deflation/depression-proof. ...

"Here, for lack of time. I must close. I'd like to do so by saying that if you've found my talk today to be of interest, I hope you will explore the matters I've discussed, at greater length and in detail in my book. Its entire sum and substance can be understood as a systematic exposition of the benevolent nature of capitalism."

~ George Reisman, from his pamphlet 'Some Fundamental Insights Into the Benevolent Nature of Capitalism'. Read it all on the web here. And for the full(est) argument, head to Reisman's full book-length argument in Capitalism -- on free PDF here, on Kindle here, hardback here, or paperback here: Vol. 1 and Vol. 2.

"For the first time men could conceive a social order in which the ancient moral aspiration for liberty, equality, and fraternity was consistent with the abolition of poverty and the increase of wealth."

 

"[T]he development of [classical] liberal ideas ... augmented by the division of labour in widening markets ... changed the condition in which men lived....
    "It was no accident that the century which followed the intensified application of the principle of the division of labour was the great century of human emancipation. In that period chattel slavery and serfdom, the subjection of women, the patriarchal domination of children, caste and legalised class privileges, the exploitation of backward peoples, autocracy in government, the disfranchisement of the masses and their compulsory illiteracy, official intolerance and legalised bigotry, were outlawed in the human conscience, and in a very substantial degree they were abolished in fact.
    "During this same period petty principalities coalesced voluntarily into larger national unions, at peace within their borders; in this period, too, the interdependence of the peoples became so evident a fact that the older empires went through a spectacular transformation into federations of self-governing states, and among all civilised nations peace became the avowed aim, even if it was not always the real aim, of foreign policy.
    "All of this did not happen by some sort of spontaneous enlightenment and upsurge of good will. The characters of men were not suddenly altered. We can be certain of that, now that we live in an epoch of reaction where ... there is so much bad will in all the nations. What did change in the nineteenth century was the condition in which men lived, and the liberal enlightenment reflected it. The new mode of production, since it was based on the profitable exchange of specialised labor, envisaged a social order based on the harmony of interest among widely separated but collaborating men and communities.
    "We have become insensitive and forgetful about the revolutionary change in human life. But to our great-grandfathers it was an intoxicating promise that had suddenly been revealed to mankind, and only by recapturing the original insight of the pioneer [classical] liberals can we fully appreciate the evangelical fervour with which they preached that the freedom of trade was a new dispensation for all mankind.
    "For the first time in human history men had come upon a way of producing wealth in which the good fortune of others multiplied their own. It was a great moment, for example, in the long history of conquest, rapine, and oppression when David Hume could say (1742) at the conclusion of his essay, "Of the Jealousy of Trade":

'I shall therefore venture to acknowledge, that, not only as a man, but as a British subject, I pray for the flourishing commerce of Germany, Spain, Italy, and even France itself. I am at least certain that Great Britain, and all those nations, would flourish more, did their sovereigns and ministers adopt such enlarged and benevolent sympathies toward each other.'

"It had not occurred to many men before that the Golden Rule was economically sound. Thus the enlarged and benevolent sympathies of the eighteenth and nineteenth centuries had a material foundation in the self-interest of men who were growing richer by exchanging the products of specialised labor in wide markets.
    "They [understood] it to be true that an enlightened self-interest promoted the common good. For the first time men could conceive a social order in which the ancient moral aspiration for liberty, equality, and fraternity was consistent with the abolition of poverty and the increase of wealth."

~ Walter Lippmann, from his 1938 book The Good Society [p. 192-3]

 

"It is commerce which is rapidly rendering war obsolete..."

“Finally, commerce first taught nations to see with good will the wealth and prosperity of one another. Before, the patriot, unless sufficiently advanced in culture to feel the world his country, wished all countries weak, poor, and ill-governed, but his own: he now sees in their wealth and progress a direct source of wealth and progress to his own country. It is commerce which is rapidly rendering war obsolete, by strengthening and multiplying the personal interests which are in natural opposition to it. And it may be said without exaggeration that the great extent and rapid increase of international trade, in being the principal guarantee of the peace of the world, is the great permanent security for the uninterrupted progress of the ideas, the institutions, and the character of the human race.”

~ John Stuart Mill, from his Principles of Political Economy (Book III, Chapter XVII, Section 14).

• Hat tip Stephen Hicks, who contrasts the pre-war German intellectual Werner Sombart, who believed "the German way of war will cleanse humanity and raise it to a sacred height."
• And 'shout out' to Richard Fulmer, who contrasts the sentiment with the "thinking" of some contemporary maggots:

"Reason Is Infinitely More Important Than Race"

"A commonality of skin colour and associated facial features is as nothing compared to the fact that human beings of all races share the faculty of reason. 

    "The former may allow for an interesting group photo once in a while. The latter is what underlies the accumulation and application of knowledge and gives to the members of all races the ability to produce the goods and services that the members of all races need and desire.
    "Every day the members of all races benefit from the work of the members of all other races in that greatest phenomenon of voluntary social cooperation, the division of labour and capitalism."

~ George Reisman, from his post 'Reason Is Infinitely More Important Than Race'

"Society is nothing but the combination of individuals for cooperative effort." Meaning, we generally gain from the existence of others

“In the state of isolation, our wants exceed our productive capacities. By virtue of exchange, our productive capacities come to exceed our immediate wants. Implicit in exchange is division of labour...”

~ Frederic Bastiat, from his Economic Harmonies

“The individual lives and acts within society. But society is nothing but the combination of individuals for cooperative effort. It exists nowhere else than in the actions of individual men.”

~ Ludwig Von Mises, from, his book Human Action

“When you live in a rational society, where men are free to trade, you receive an incalculable bonus: the material value of your work is determined not only by your effort, but by the effort of the best productive minds who exist in the world around you. When you work in a modern factory, you are paid, not only for your labour, but for all the productive genius which has made that factory possible...”

~ Ayn Rand from her essay 'What is Capitalism?'

“Economic competition is not a process by which the success of the biologically fit brings about the extermination of the biologically weak. On the contrary, it is a process by which the success of better products and more efficient methods of production promotes the survival and well-being of all. It is a process in which the success of the more able raises the productivity and improves the standard of living of the less able....

    "So far from being the law of the jungle, the freedom of economic competition emerges as the true principle of the universal brotherhood of man.”

~ George Reisman, from his book Capitalism

"Economic competition is one of the unfortunate accidents of terminology; what it means is simply the freedom of individuals to cooperate through exchange with the others who offer (or accept) the best terms."

~ Frank Knight, from his 1944 lecture “The Planful Act: The Possibilities and Limitations of Collective Rationality,” as reprinted in Knight’s 1947 collection, Freedom and Reform [hat tip Cafe Hayek]

“The very fact that an exchange takes place is proof that there must necessarily be profit in it for both the contracting parties; otherwise it would not be made. Hence, every exchange represents two gains for humanity.”

- Etienne Bonnot de Condillac, from his Le commerce et le gouvernement considérés relativement l'un à l'autre

"Society could not have come into existence or been preserved without a harmony of the rightly understood interests of all its members."

"[T]he gain of one man is [said to be] the damage of another; no man profits but by the loss of others... [Yet] society could not have come into existence or been preserved without a harmony of the rightly understood interests of all its members....
    "Human effort exerted under the principle of the division of labour in social cooperation achieves, other things remaining equal, a greater output per unit of input than the isolated efforts of solitary individuals. Man's reason is capable of recognising this fact and of adapting his conduct accordingly. Thus social cooperation becomes for almost every man the great means for the attainment of all ends. An eminently human common interest, the preservation and intensification of social bonds, is substituted for pitiless biological competition, the significant mark of animal and plant life. Man becomes a social being. He is no longer forced by the inevitable laws of nature to look upon all other specimens of his animal species as deadly foes. Other people become his fellows. For animals the generation of every new member of the species means the appearance of a new rival in the struggle for life. For man, until the optimum size of population is reached, it means rather an improvement than a deterioration in his quest for material well-being."

~ Ludwig von Mises, compilation quote from his 1949 book Human Action, and his 1957 book Theory and History [hat tip Daniel Sanchez's article 'The Profound Significance of Social Harmony']

"Society is nothing but the combination of individuals for cooperative effort."

"Individual man is born into a socially organised environment. In this sense alone we may accept the saying that society is--logically or historically--antecedent to the individual. In every other sense this dictum is either empty or nonsensical. The individual lives and acts within society. But society is nothing but the combination of individuals for cooperative effort. It exists nowhere else than in the actions of individual men. It is a delusion to search for it outside the actions of individuals. To speak of a society's autonomous and independent existence, of its life, its soul, and its actions is a metaphor which can easily lead to crass errors.
    "The questions whether society or the individual is to be considered as the ultimate end, and whether the interests of society should be subordinated to those of the individuals or the interests of the individuals to those of society are fruitless. Action is always action of individual men. The social or societal element is a certain orientation of the actions of individual men. The category end makes sense only when applied to action....
    "Within the frame of social cooperation there can emerge between members of society feelings of sympathy and friendship and a sense of belonging together. These feelings are the source of man's most delightful and most sublime experiences. They are the most precious adornment of life; they lift the animal species man to the heights of a really human existence. However, they are not, as some have asserted, the agents that have brought about social relationships. They are fruits of social cooperation, they thrive only within its frame; they did not precede the establishment of social relations and are not the seed from which they spring.
    "The fundamental facts that brought about cooperation, society, and civilisation and transformed the animal man into a human being are the facts that work performed under the division of labor is more productive than isolated work and that man's reason is capable of recognising this truth. But for these facts men would have forever remained deadly foes of one another, irreconcilable rivals in their endeavors to secure a portion of the scarce supply of means of sustenance provided by nature. Each man would have been forced to view all other men as his enemies; his craving for the satisfaction of his own appetites would have brought him into an implacable conflict with all his neighbors. No sympathy could possibly develop under such a state of affairs."

          ~ Ludwig Von Mises, from 'Human Cooperation,' in his book Human Action

"Capitalism is a system of class harmony..."

"Capitalism is a system of class harmony, in which the accumulated wealth of the capitalists, i.e., their capital, is the source of the supply of products and the demand for labour, and progressively enriches wage earners.
    "The result is that today the average wage earner in a capitalist country has a higher standard of living than did the kings and emperors of the past, such as Augustus Caesar, Louis XIV, and Queen Victoria."

          ~ George Reisman. For proof, see his Capitalism: A Treatise on Economics

"...economics provides us with is a way to see what makes a society of peace, cooperation, and progress possible."

Steve Horwitz, the libertarian economist whom we've posted here at NOT PC a few times, died yesterday at the cruel age of 57, after a years-long battle with plasma-cell cancer (multiple myeloma).

The comments on his last Facebook post (which is public) give a sense of how much he inspired people.
And this excerpt from a talk he gave in 2019 gives some small idea of why they felt that way:

❝ I want to argue that what an understanding of economics provides us with is a way to see what makes a society of peace, cooperation, and progress possible. The reason to care about economics, and the reason to study it, is not just to understand material well-being, but instead it’s about a much bigger picture: how we cooperate in a world of strangers and diversity, and how we turn that cooperation into better and longer and more peaceful lives for more people….
    Through this process, exchange brings strangers into each of our communities, and helps transform them from a potential enemy to a friend. We trade across differences all of the time, and there’s no better way of reducing the suspicions and stereotypes about 'the other' than to enter into a mutually beneficial exchange relationship with them….
    Nothing symbolises this better than the 'double thank-you' of the marketplace. How often when we conclude an exchange do both parties say “thank you?” That’s symbolic of the mutual benefit, cooperation, and interdependency that markets and liberalism create. It’s a world of peaceful human cooperation and progress captured in the simplest of acts. It is also, I should note, an expression of gratitude to the other party. And gratitude for the bounty that markets and liberalism have given us is in short supply these days.
    We live in a world of secular miracles, not the least of which are the drugs that are beating back diseases and extending human lives, including a bunch that have made it possible for me to be here tonight. The poorest of Westerners lives far better than the kings of old, and many of the global poor have access to all the world’s knowledge in their pockets….
    We’ve learned that the positive-sum game of the liberal order is better at producing the world of Micah’s vision than the zero- and negative-sum games of plunder, whether feudal or socialist. Or nationalist. An increased understanding of economics helped make this happen and has sustained it in the face of enemies, old and new.
    Unfortunately, we are at a dangerous point of losing this learning these days thanks to the revival of the forces of nationalism and socialism. There are a lot of reasons for this, but I do think that liberals need to engage in some self-reflection about whether our own rhetoric and way of talking about economics and liberalism don’t bear some responsibility for our dilemma. How often do we speak of markets as sources of not just prosperity, but prosperity for the least well off? How often do we speak of markets as the cause of peace and social cooperation and mutual interdependence? How often do we talk about how markets have humanised us and reduced our propensity to violence, and turned strangers into honorary friends or kin? It’s important to stress the material wealth that markets produce, but the point of even that is enabling us to live lives of peace, cooperation, and security.
    Perhaps more focus on economics as the study of peaceful human social cooperation and how markets and liberalism enable us to bridge our differences and leverage our diversity can bring more people who are concerned with peace, prosperity, and progress to appreciate the study of economics and the institutions of the liberal order as a means to those social ends. ❞

[Hat tip John Althouse Cohen and David Pritchard]

Supermarkets: "...one of the great bargains of all time."

"The logistics chain that is Amazon, or [Warehouse], or even a [Countdown], is one of the grand capitalist achievements in history. It used to be, in those heady days before the capitalists inserted themselves into the food supply system, that the working man spent 80% of income on food and rent. Sure, rent is a bit of a problem in certain places still. But food bills have fallen to perhaps 10% of household income.
    "We can check this too. Back in 1962 or so Mollie Orshansky noted that a poor family was spending about 30% or so of income on food. So, if we take a reasonable diet and triple it – roughly – then we’ve got a reasonable estimation of the poverty line. Sure, it was a back of the fag packet estimation and was meant to be used for a year or two while they all figured out something more sensible. But that is what the Official Poverty Line in the US is today, merely upgraded for inflation. And as general inflation has been significantly higher than food price inflation over those decades that average poor family, on the same inflation adjusted budget, is now spending 12 to 15%, not 30%, of their budget on food.
    "Supermarkets are the reason why. The people who own supermarkets charge a 1 or 2% margin on their activities. They get 2%, we get a 50% reduction in costs. It’s one of the great bargains of all time.
    "And this is what Guardian columnists complain about…"

          ~ Tim Worstall, from his post 'The problem is the solution - Jeff Bezos'

             [Hat tip Samizdata] 

>>READ MORE about The Miracle of Breakfast ....

"One cannot Sell without at the same instant and in the same act Buying, nor Buy anything without simultaneously Selling something else..." #QotD

"A market for Products is products in Market. The fundamental thus tersely expressed may be formulated more at length in this way: One cannot Sell without at the same instant and in the same act Buying, nor Buy anything without simultaneously Selling something else; because in Buying one pays for what he buys, which is Selling, and in Selling one must take pay for what is sold, which is Buying. As these universal actions among men are always voluntary, there must be also an universal motive leading up to them; this motive on the part of both parties to each and every Sale can be no other than the mutual satisfaction derivable to both; the inference, accordingly, is easy and invincible, that governmental restrictions on Sales, or prohibitions of them, must lessen the satisfactions and retard the progress of mankind."

~ Arthur Latham Perry, from his best-selling Principles of Political Economy (1891)

A mugging that created a career

"The mugging caught me emotionally off guard, and I had a lot of flashbacks afterward. It got me interested in the question of why some kids would humiliate me over a small amount of money. And I started to think: Had they been able to sell me something or ask me to invest in a business deal, they could have gotten a lot more money and it would have been a win/win situation for everyone. And that really got me interested in a new career path in education, which turned out great." 

~ Steve Mariotti on the moment that changed his career path and, with it, many young lives...

"There is no conflict of interests among men who do not desire the unearned." #QotD

"There is no conflict of interests among men who do not desire the unearned, who do not make sacrifices nor accept them, who deal with one another as traders, giving value for value.
    "The principle of trade is the only rational ethical principle for all human relationships, personal and social, private and public, spiritual and material. It is the principle of justice.
    "A trader is a man who earns what he gets and does not give or take the undeserved. He does not treat men as masters or slaves, but as independent equals. He deals with men by means of a free, voluntary, unforced, uncoerced exchange -- an exchange which benefits both parties by their own independent judgment. A trader does not expect to be paid for his defaults, only for his achievements. He does not switch to others the burden of his failures, and he does not mortgage his life into bondage to the failures of others.
    "In spiritual issues—(by 'spiritual' I mean: 'pertaining to man’s consciousness')—the currency or medium of exchange is different, but the principle is the same. Love, friendship, respect, admiration are the emotional response of one man to the virtues of another, the spiritual payment given in exchange for the personal, selfish pleasure which one man derives from the virtues of another man’s character. Only a brute or an altruist would claim that the appreciation of another person’s virtues is an act of selflessness, that as far as one’s own selfish interest and pleasure are concerned, it makes no difference whether one deals with a genius or a fool, whether one meets a hero or a thug, whether one marries an ideal woman or a slut. In spiritual issues, a trader is a man who does not seek to be loved for his weaknesses or flaws, only for his virtues, and who does not grant his love to the weaknesses or the flaws of others, only to their virtues."
        ~ Ayn Rand on 'The Trader Principle'
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"Through all time, wherever mankind have attempted to live in peace with each other, both the natural instincts & the collective wisdom of the human race have acknowledged and prescribed, as an indispensable condition, obedience to this one only universal obligation: viz., that each should live honestly towards every other." #QotD

"The science of justice ... is the science of all human rights; of all a man’s rights of person and property; of all his rights to life, liberty, and the pursuit of happiness.
    "It is the science which alone can tell any man what he can, and cannot, do; what he can, and cannot, have; what he can, and cannot, say, without infringing the rights of any other person.
    "It is the science of peace; and the only science of peace; since it is the science which alone can tell us on what conditions mankind can live in peace, or ought to live in peace, with each other.
    "These conditions are simply these: viz., first, that each man shall do, towards every other, all that justice requires him to do; as, for example, that he shall pay his debts, that he shall return borrowed or stolen property to its owner, and that he shall make reparation for any injury he may have done to the person or property of another.
    "The second condition is, that each man shall abstain from doing so another, anything which justice forbids him to do; as, for example, that he shall abstain from committing theft, robbery, arson, murder, or any other crime against the person or property of another.
    "So long as these conditions are fulfilled, men are at peace, and ought to remain at peace, with each other. But when either of these conditions is violated, men are at war. And they must necessarily remain at war until justice is re-established.
    "Through all time, so far as history informs us, wherever mankind have attempted to live in peace with each other, both the natural instincts, and the collective wisdom of the human race, have acknowledged and prescribed, as an indispensable condition, obedience to this one only universal obligation: viz., that each should live honestly towards every other.
    "The ancient maxim makes the sum of a man’s legal duty to his fellow men to be simply this: 'To live honestly, to hurt no one, to give to every one his due.'
    "This entire maxim is really expressed in the single words, to live honestly; since to live honestly is to hurt no one, and give to every one his due."
          ~ Lysander Spooner, from his 1882 pamphlet on Natural Law

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Shut-down disharmony: The lesson from Bastiat

The continuous encroachment of government into people's everyday lives was dramatically demonstrated in the recent U.S. Federal Government partial shutdown. You might think, write Gary Galles in this guest post, that with the shutdown at an end, that national harmony would now break out.
But you would be wrong: because as Frédéric Bastiat famously pointed out, as long as government coercion continues, and expands, then there is no possibility of any genuine harmony.
The reason is simple: Genuine harmony requires cooperation, it relies on voluntary human interaction; coercion makes this impossible. Freedom requires government “exerted solely for the maintenance of order, security, and justice.” Every expansion beyond that narrow bound expands disharmony.

Amid the hyperbole devoted to the partial government shutdown, Americans have heard the soap-opera details of behind-the-scenes jockeying and Twitter smack-downs while being told how dire things are as a result. In fact, with all the blaming of opponents for extremism and unprincipled intransigence in preventing a resolution, you might think that the government status quo they are trying to get back to is the means to national harmony. That would be seriously mistaken.

The government we suffer from is the primary cause of our disharmony, which is why liberty itself requires a partial government shutdown.

Continually leveraging government power into ever-more areas where people’s views dramatically differ expands how frequently some people’s preferences are forced on others. That guarantees acrimony, not harmony. And our public servants in Washington could use some wisdom on that score. For that, they could turn to one of the most insightful observers of government’s influence on social comity—Frédéric Bastiat, among history’s ablest defenders of freedom. In his seminal book, Economic Harmonies, he writes:

"All men’s impulses, when motivated by legitimate self-interest, fall into a harmonious social pattern…the practical solution…is simply not to thwart those interests or to try to redirect them.
    Coercion…[has] never yet done anything…except to eliminate liberty.
    Where do you…establish the acting principle of coercion?... if you entrust men with arbitrary power, you must first prove that…their minds will be exempt from error, their hands from greed, and their hearts from covetousness.
    But it is not necessary to force into harmony things that are inherently harmonious.
    Let men labour, exchange, learn, band together, act, and react upon one another…there can result from their free and intelligent activity only order, harmony and progress.
    The question is whether or not we have liberty...not profoundly disrupted by the contrary act of institutions of human origin.
    Social order, freed from its abuses and the obstacles that have been put in its way…[is] the most admirable, the most complete, the most lasting, the most universal, and the most equitable of all associations.
    The laws of Providence are harmonious…only when they operate under conditions of freedom…Therefore when we perceive something inharmonious in the world, it cannot fail to correspond to some lack of freedom or justice.
    The state always acts through the instrumentality of force…What are the things that men have the right to impose on one another by force?... I have no right to force anyone to be religious, charitable, well educated, or industrious; but I have the right to force him to be just: this is a case of legitimate defence.
    If, therefore, the use of force by the individual is justified solely on grounds of legitimate defence, we need only recognise that government action always takes the form of force to conclude that by its very nature it can be exerted solely for the maintenance of order, security, and justice. All government action beyond this limit is an encroachment upon the individual’s conscience, intelligence, and industry—in a word, upon human liberty.
    Accordingly, we must [turn]…to the task of freeing the whole domain of private activity from the encroachments of government.
    It seems evident to me that to restrict the public police force to its one and only rightful function, but a function that is essential, unchallenged, constructive, desired [xxxvi] and accepted by all, is the way to win it universal respect and co-operation.…from what source could [then] come all our present ills of systematic obstruction, parliamentary bickering, street insurrections, crises, factions, wild notions, demands advanced by all men to govern under all possible forms, as dangerous as they are absurd, that teach the people to look to the government for everything. We shall have an end … to the ever increasing and unnatural meddling of politics into all things.
"[Many] causes of disturbances, friction, disaffection, envy, and disorder would no longer exist…it reduces evil to the smaller and smaller area left open to it by the ignorance and perversity of our human frailty, which it is the function of harmony to prevent or chastise."

Bastiat's Economic Harmonies identified the principled defence of individual rights and freedom as central to social harmony and progress. But such freedom required government “exerted solely for the maintenance of order, security, and justice.” Every expansion beyond that narrow bound expands disharmony.

Politicians promise harmony and blame opponents for destroying it. But government acting as the ubiquitous dispenser of goodies and garnishments destroys harmony. So the fight in Washington is not the cause of division, and no temporary DC détente can eliminate it. The core fight is over how invasive, and thus how destructive of harmony, government will be.

* * * * * 

Gary M. Galles is a professor of economics at Pepperdine University. His recent books include 'Faulty Premises, Faulty Policies' (2014) and 'Apostle of Peace' (2013). He is a member of the FEE Faculty Network.
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Seeking social justice by means of the state ends only in destroying social harmony

The state is the wrong means to seek social justice. Take this path and you create discord, explains Jeffrey Tucker in this guest post: The violent hatreds, tribalisms, acts of revenge, and never-ending escalation of the war between left and right (and between races, religions, sexes, and classes) are exactly what you would expect to get when you attempt to organise life according to the zero-sum game that is politics.
Liberalism proposed a totally different idea, says Tucker: It said that everyone should be free to live as they want provided that didn’t interfere with others’ ability to do the same -- to live and let live and embrace the kind of legal order that instantiates that principle. It's the only path to the social harmony that I and so many others seek.

Here is what happened to social harmony

Guest Post by Jeffrey Tucker

America is fracturing right now, and this earnest New York Times column by David Brooks convinces me that neither he nor the legions of other public intellectuals currently warning of the fracturing of the country really have any idea why.

In Brooks’s ideal society, as he explained in his influential 1997 article “A Return to National Greatness,” we should have a large and activist central state that controls national life and takes care of all needs and rules over a happy and unified people who take joy and pride in our civic institutions." That pretty much describes the ideal society of most other public intellectuals as well.

Neither he nor they have given up the dream, which accounts for the palpable shock at the frenzied tribalism in evidence during the controversy over a Supreme Court pick. “This is a complete pulverisation of the actual individuals involved in this case – a retreat from complex particularity to simplistic group prejudice,” writes Brook. “The core problem behind all of this is a complete breakdown in the legitimacy of our public institutions.”

That sounds terrible, but what is it that he wants? He wants a big state plus civic unity. And you can see from his column that he is completely mystified about why this is not happening. Indeed, he is panicked (and maybe he is right to be) about the sheer wickedness of the current moment in politics.

Why the Shock?

Here is what frustrates me about this perspective. It nowhere acknowledges that the current moment is precisely what liberalism (or libertarianism) predicted would happen if you grow the state beyond the most minimal functions pertaining only to a narrow range of particular crimes.

The classical liberal (or libertarian) is not surprised by the growth of partisan tribalism as the state itself metastasises because we understand that the divisions of big-government's pressure-group politics demand it. 

We Chose Wrongly

Over the last hundred years, we've chosen the path of building a total state (a state that knows no limits to its power), and thus did the prediction of the liberals become true, most obviously now in times of relative peace and prosperity (it takes war and depression to unite people in the way that Brooks and others imagine that they should be).

The violent hatreds, tribalisms, acts of revenge, and never-ending escalation of the war between left and right (and between races, religions, sexes, and classes) are exactly what you would expect to get when you attempt to organise life according to the zero-sum game that is politics.

Why is it that so few are willing to see what would strike any liberal from the past, or any educated libertarian of the present, as incredibly obvious?

Brooks is a smart guy. But he can't bring himself to admit the core failing of modern political life: the attempt to achieve social harmony through political means. It can't happen. It's the wrong means to a good end. It's wrong because behind the veil of good intentions of political organisation is the only real tool that the state has, which is the threat of violence against person and property. That is not a basis for social harmony.

The Best Guarantor of Social and Economic Harmony

The liberal conviction from the last several hundred years is that the best guarantor of social and economic harmony is not government), but freedom. Frederic Bastiat wrote his last book with that title. “Liberty!" he proclaimed: "Therein, in the last analysis, lies the source of harmony. Oppression! Therein lies the source of discord. The struggle between these two forces fills the annals of history.”

To be sure, Bastiat was no utopian. It is the social and economic planner who imagines some ideal state to bring about through force. He saw in the institutions of freedom the capacity for improvement. “Harmony does not consist in the complete absence of evil, but in its gradual reduction,” he wrote.

Lord Acton said the same. Power, he emphasised constantly, does not solve social problems; it leads to moral corruption, conflict, and violence.

By the end of his own life, economist Ludwig von Mises had come to understand that the political landscape is divided between two groups. First, there are the harmonists who believe in leaving society alone to manage itself because exchange and association leads to ever more favourable, prosperous, and peaceful social outcomes. Second there are the anti-harmonists who believe that “a community of interests exists only within the group among its members. The interests of each group and of each of its members are implacably opposed to those of all other groups and of each of their members.” Given this, “there should be perpetual war among various groups” with government there to foment the whole ghastly scene in the name of managing it, bringing justice, righting wrongs, making society great, or whatever slogan is popular among the right or the left.

The anti-harmonists, because of their dedication to coerced outcomes, end up causing society to behave precisely as they imagine it does and should behave. They end up creating the world of their fevered imaginations. The harmonists, in contrast, are left calmly to explain that there is another path, but people are less likely to listen in the midst of tribal wars in which the winning group takes all.

The pressure-group warfare of their tribal politics deafens them to those who make the point that this warfare of one pressure group against another is precisely what makes big politics tick!

No Forced Unity

You can do easy mental experiments to discover this for yourself. Let's say that the political elites announce that there would be only one religion, and one sect within that religion, that will prevail in all matters related to morality and theology. What do you suppose would follow such an announcement? More peace or more civic war?

The same pertains to every other aspect of life. What should be done with our private associations, our enterprising aspirations, the property that we own, our desire to travel, our desire to work with others in a business, our willingness to engage in exchange with others, our desire to speak and write what is on our mind, our affections and familial ambitions, our preferences over art and music, the personal preference for what we smoke and eat, and so on through the whole list of life activities?

Every attempt to manage these things from the top down fuels social division. There are literally millions of examples but the most insidious among them touch on the most complex areas of life such as gender relationships in professional life.

For example, when in the 1990s the courts, regulators, and Congress decided to legislate against sexual harassment, it seemed like an innocuous affirmation of meritorious cultural change that was already taking place. Who could possibly object to such laws? All these years later, we see how this use of legislative force mutated into a brutal war in which each side claims the other is plotting the disempowerment of the other.

The anger is palpable on all sides, precisely what you expect when people literally believe they are fighting for their identity and lives. 

And, of course, in the end, well-intentioned laws are being used to manipulate political outcomes. All state interventions, even those that seem to push completely wonderful social results, end up becoming weapons – and weaponising the people who use them to gain advantage over others.

Who benefits? Those who seek power over others – and that’s true whether the power seekers wave flags of the left or right.

The truth that they ignore however is this: That the state is the wrong means to seek social justice. Take this path and you create discord.

Liberalism proposed a different idea. It said that everyone should be free to live as they want provided that didn't interfere with others' ability to do the same. It's the law of equal freedom, enforced by decentralised institutions, the gradual evolution of social norms, and the courts of taste and manners. People are guaranteed rights to liberty, property, and associations of their own choosing; otherwise, the state does not interfere. This approach built civilisation. It created the most harmonious societies in the history of humankind.

Brooks is at a loss about what to do about the civil wars of our time, and pathetically ends up suggesting small group seminars in which we talk amongst ourselves so we gain greater understanding.

The real answer is to live and let live and embrace the kind of legal order that instantiates that principle. It's the only path to the harmony that he and so many others seek. The alternative is to keep tearing each other apart in a great struggle to control the whole.

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Jeffrey A. Tucker is Editorial Director for the American Institute for Economic Research. He is the author of many thousands of articles in the scholarly and popular press and eight books in 5 languages. He speaks widely on topics of economics, technology, social philosophy, and culture.