(L55) Compact Althusius & Nationalist Hobbes

1.) Describe the models of society laid out by Althusius and Hobbes.

The model of society laid out by Althusius was one consisting of many smaller authorities, each with its own rights that no other power could overturn or impede upon. The reasoning behind this being that if one authority (say, a state) became too oppressive, a person could easily move to another. The ability to leave the authority of a tyrannical state pressures all the states to remain un-oppressive.
The Hobbesian model of society, being quite opposite of Althusius’ model, stated that large states would be ruled over by one irresistible and centralized power; a government.

2.) What are the compact and nationalist theories of the Union?

The compact theory, as known as the “compact fact”, goes hand in hand with Althusius’ model of society. It holds that a union, which is a collection of states, was created by and from the states; meaning that the states were the original unit. The nationalist theory, corresponding with the Hobbesian model of society, states that the union is a single whole, and that it was the original unit. This theory holds that states exist only as parts of the union.

(L50) Fiat Money & Government Interference

1.) What problems do price ceilings cause, and what are the benefits of letting prices adjust without government interference?

Price ceilings lower the quantity of products available to consumers, and raise the demand all at the same time. This causes shortages. Allowing prices to adjust themselves would allow producers to accurately interpret economic signals and meet the needs of consumers in a highly efficient fashion.

2.) Name and explain three disadvantages that have been identified with fiat money.

One disadvantage that has been identified with fiat money is the fact that when the government (really The Federal Reserve) increases the paper money supply, prices rise to a level that they would not have naturally reached without intervention. Another disadvantage to fiat money is that it increases the power of the government. Because they can create new money from thin air and there is no limit to how many paper bills they can print, they have, in a general sense, unlimited resources. Adding onto this, when new money is created there is a distortion in the distribution of money throughout the economy, because whoever receives the new money first is spending it at the prices of the old money. (When new money makes its way through the economy, prices rise; however those who are the first to receive the money have not yet experienced this rise in prices, and are therefore favored in this process.) The losers of this process are those who get the new money at the end of the process, or by the time it has already taken it’s toll on the economy.

(L40) Government Intervention in The United States

1.) Explain the basics of the Austrian theory of the business cycle. What is the difference, in terms of consequences, between lower interest rates that result from the saving choices of individuals, and lower interest rates that are achieved artificially, by a government-established central bank?

The Austrian theory of the business cycle basically dictates that in a free market, there is communication between the consumer and the producer which is translated through interest rates. As long as interest rates are not interfered with, they will read correctly to producers and allow them to meet the needs of their consumers reliably. However, when interest rates are interfered with and pushed down artificially by the central bank, there is no longer clear communication between producers and consumers. This lack of economic coordination creates conflict, and makes society poorer because labor and physical resources have been misallocated. The results of government intervention and false interest rates are recession and depression plagued upon the people.

2.) What are some of the pitfalls of industrial policy?

Industrial policy is what it is called when the government favors certain industries through subsidies, cheap loans, and other specific assistances. One of the biggest downfalls of industrial policy is the fact that it diminishes incentive within the favored business firms to be entrepreneurial. Another large issue with industrial policy is that it eliminates competition to a certain degree, and makes it more difficult for newer firms to compete against pre-established, government supported firms.

(L35) The United States: Healthcare and Antitrust

1.) What are some of the factors that have contributed to rising health-care costs in the United States?

The birth of the rise in health care costs can be pinpointed in WWII. It was during this time that businesses were desperate to attract labor, but they couldn’t raise wages because the government had frozen the price. So, to compensate for this, businesses began to offer employer-supplied medical insurance; it was not considered a wage increase and thus, could not be taxed. After the war, labor unions demanded employer financed medical insurance be a continuous part of their contracts. This forced the hand of nonunion businesses to also provide health insurance in hopes of avoiding unionization. The result of all of this was that medical care was barely paid for out of pocket by Americans, which in turn caused people to care much less about price comparing. Since the client was not the one paying, (their employer was), health care suppliers then developed an incentive to offer high cost treatments. Ultimately, this created an ongoing price increase in the healthcare business.

2.) How is the actual history of antitrust different from what the average person probably thinks it is?

Antitrust is generally presented to the public as program that would help people pay ‘fair’ prices, and favor consumers. In reality however, the antitrust acts (Sherman Antitrust Act, 1980 and Federal Trade Commission Act, 1914) did the opposite of favoring consumers, and created a history of attacking successful and efficient businesses. One example of this would be the US vs. American Tobacco, in which this ness had merged with other smaller companies, (but not created a monopoly); American Tobacco was able to raise product output all the while lowering prices. There was still easy entry into the tobacco industry for competitors, and no consumers were being harmed whatsoever. However the US government decided to step in to punish and limit them by law, for favoring consumers.

(L30) Government Intervention and Child Labor

1.) “Government must intervene in the economy to bring about improved working conditions.”

Government intervention in the economy, while forcing certain standards upon workplaces, does more harm than good. For example, say the government forced every business to have an AC system in the building. While workers would be more comfortable at work, there would be a great decrease in the number of people employed because the costs of maintaining AC have cut into the employers ability to pay workers. In the free market however, businesses with AC would pay their workers slightly less than those businesses without. This would be a trade off between comfort and pay that workers would have the choice to make, rather than having a decision made for them and suffering job loss because of it. It is also probable that government mandates on this sort of thing would cause small businesses to shut down, paving the way for corporations. This is also known as a state granted monopoly. (This example is more relevant to when air conditioning was relatively new, and much more expensive than it is now. Today AC is more common than not, and businesses without AC are forced to catch up to this standard by their own accord in order to compete with companies that offer more comfortable work environments.)

2.) What has been the most significant contributing factor to the abolition of child labor?

The most significant contributing factor to the abolition of child labor can be observed as happening during the 1832 Report of the Select Committee on the Bill for the Regulation of Factories. It was at this committee meeting that the testimony covering child labor was twisted, and rather than having both sides of the situation presented, factory critics were the only people heard from. These stories, being unrivaled with stories of supporters, left impressions that were to change the course of the future forever. Clark Nardinelli, author of The Industrial Revolution and Child Labor, stated that these horror stories remain the “basic indictment of child labor in early industrial Britain”.

(L25) Government Funding & Income Inequality Debunked

1.) What are the arguments for and against government science funding?

The two main arguments for (and against) government science funding are this:
1. Claim: Because there is no profit in basic science, there is no chance it will ever be privately funded.
Response: In reality, 90% of new research stems from previously existing technology, and basic/academic science research only accounts for 10% of new discoveries and technologies. Also, when looking back in history, one would find that despite the fact that Britain had no government funding for science, and there was substantial government funding for scientific research in Germany and France, they both consistently lagged behind Britain.
2. Claim: Private firms cannot claim exclusive profits from scientific discoveries, and so they will not get involved in funding scientific research in the first place.
Response: Firms are known to trade laboratory space to scientists
for the up-keep on the latest knowledge in the scientific community. This is done by having scientists working in their lab space agree to attend conferences, saving everybody time and money by keeping scientists from having to spend all their time in libraries reading previous studies rather than doing their own (in the labs). Basic/academic science has been funded by foundations, private university endowments and private industry in the past, not to mention being extremely more generous than government funding has even been.
On another note, government funding has been 
the well known cause of the politicization of scientific research in may cases; it also stifles opposing claims and approaches, causing a clog in the free-flowing wealth of information and communication between scientists that is so crucial to the discoveries we have already, and are yet to discover. 

2.) Is “income inequality” a problem, in your opinion? Why or why not?

Income inequality is not a problem in my opinion, because the real issue affecting income is economic freedom. This is proven by looking at the fact that no matter what country you live in, the bottom 10% of earners will earn 2.6% of the country’s total income. (As of 2011) in less free countries, 2.6% of the countries total income was equal to about $932; however, in more economically free countries 2.6% was equal to an average of about $10,556! According to these statistics, people residing in “unequal” countries are earning more, because these countries are the ones that are the most economically free.

(L20) Public Goods & Poverty

1.) What are some of the problems with the concept of public goods?

There are two main issues with the concept of public goods (not including the fact that the government produces them with the public’s money). The first issue is the fact that even “public” goods such as railroads, streets, etc. can be limited to those who pay for them (in the first place). The second issue is the fine line between public and private goods, and the flimsy distinction between both. A rose garden in someones front yard for example, is privately owned. However, while it is not a public good, the passerbys on the sidewalk are not prohibited from enjoying it from the distance of the public sidewalk. Public goods are non-excludable to those who pay (but, how does one know if someone else has paid or not?). Private goods have rules set by the owners; so, in this case, how would one exclude someone who did not help pay for the rose garden? What about in the case of a public rose garden that one has not helped pay for?

2.) Describe the process by which the market economy tends toward an improvement in the standard of living.

The free market economy encourages saving and investment, which leads to an increase in capital goods, which ultimately creates a greater amount of consumer goods. A great amount of consumer goods reduces poverty by making the available consumer products cheaper. It also frees up people to move on to creating other consumer goods (because capital goods have made way for less hands to create the same amount of products in a shorter time). Increased production ultimately creates lower product prices relative to wage rates.

(L10) Human Rights

1.) Is there a “right of free speech” in the abstract, or is the question of free speech at root a matter of property rights?

Free speech, while being an essential human right, stands only on the basis of property rights. When property and human rights are separated, human rights become inconsistent and imprecise at best. They must instead, for understandings sake, be viewed as two pieces of the same thing, (rather than two different things). For example, if I were to rush into a movie theater shouting “Fire! Run! The theater is on fire!” I would get thrown out. I would not be thrown out because I was exercising my freedom of speech, but because I was on someone else’s property, and I was violating the set rules that they have on their property. I would be thrown out because I yelled (which is against the owner’s rules), not because of what I yelled.

2.) Explain the difference between positive and negative rights, using at least one example.

Negative rights are rights that simply require the absence of interference from others; for example, the rights to life, liberty, and property. More specifically, the right not to be killed, the right to not have my liberties infringed upon, and the right to not have my property stolen. Positive rights on the other hand place burdens on some people to obtain specific benefits for others. Positive rights are things that are all especially desirable, but not technically human rights; the reason for this is that positive rights may only be obtained through plunder and coercion.
Positive rights create conflict (between positive and negative rights) because, one’s negative rights will never infringe upon another’s (negative) rights. Positive rights however (in every case) will infringe upon one’s negative rights not to have their property (money) stolen. Negative rights require only self responsibility and mindfulness of others, whereas positive rights violate people’s negative rights (God given/birth rights) and incite threat-assisted theft.

My Summer Reading List 2015 (L175)

Create a reading list (equivalent to that of roughly 8 books) for this coming summer. The books you choose should focus on either business, personal finance, and/or economics.
Each of the books I have chosen were picked from the suggested reading lists in this weeks lessons. I also left the majority of the other book suggestions (which I did not choose) at the bottom of the page.

The first book I picked (at almost 200 pages) is called Why Didn’t They Teach Me This in School? 99 Personal Money Management Principles to Live By, by Carey Siegel. I chose this book first because it covers a broad range of principles at a few pages a piece; I think it will be an impacting way to begin my summer reading.
The second book I picked is called What Has Government Done To Our Money, and like many other books on the suggestion list, it was written by Murray Rothbard. Being a short book, it doesn’t fail to cover crucial topics in understanding the gold standard, the history of money, and the barter system.
The third book I picked to read this summer was written by Bob Murphy, and while being officially titled The Great Depression and The New Deal, it is also known as the “Politically Incorrect Guide to The Great Depression”.
The fourth book I chose is How Capitalism Saved America, by Tom DiLorenzo; I am rusty in my economic history and this will hopefully be a good book to help me brush up.
The fifth book I’ve chosen is The Cause of The Economic Crisis, by Ludwig von Mises (who also appears on the suggestion list quite a few times).
The sixth book I’ve chosen is called Economic Policy: Thoughts for Today and Tomorrow, by Ludwig von Mises.
The seventh book I chose is called Trade Offs, by Harold Winter. It covers the economic “trade offs” between safety/quality, and expense.
The eighth (but not the last) book I’ve chosen to add to my reading list this summer is The Road To Serfdom, by F.A. Hayek.

Other Books On The Suggestion List Included:

  • Applied Economics by Thomas Sowell
  • A Beginners Guide to Investing: How to Grow Your Money The Smart and Easy Way by Frey, Frey and Byte (100 P)
  • Common Sense Economics by Gwartney, Stroup, Lee, and Ferrarini
  • Personal Finance for Dummies by Eric Tyson
  • America’s Great Depression by Murray Rothbard
  • The Money Book for the Young, Fabulous, and Broke by Suze Orman (400 P)
  • Economics in One Lesson by Henry Hazlitt

How Does Inflation Affect Me? (L165)

Inflation affects each and every one of us on a daily basis in the United States (and many places elsewhere across the world). It doesn’t interfere with my life in a good way either; every time inflation rises, my dollar has less and less purchasing power. Inflation also neglects to take an equal affect on the entire market; severely screwing the majority of the population while favoring a very slim few. Inflation affects me every time I spend money; food, clothing, internet, even a house.
According to Numbeo, the current average cost of a gallon of milk (where I live) in Boston, MA is $3.65. Using an inflation calculator to go as far back as 1913, I found that what bought me a gallon of milk today could have bought me $87.98 worth the products (CPI). That is like one gallon of milk vs. one small grocery trip (today). In 1950, that same $3.65 would have had the purchasing power of $36.14 (CPI 1). Money is losing its value almost quickly enough to sit and watch.

Bibliography
“Food Prices in Boston,+MA, United+States.” Food Prices in Boston,+MA. Numbeo, July 2015. Web. 21 July 2015. <http://www.numbeo.com/food-prices/city_result.jsp?country=United%2BStates&city=Boston%2C%2BMA&gt;

“CPI Inflation Calculator (1).” CPI Inflation Calculator. N.p., n.d. Web. 21 July 2015. <http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=3.65&year1=1950&year2=2015&gt;.

“CPI Inflation Calculator.” CPI Inflation Calculator. N.p., n.d. Web. 21 July 2015. <http://data.bls.gov/cgi-bin/cpicalc.pl?cost1=3.65&year1=1913&year2=2015&gt;.