LearnLiberty

by Don Boudreaux on July 6, 2011

in Civil Society, Economics, Great Depression, History, Video

The Institute for Humane Studies at George Mason just released a new on-line series of short videos on the economics and philosophy of classical liberalism.  Steve Davies, Jim Otteson, Aeon Skoble, Jeff Miron, Nigel Ashford, and others discuss various aspects of liberalism.  With one exception, all speakers are outstanding.

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{ 45 comments }

Daniel Kuehn July 6, 2011 at 2:16 pm

I know you like to talk modestly about yourself, but your video was quite excellent. And you know I’ll tell you if it wasn’t excellent, so you can trust that one. Really great example.

On a somewhat less excellent note… Stephen Davies’ video… I get the libertarian appeal of this argument, but it still doesn’t make it a good one. If I buy a gun to protect myself that is real wealth. You might get concerned about efficiency arguments associated with public provision of that same good (the gun) and service (security), and I may argue back with criterion for public goods, yadda yadda yadda. We might argue over the efficiency of public provision in these cases. But it’s still wealth. The fact that it destroys things has nothing to do with it. That’s why it’s valuable. Weapons hurt predators. That makes it valuable. That makes it wealth. This idea that we can just subtract out defense spending is highly dishonest in my mind, particularly in the case of something like WWII where mobilization was broadly considered to be of high subjective value to people.

vikingvista July 6, 2011 at 2:32 pm

Wealth is measured by choices. People would rather pay for national defense than to go to jail AND pay for national defense. To determine how much if any value there is in national defense, you simply have to open up the spectrum of choices.

Daniel Kuehn July 6, 2011 at 2:42 pm

Right – this is why I say we could go back and forth arguing about government inefficiency in providing anything and market inefficiency on things such as public goods or near public goods.

Those questions are messy and ultimately there’s no unambiguous answer.

I acknowledge that.

If Higgs and others just said “well, attaching a number to this and calling that the value of it is fuzzy”, that would be fine by me.

It’s this tendency to simply subtract it out and say “war spending isn’t wealth” that strikes me as wrong at best and dishonest at worth. If I were to buy a gun it would be wealth. Nothing about the nature of the spending changes when the government buys a gun, although it certainly introduces some messiness which I originally mention and which you reiterate for me.

Frank33328 July 6, 2011 at 4:31 pm

A defenseless person produces $100 of wealth per day but $50 is stolen by bandits. Mr. Defenseless then hires a person (or persons) to protect him and pays them $10 a day. If the theft is then reduced to only $20 a day Mr. Defenseless is better off since even including the expense protection ($10) he now can keep $70 (100-20[theft]-10[protection]). In fact, logically he should continue to hire protection until the cost of protection balances out the losses due to theft and what he gets to keep is maximized.

Whether the protection is the police, the military, a gun or a club I suppose it becomes semantics whether this “adds” to your wealth. If your baseline is the $100 you made prior to theft then it does not add to wealth. If your baseline is the $50 post theft then you’d conclude it does.

J Cuttance July 6, 2011 at 7:03 pm

“A defenseless person produces $100 of wealth per day but $50 is stolen by bandits”
replace ‘bandits’ with ‘the state’ and you’ve got a realistic scenario, then tell me more about any protection I can get

Frank33328 July 6, 2011 at 8:57 pm

Actually your are not far off. When the state charges you 60 for protection you are better off with less state and more bandits (the non-government kind).

vikingvista July 6, 2011 at 4:41 pm

You have to keep in mind that its unrealized value may be less than a poke in the eye with a hot cinder. It may be net destructive of wealth. Its value can be negative. And since it appears to be the case that you have to point a gun to get people to pay for it, the presumption of negative value is not unwarranted. Those who disagree, can advocate making it voluntary.

Dick Fitzwell July 6, 2011 at 2:58 pm

If you buy a bomb to protect yourself and drop it onto a building, where does your wealth go?

Daniel Kuehn July 6, 2011 at 3:03 pm

The same place your wealth goes if you buy a sandwich and eat it: it’s consumed.

That’s the point of it all – right?

Shouldn’t sandwiches be counted in production statistics? Shouldn’t income earned from supplying those sandwiches be counted?

Subhi Andrews July 6, 2011 at 3:21 pm

The same place your wealth goes if you buy a sandwich and eat it: it’s consumed.

Really? I might be still walking upright tomorrow because I ate the sandwich, but I’d be dead if was in that building when you dropped that bomb. One improves my well being, the other does the opposite.

Shouldn’t sandwiches be counted in production statistics? Shouldn’t income earned from supplying those sandwiches be counted?

If we have to have statistics, I think they should be counted!

Subhi Andrews July 6, 2011 at 3:34 pm

Activity without accomplishment shouldn’t be counted.

Daniel Kuehn July 6, 2011 at 3:35 pm

Yes, well presumably you don’t need security against yourself. When you buy a gun it’s to shoot someone else.

There are people who say that war destroys wealth so payment for war shouldn’t be counted in these statistics. Presumably they would count the private arms industry. Why?

If you want to tell me its hard to identify the real value of government arms expenditures, I will agree with you. If you want to tell me arms expenditures are INHERENTLY not wealth because they destroy things, I call B.S.. If I were to buy a gun it would rightfully be considered wealth, even if it does destory things.

Daniel Kuehn July 6, 2011 at 3:36 pm

re: “Activity without accomplishment shouldn’t be counted.”

There’s lots of dubious wars, but preventing Nazis from taking over Western Europe is an impressive accomplishment.

Subhi Andrews July 6, 2011 at 3:57 pm

I should have watched the video first. I agree with you that given the circumstances, WWII was a fruitful venture. I don’t agree that WWII spending cured the Great Depression. I don’t have time to write a lengthy post.

Dick Fitzwell July 6, 2011 at 3:57 pm

“There’s lots of dubious wars…”

I assume you’re talking about our recent wars since ’01. How dubious can these wars really be? According to your argument, they have added trillions of dollars to GDP, no? Why are these wars not a boon to the economy?

Daniel Kuehn July 6, 2011 at 4:01 pm

Dick Fitzwell -
I have no problem with Afghanistan, but yes – I think “dubious” is actually a generous term for Iraq.

Why would you think we needed extra demand during most of that period, though?

Dick Fitzwell July 6, 2011 at 4:16 pm

DK

Ok. What I’m asking is that since you agree with the premise for going into Afghanistan and believe that the war in Iraq is dubious, is the wealth that you say is created by making the guns and bombs used in these wars real? Does a dubious war create justifiable, real wealth?

Daniel Kuehn July 6, 2011 at 4:22 pm

Dick Fitzell -
The guns that went to Afghanistan – I would argue – had real value. Sure.

But then you ask if it “creates wealth”. You’re being vague here, but based on your 3:57 comment I took you to be asking whether it provided a net increase in GDP – in economic production. Somehow I doubt this. I’m guessing it displaced other wealth-creation. The question for a democracy is whether the value of fighting al Qaeda and the Taliban is worth the other things we have to give up for it.

But that tradeoff at that time seems to me to be quite different from the situation now or the situation in the late 1930s and early 1940s.

Dick Fitzwell July 6, 2011 at 5:35 pm

I’m not arguing whether or not the war is justified. The reasons for going to war are irrelevant.

In your original post you stated your problem with Mr. Davies’ position that “military production output is not real wealth.” You go on to say, “It’s this tendency to simply subtract it out and say “war spending isn’t wealth” that strikes me as wrong at best and dishonest at worth.(sic)”

Now, speaking of the Iraq war you state, “…based on your 3:57 comment I took you to be asking whether it provided a net increase in GDP – in economic production. Somehow I doubt this. I’m guessing it displaced other wealth-creation.”

Mr. Davies’ statement seems to me to be correct. To believe otherwise is to applaud the little boy who broke the window.

ArrowSmith July 6, 2011 at 3:22 pm

There’s too much consumin’ goin’ on!

geoih July 7, 2011 at 7:00 am

For the first time since I’ve been reading your comments I think you’ve actually hit on something of significance. I agree with your position. I think much of the arguements against it stem from an inherent gap in the thinking of many libertarians, especially those of the anarcho-capitalist type: the assumption that everybody and everything agrees with the legitimacy of their premises (e.g., non-aggression). A lion, a pack of wolves, an earthquake, or a tornado care nothing for libertarian principles. Why then should we think that every human being would care, no matter how reasoned or logical the argument might be in support of these principles.

So I agree that weapons and security, and perhaps even aggression, have value. The problem I think is that this is an area of human action that leads us outside of cooperative interaction (i.e., economics), and not subject to the same laws in the same ways.

Scott July 7, 2011 at 8:02 am

Very true both to Daniel Kuehn and geoih. I expect people to be selfish. I expect some people to be so selfish they would steal what I have worked hard for. I expect some people to be even more selfish as to want to kill me for all I have. We need government for this purpose of protecting its citizens. Wealth is valueless to me if someone can take it all away tomorrow through coercion OR bodily harm. Militaries are one essential piece to maintaining the rule of law. Militaries can be misused, but let’s not throw the baby out with the bathwater.

geoih July 7, 2011 at 11:29 am

Thanks for the endorsement, but I don’t think I necessarily agree with your conclusion (i.e., that “we need government”). It would depend on your definition of “government”, and you don’t necessarily need “government” to protect yourself or your wealth.

LowcountryJoe July 7, 2011 at 12:21 pm

I expect some people to be so selfish they would steal what I have worked hard for. I expect some people to be even more selfish as to want to kill me for all I have. We need government for this purpose of protecting its citizens.

Ahh, but what happens when these same ‘some people’ use the government to sanction the first behavior you mentioned?

Scott July 7, 2011 at 9:58 pm

Do you think for a moment that anyone who has considered a limited government framework has not considered this?

vikingvista July 7, 2011 at 2:25 pm

“I expect people to be selfish. I expect some people to be so selfish they would steal what I have worked hard for. I expect some people to be even more selfish as to want to kill me for all I have.”

You don’t really believe this. If you did, the very idea of a government would horrify you.

Scott July 7, 2011 at 9:57 pm

I do believe it would horrify me to have a government like half of the world has, that lacks the rule of law, a limited government constitution, or ample checks and balances.

That those three things are constantly being subverted by the left concerns me and why I believe in the importance of what is being said here on this blogsite.

But I believe in the necessity of government as founded by the framers of the constitution. They were absolutely afraid in the untameable power of government.

vikingvista July 7, 2011 at 11:18 pm

“They were absolutely afraid in the untameable power of government.”

Obviously not absolutely. At least not the ones on the winning side of the debate. The losers have been vindicated.

Sam Grove July 7, 2011 at 9:58 am

Maybe after you learn more about those wars you won’t be so sanguine about U.S. participation in them.

jjoxman July 7, 2011 at 5:34 pm

DK,

We agree to a point, but I don’t think one can compare defense spending to private purchase of weapons. As you point out, quite correctly, it has to do with the public’s subjective valuation of the defense spending. So, no, the value of defense spending isn’t zero, but it’s not 1-1 either. Not sure where in the spectrum it falls; that would be the public’s subjective valuation factor.

Now, it must be made clear that defense spending should not be counted as investment in the main, unless certain materiel that are built are easily convertible to capital uses; like say dump trucks and the like. But the weaponry itself, including artillery, tanks, and whatnot are consumption. Maybe durables, depending on the enemy’s accuracy, but consumption nonetheless.

Most importantly, though, is to think about the human aspect of war and the public choice angle. A ‘nation’ never goes to war. The young men of a nation are sent into battle zones but an act of Congress (or el Presidente, but that’s another story). The sons of politicians don’t go to war. I bet the subjective value of the families of those young men being sent to war is substantially negative. So when we think of the value of WW2, we must also consider the costs of conscription. At least now it’s an all-volunteer army, so that’s less of a concern.

W.E. Heasley July 6, 2011 at 2:44 pm

Value is subjective as consumers have preference.

The overarching question that needs asked regarding the video is: had a phone booth been conveniently located near the George Mason University signage, would subjective value due to consumer preference have caused Super Milton Boudreaux to leap over the building in the background of the video?

Scott G July 6, 2011 at 6:45 pm

Wow! Great innovation by IHS and LearnLiberty!

I predict that in the next 20 years, doing economics will become much more like doing engineering. Economists will produce more than just ideas, language, papers and talk. They will produce products and services with paying customers in mind. They will more often be required to innovate, cut costs, consider risks, manage their reputation, meet schedules, avoid losses, apply theory in creative ways and appeal to individuals off all types (not just politicians, students and universities managers). They will produce more of what individuals are willing to pay for out of their pockets. For example, economists may create revenue from paid subscriptions, selling online lectures, selling books and essays, creating movies, and maybe even rap videos and music that teenagers will buy. They will work for small and large businesses, create free zones and seasteads, and consult for movie producers and innovate media.

This will all be change for the good. They will enjoy their jobs more and they will be appreciated more.

Maggie July 7, 2011 at 11:02 am

What an encouraging vision! I hope you’re right.

Troy Camplin July 6, 2011 at 7:03 pm

The problem is that we have a choice that seems good, but is in fact worse. The offer is really this: “Unless you allow us to protect you, we will treat you worse than those we are protecting you from would treat you.” It would be nice if it were in fact like the voluntary scenario Daniel starts us off with, but it’s not. So long as we agree to abide by the details of the protection racket, it seems pretty god — and better than the alternative. But if we decide we don’t want to abide by those details, we find out that things are worse. But since the bad outcome is individual rather than collective (since the promise is that our government will make things better for us as a collective than another would), we don’t pay it much attention.

vikingvista July 6, 2011 at 7:35 pm

People who agree with government demands frequently and obliviously speak as though they have a choice. You see it even on this forum.

Ken July 6, 2011 at 8:28 pm

Interesting essay by Wendy McElroy at Mises today. She argues that states who declare war essentially do so on three fronts: the state apparatus of the identified enemy, the populace of the enemy (many of whom would otherwise happily sit this one out), and the dissenting citizens under its jurisdiction.

vikingvista July 6, 2011 at 8:39 pm

So true. It is the nature of government action, that it is unjustly against at least some of its citizens. Government action is–ultimately–an affront to individual liberty and civility.

Scott July 7, 2011 at 8:05 am

What is she plagiarizing clausewitz’s paradoxical trinity?

Speedmaster July 6, 2011 at 8:12 pm

GREAT stuff, thanks!!!

RC July 6, 2011 at 8:28 pm

I don’t know who the exception is, Don, but your videos were excellent in making the point, and were quite entertaining too:)

Stan Heard July 7, 2011 at 8:05 am

I didn’t find the exception but I did find a typo in Skoble’s abstract. I am pretty sure it meant to say “compatable” instead of “combatable”.

Great site. I look forward to future videos.
Stan

Kendall July 7, 2011 at 10:00 am

Are those claiming military spending creates no wealth proposing eliminating the military? If not, why should the government spend money on anything that doesn’t create wealth?

Ombibulous July 7, 2011 at 10:04 am

Excellent stuff. I’ve learned to enjoy liberty & libation from reading Mencken:
“I’m ombibulous. I drink every known alcoholic drink and enjoy them all.” “Most of the trouble from so-called overeating comes from underdrinking…”
“I drink exactly as much as I want, and one drink more.”
“No heavy eater and no good drinking man has a mean heart. That’s why the fatsos of the world get the best women…
“The rules are simple as mud.
“First, never drink if you’ve got any work to do. Never. If I’ve got a job of work to do at 10 o’clock at night, I wouldn’t take a drink up to that time. Secondly, never drink alone. That’s the way to become a drunkard. And thirdly, even if you haven’t got any work to do, never drink while the sun is shining. Wait until it’s dark. By that time you’re near enough to bed to recover quickly.”

Scott G July 7, 2011 at 10:36 am

I’m tempted to be envious of Don’s Superman-like physique and Milton-Frieman-like intellect. What a combination! I’m feeling some inequality here!

Here’s the econ quiz question of the day. How do the young women Don’s classes resist!?

Scott G July 7, 2011 at 11:37 pm

Both fantastic videos Don.

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