I previously noted Cato Senior Fellow and former president of the St. Louis Federal Reserve Bank William Poole worrying about Congress “damag[ing] the independence of the Fed.” And now, in a Washington Post piece, Poole is quoted as saying: “New York Fed employees ‘play a very valuable role, day in, day out, with detailed contacts with the big financial firms.’” I’m sure they do.
[LRC Cross-post]
I previously noted that NTP used the patent system to wring over $600M out of RIM, the manufacturer of the Blackberry smartphone. As noted by Mike Masnick, now RIM has coughed up another quarter billion dollars to another company, Visto (“coincidentally” a licensee of NTP). A quarter billion dollars–everyone yawns. Masnick asks, why did NTP have to pay Visto?
For being the loser in the market place. This is a tax on innovation. The loser in the marketplace forces the winner to hand over a nice chunk of profits. It’s bad for everyone (except some lawyers and Visto shareholders).
Masnick is right: this is yet another tax on innovation. Patents are killing innovation (see Yet Another Study Finds Patents Do Not Encourage Innovation). This is the age of technocide.
[Masnick opined that one reason NTP invested in Visto to get it to take out an NTP license was: “That certainly looks like NTP paying a company to license its patents, just to make it looks like there were some legitimate licensees.”
This may be right, but as I explain in “Impact of Patent Licensing on Patent Litigation and Patent Office Proceedings” (available on my legal site), “a license under the patent may be offered as persuasive evidence in rebutting a prima facie case for obviousness.” In other words, one reason patentees seek to license their patents is to build up the case that the patent is not obvious–to use it in litigation later to help defend the patent.]
[Mises cross-post; Against Monopoly cross-post]
Take a gander at the nausea-inducing conservative collectivism on display at the National Museum of Patriotism.
WHY DO WE NEED THE NATIONAL MUSEUM OF PATRIOTISM?
- To restore faith in America and remind ourselves of how we got here and what it takes to create and sustain greatness.
- 97% of Americans think of themselves as Patriotic, yet 70% also think children today aren’t as patriotic as earlier generations.
- There is a growing concern among Americans that future generations are more cynical about country, and lack historical perspective and context.
- According to the US Department of Education, more than half of high school seniors lack even a basic knowledge of American History.
- The Museum will serve as a national asset reaching all generations to help Americans re-connect with our original patriotic traditions. Simply put, we need a shared pride resulting in actions and aspirations for something greater than self.
And the site promotes the worst combination of colors imaginable: Red White & Blue … and Green! Wow! “It’s Hip to be Green!”
Of course, one of its highlighted celebrities is Lee Greenwood, whom I mentioned in The HUGE Flag: “I remembered one time when I was at Callaway Gardens, Georgia, on the 4th of July, with hundreds of people around the gorgeous man-made lake, watching fireworks, and as Lee Greenwood’s cloying “Proud to be An American” was played, the entire crowd stood up in unison, like toy soldiers, hands over hearts, at the line, “and I’d proudly STAND! UP!”, and it gave me chills.”
From April 2009 LRC blog:
Today my wife and I were in the Houston Galleria with our 5 year old son. There was a huge American Flag hanging over one part–it must have been 50 yards long. My boy asked me why it was there. I thought about it. I remembered when I was in living in London in 1992, as a student, and watched the movied Kindergarten Cop in a dorm room with a group of about a dozen students from all over–England, Greece, Spain, Ireland. The entire room, except for me and the one other American, burst into laughter when the kindergartners were shown in class saying the Pledge of Allegiance. We were confused and asked for the movie to be paused, and said, “hold on–what’s so funny?” One of them said, laughingly, dismissively, “You Americans–you are so patriotic!”
Later the same year in London, I went to the Bette Midler movie For the Boys, which opens with some number on a stage in front of a ginormous American flag. Again, titters from the non-Americans in the audience.
I remembered one time when I was at Callaway Gardens, Georgia, on the 4th of July, with hundreds of people around the gorgeous man-made lake, watching fireworks, and as Lee Greenwood’s cloying “Proud to be An American” was played, the entire crowd stood up in unison, like toy soldiers, hands over hearts, at the line, “and I’d proudly STAND! UP!”, and it gave me chills.
So I told my son, the flag is there because Americans have been taught by the government–the one that steals from me the money I would otherwise save for your college fund–to worship the state.
How much better under monarchy when there was a clear distinction between ruler and ruled; when secular worship of the state had not replaced real religion. [See Big Enough] Now that the state has taken the place of religion, and the distinction between the rulers and the ruled has been blurred, the state can do almost anything. Can anyone imagine a king extracting 60% taxes without getting his head handed to him?
From Oct. 2005 LRC blog:
Don’t exist, apparently. Here’s Capitalism magazine trotting out the tired, old, weak arguments against libertarian anarchism. Notes the headline in typically breathless and stark Randian prose, “Anarchism is not a form of capitalism; anarchism is a form of collectivism, where individual rights are subject to the rule of competing gangs.”
This is ridiculous. As I have previously noted, to be an anarchist simply means you (a) recognize that aggression is not justified; and (b) recognize that the state necessarily commits aggression.
Now Randians claim to believe in individual rights and to oppose the initiation of force–aggression. So if they are not anarchists they must believe that states do not necessarily employ aggression.
But they admit that the “government” they favor “is an agency with a monopoly on the power to legally use force in a specific geographic area”. A monopoly on the power to legally use force means that this government has outlawed similar agencies. To outlaw is to use force against. If this force is initiated, it is aggression and a violation of rights by Rand’s own admission.
Now the Randians can argue that it is for some reason necessary that the state use force at least to the extent it has to outlaw competitors (even those who are not themselves aggressors), and perhaps to fund itself (taxation–who really believes a lottery will suffice?), and perhaps to expropriate private property (see, e.g., the endorsements of eminent domain by neo-Objectivist Tibor Machan (2) and Objectivist Michael Kelly). But just because they view it as “necessary” does not mean it is not aggression. It just means that, like conservatives and liberals, they prefer some value above conflict-free interaction and peace; they are willing to break a few eggs to make an omelette.
How can Objectivists deny that one self-proclaimed defense agency’s outlawing another is not aggression? Yes, they can plead their case that it’s necessary–necessary aggression, that is, but how they can pretend it’s not aggression, I cannot fathom.
In my view anti-anarchist Objectivists cannot have it both ways: they cannot be principled opponents of aggression while opposing anarchy. To seriously oppose anarchy they have to favor some aggression. There is no way around this.
(Some Objectivists might counter by resorting to the tired refrain that “oh but you are context dropping”. Egad, context has its place but the overuse of this concept by Objectivists makes me sick of ever hearing it again. They will often attack libertarians’ opposition to aggression by saying that it’s context-bound and requires an entire philosophy to defend and uphold the individual rights that are correlative to the opposition to aggression. In other words, they imply that libertarians cannot coherently mount a case in defense of individual rights, or against aggression; indeed, we cannot even coherently define aggression, without adopting the whole of Rand’s philosophy, hook line and sinker–presumably this includes her pet preferences on music, capes, cigarettes, and the obvious fact that a woman “should not” be, or even want to be, President, which preferences she held up as more than mere preferences. Yet, this harping on the necessity of “context” and Rand’s entire philosophy just to define what force is flies in the face of this key statement by her alter ego, John Galt: “Whatever may be open to disagreement, there is one act of evil that may not, the act that no man may commit against others and no man may sanction or forgive. So long as men desire to live together, no man may initiate–do you hear me? no man may start–the use of physical force against others.” Wow, seems to me like Galt is implying here that the initiation of force–aggression–is a coherent, stand-alone concept that does not require a Ph.D. in philosophy or professional training to understand; that aggression is a simple, obvious thing that we can all point to and recognize. So spare me the “context” yammering, please.)
The “Capitalism” site’s attack on anarchy is riddled with errors and fallacious reasoning. The title states, “anarchism is a form of collectivism, where individual rights are subject to the rule of competing gangs”. Well, this is just a nonsense assertion. Objectivists favor a state that they hope would protect (and not violate) individual rights (despite the fact that every state that has ever existed has done a bad job of protecting, and a good job of violating, rights; but let’s not let history or reason stand in the way). But it is possible, if not inevitable, that such states would become “gangs”. And assuming the Objectivist has not become a utopian one-worlder (see my comments on Objectivists and One World Government in Libertarian Centralists; see also my comments here, and here), they presumably favor a world system of multiple states, some of which might be or become gangs. How is this different than their distorted caricature of libertarian anarchy? Well they might say, “no no, we only favor a proper government ruled by objective law” (whatever the hell the catchword “objective” means in this … um… context). Oh oh, so it’s okay for them to posit a “good” government. Okay. Fine. Then we can just posit “good” private defense agencies–you know, ones that all have as their goal the defense of and adherence to individual rights; ones that act reasonably and work with each other to apprehend and bring criminals to justice instead of “warring” with each other.
They also write,
Under capitalism, corporations are the result of a specific contractual legal framework (provided by government), based on the principle of individual rights. Without government, the distinction between public (state owned) and private no longer exists. Corporations cannot exist without individual rights, and governments to protect those individual rights. [However, keep in mind that corporations are not creatures of the state, no more then individuals are.]
So you can’t have contracts without the government? You can’t have individual rights without the government? Well, this implies the government (the state) is not governed by the consent of the people; it means the Constitution is a lie. Because for the state to be subject to the consent of the governed, to have powers “delegated” to it as our Constitution pretends; for the people to “establish” it as Locke would have it–presupposes a pre-state type of contract law, does it not? It presupposes the pre-state ability of people to form binding agreements, such as that underlying the delegation of authority to the state, the faux “consent” of the governed to establish the government. And it presupposes the people already have individual rights, some of which they either give up, or at least exercise, to form the state. In other words, the very existence of the mythical entity known as limited government itself presupposes some pre-state (gasp–anarchical!) body of contract law (and some version of individual rights). Unless, that is, the Objectivists want to just admit the truth that the state is not based on the consent of the governed, that no one ever delegated any power to it–that is is just naked force wielded by a gang of thugs (sort of like the gangs they imagine in the horrible world of anarchy. Thank GOD we dont’ have anarchy now, otherwise we might have multiple, competing, thuggish agencies of aggression ruling the globe! … uhh… waitasec…)
Those who attempt to combine anarchism with capitalism, make the error of confusing the peaceful form of competition of capitalism — trade, ideas, and dollars — with the brutal “jungle” form of competition of anarchism — brutality, whims, and bombs.
Well, I was going to reply, but the strategic, nuanced use of “whim” here knocked me out of the ring. No way I can respond to that; they have me dead to rights!
Seriously, how can you respond seriously to this uber-serioso, goth-talk?
Have you ever thought what happens when one ‘corporate protection agency’ disagrees with another? By what method do they solve their dispute? They do it by competition not with dollars, but with guns.
Wow. Deft use of assertion. Hey, I know, let’s use more assertions to solve the various intractable problems of philosophy and other fields. Is the universe infinite? “YES.” Wow. Thanks. Ummm, how did dinosaurs die out? “A mutated virus from the archeopteryx.” Cool. Was there really a Jesus? “Yes, but he lived in 70 A.D. and had 3 sisters and 1 brother.” Did Fermat himself know the solution to Fermat’s last theorem? “No.” Great, man, you are a regular Ask Jeeves.
They go on, “They seek to solve their dispute by resorting to force against each other, i.e., a perpetual state of civil war. Under such a system, which gang wins? The one that is the most brutal.”
Ummm, hey, even if this were true (and it’s not; have these people even READ the Tannehills?)–ummm why is it not true of a multi-state world? (See on this the quote by Hoppe on liberal economies and the tendency to war, quoted and discussed here.)
Anarchism is not a form of capitalism; anarchism is a form of collectivism, where individual rights are subject to the rule of competing gangs. Under such a system, any individual would beg to be placed in the relative safety of a dictatorship. The only peaceful solution to such disputes is to have one agency with the power to settle those disagreements, according to one set of objectively defined laws — a government. This is what corporations do under capitalism, when they have a dispute with each other — they go to court (government).
Ummm, now we are back to “one agency” again. I guess the Objectivists are one-worlders. But ummm, I thought they opposed dictatorship. Oh, I see–it’s possible to have a one-world state that is Rational. Oh joy! Yippee! We can transform man’s nature! Marx was a genius! Ummm… waitasec. I guess these people never heard of dystopian novels. Like, Oh, I don’t know, ANTHEM?? Atlas Shrugged?!
One last delicious quote:
On a micro-level one can observe anarchism in black markets, where drug dealers compete with each other on the same “turf” to “protect” their interests. It is to subject “might” to “right”, that one requires rights, and that one requires a government to protect those rights.
Well, the black market might also include private evasion of taxes and other immoral laws. Or the purchase or sale of medical marijuana, which some might call “heroic”. And let’s get this straight: people operating on the black market are unable to appeal to the state to protect their rights, and to resolve disputes with other black market actors … er, um, because that very government outlaws peaceful activity and thereby creates the black market in the first place…? So, um, this proves that the state is, um, necessary? Sorry, but I can’t follow the pea in this shell game.
There’s another word for black market: free market. Sickening to hear purported defenders of the free market snidely disparage it.
From July 4, 2005 LRC blog:
My friend Tibor Machan has a column, Some Libertarian Confusion about Kelo v. New London City, CT, criticizing my article on Kelo. Unfortunately, Machan’s critique itself is confused. [Note: Machan’s short column linked above was apparently subsequently deleted and replaced by this newer version.]
First, Machan states that I justified Kelo’s ruling based “on the view that government has no authority to take private property in any case, including for public use (which the Fifth Amendment to the US Constitution sanctions, provided compensation is provided), and if it does engage in taking, it is better to do it for a genuine private than a nonexistent public use.”
But I did not justify Kelo’s ruling; I simply argued that the constitutional result would have been for the Court to have refused to strike down the state law for lack of constitutional authority to do so. The Court in Kelo upheld the law by applying the Fifth Amendment to the states and then giving it a bizarre interpretation–which I criticized: as I noted, “the Court’s reasoning was flawed.”
Moreover, my argument did not rely upon the anarchist notion that there are no valid “public uses”, nor did I unequivocally state that it is better to have a taking for a private than for a public use. My main argument was that the Fifth Amendment does not apply to the states. I only added an afterthought stating that it is odd for “libertarians to be more offended at takings that are for a private purpose than for those that are for a public purpose.” This is so especially because the taking of property itself is the harm; what is done with it afterwards is of secondary consequence. I stated my personal preference that my own property, if taken, be used for peaceful, private uses rather than by the state; but this preference is not an attempt to justify the ruling in Kelo at all.
As I said, my primaray argument was that the Fifth Amendment does not apply to the states. Machan’s reply:
this is not proper legal theory by now, not if one considers how the Constitution has been applied in, for example, cases baring on the right of freedom of speech and religion, as well as the right to freedom to bear arms and be free of coerced confessions (also part of the Fifth Amendment) of all American citizens.
I confess I am not quite sure what Machan is saying here, in his main substantive critique of my main substantive argument. He is confused to say that the rights to freedom of speech and religion, to bear arms, and to be free of coerced confessions, are part of the Fifth Amendment. These rights are included in the First, Second, and Fourth Amendments. I suspect he was trying to say that these rights are now part of the Fourteenth Amendment (not the Fifth). (Although I do not recall the right to bear arms having been incorporated yet by the Court, but I could be mistaken.) But he seems to be saying that my interpretation of the Constitution is wrong, because of Supreme Court precedent. I am not quite sure what his argument is here, unless he is either saying that Supreme Court decisions take precedence over the Constitution’s language and original meaning, or that he agrees with (which?) prior Court reasoning (but even libertarian legal experts who support incorporation reject the Court’s reasoning to date, which uses the Due Process clause instead of the Privileges or Immunities clause).
In any event, Machan has simply not even made an attept here to explain what is flawed in my argument that the Fifth Amendment does not apply to the States. If it is an argument that the Court has ruled otherwise, I find that argument flawed as either an appeal to authority or as based on the notion that the Constitution is “living” and does not have an original meaning.
Machan also writes:
The main motivation behind the states rights stance of some libertarians seems to be that they consider empowering small governmental units to be less hazardous than empowering the federal government (even if both should not be so empowered). It seems to be especially objectionable to such libertarians that a branch of the federal government would be empowered to rule on what constitutes securing our rights, so when they fail to do this securing, or actually do the opposite, these libertarians play the “bite the bullet” gambit instead of construing what the branch does wrongheaded. For instance, in Kelo v. New London City, CT., these libertarians just hold that whatever the Court says about anything other than the powers of the feds must be wrongheaded.
I believe Machan, like many libertarians, is confused for some reasaon by the very idea of federalism, of vertical separation of powers. They just cannot seem to accept the view that the states predated the Union and are not empowered or created by the Constitution. My and other federalists’ view of “states rights” is not that “states” have “rights,” but that the federal government has only limited powers–those enumerated in the Constitution. And my view is not so much that the federal courts “should not” be empowered to review state legislation for compliance with rights in the Bill of Rights–but that they are NOT so empowered by the Constitution. Machan’s pointing to how Supreme Court decisions as somehow refuting my argument fails, because it is those decisions I am inherently critiquing. It would be question begging to say my critique of constitutional case law is flawed because the case law disagrees with me.
Finally, Machan notes:
The state’s rights issue is but a diversion here, not one of basic principle.
I never brought up states’ rights; Machan did. What we have is a case where the Supreme Court assumed the right to review a state law, even though the Constitution does not empower them to do so. Libertarians upset with the Court’s decision seem to endorse the notion that the Court does have the right under the Constitution to review state laws. I have tried to point out to those libertarians who do care what the Constitution says that this view is incorrect. What I cannot figure out is if Machan thinks the Constitution does apply the Bill of Rights to the states (and therefore my legal-constitutional arguments are wrong), or if he does not give a damn about what the Constitution says (in which case his appeal to the Supreme Court’s interpretation of it makes no sense) and just wants the Court to do “the right thing” regardless of its authorized power to do so.
So I have no idea what Machan thinks is a diversion. Perhaps the libertarians who want the Court to strike down every unlibertarian state law and who therefore just assume this must be the constitutional result, are the diversion. It seems to me that being concerned with keeping the large, central state limited by the Constitution that created it is not a diversion, and indeed related to the basic principle of trying to limit the state in order to protect individual rights.
***
Coda: In a private exchange with Machan, I noted:
My point was primarily addressed to the question of whether is legal, and a good idea, for the federal central state to be in charge of supervising state laws. [Concerns] about property rights and
the New London condemnation are valid and do not undercut at all my
view.
He replied to me, alleging that I would simply let people be victims of a socialist system rather than work with the system we have or favor incremental, ad hoc improvement, because it is not “pure enough.”
My reply:
You are wrong in characterizing my views. Where have I opposed working with or within the system, or incremental improvements in freedom?How is any of this implied by my views: (a) that it would be unconstitutional (not because I WANT it to be, but because it IS) for the feds to intervene here with the states; or (b) that it is preferable to honestly *identify* what the Constitution specifies, even if it is contrary to our preferences or beliefs; or or (c) that it is in general a good idea to insist the federal government refrain from acting in ways prohibited by the Constitution; or (d) that it is in general a good idea to have both horizontal and vertical separation of powers in a large, federal union such as ours?
I am not in favor or letting people suffer or be victimized by the state, just because doing anything to help would be sanctioning the system. It is a unwarranted and I believe unfair for you to distort my views this way. Where did I scott at incremental, ad hoc improvement? I am all in favor of this. Why do you imply otherwise? Are you sure you are giving me a charitable reading?
However, it is another thing to disagree with a given move or policy on the grounds that it is a move in the wrong direction. For example, I used to support the idea of educational vouchers, but now I oppose them. Not because they don’t go far enough or are only incremetnal or ad hoc improvements, but because the costs of the improvements are too high, in my view–even if education is improved and educational efficiency increased by vouchers, the drawback is that it increases the amount of tax dollars spent on public education and gives the state more control over private education.
Now you can disagree with me on this, but my objection is based on libertarian principles and on the grounds that the measure is a bad one, not that it is “merely incremental.” Likewise with decisions like Kelo. I assume you would have the court overturn the state law. I do not disagree that overturning the state law would be a good thing for liberty–for the Kelos at least, and perhaps for other potential victims of states. But I also recognize it is a bad thing for liberty too, in some ways–it further centralizes power in the feds, which increases the likelihood of federal violations of rights in the future; and it erodes the limits in the Constitution that are important.
You yourself obviously believe the Bill of Rights set forth important limits on “governemnt” in general, and that must include limits on federal power. So you yourself want the Constitutional limits on federal power to have some force and effect. As do I. That is exactly why I am concerned when the feds ignore these limits in order to seize the power needed to review state law. You seem to want to turn a blind eye to the feds’ eviscerating the principle of enumerated powers in the Constitution. As long as it achieves a good result in some cases, it seems to be okay with you. Don’t you see you are endorsing the principle that the feds are not really bound by the limits in the Constitution, which includes the Bill of Rights? I think it is dangerous to advocate this cherry picking approach. It is better as a PRACTICAL measure to insist the feds abide by the limits placed on them in the Constitution–all of them, both the idea of enumerated powers, and the specific limits placed on them in the Bill of Rights.
I am not even opposed to your Hobbesian point that we ought to take short-term, concrete improvements in liberty where we can find it. I don’t oppose that notion. I would not mind terribly a libertarian Justice on the court who flat out ruled for the Kelos because he can, and didn’t dishonestly try to justify his decision based on the text of the Constitution.
If by “working with the system we live in” means you think we ought to take it as “established” at this point that the Supreme Court is going to have final say-so on the constitutionality of acts of states, and then urge the Court to make the most constitutional or libertarian decisions, I don’t even oppose this very much. It means giving up on the idea of federalism as one of the constraints on federal abuse of power, but I can understand your being willing to make this tradeoff. I am bothered by it; but I can understand your view here. But this does NOT imply that the Constitution itself supports this. So if I point out the constitutional aspects of this–and many libertarains ARE interested in what the Constitution actually says–why am I attacked by those who don’t really care about the Constitution? An honest reply to me would be: you may be right about the Constitution, but I think the Court should do whatever it can to vindicate rights, regardless of the constitutionality of this. But instead, I get people telling me I am wrong about the Constitution…. because they think my interpretation is not… libertarian. Wishing does not make it so, as you know.
From August 2004 LRC blog:
Roderick Long’s Mises U talk on anarchy is on his blog. I’ve heard that one anarchist expert said it’s the best speech he’s ever heard on the subject.
From LRC blog, Feb. 2004
Re a recent debate about anarchy, a new entry from Roderick Long:
“For those who’ve been following my online debate on anarchism with Robert Bidinotto, my latest contribution is available here.”
Followup to this post: 
Latest pretentious terms from today’s Slate Political Gabfest and Culture Gabfest #40 (feel free to email me suggestions or leave them in the comments to the main page):
Libertarian Papers, Vol. 1 (2009), Art. No. 31: “The Ethics of US Monetary Policy in Response to the Financial Crisis of 2007-2009,” by George Bragues
Abstract: Since the financial crisis first erupted in the summer of 2007, the US Federal Reserve has sought to contain negative spillovers into the real economy by dramatically loosening monetary policy. Initially, this was done by lowering its key lending rates, but as the crisis has worsened, and rates have approached closer to zero, it has resorted to expanding its balance sheet in a historically unprecedented fashion. The Fed’s total assets have more than doubled to nearly $2 trillion since the summer of 2007.
Much of the debate surrounding the wisdom of this extraordinary increase in the production of money has revolved around its expediency–in other words, will it actually work to rescue the economy? Very little has been said, at least explicitly, about whether it is the morally right thing to do.
This paper seeks to fill this gap by providing a moral analysis of the Fed’s response to the financial crisis. For this purpose, we apply Aristotelian virtue theory, Lockean natural rights philosophy, Kantian deontology, and Benthamite utilitarianism. The idea is that if a consensus, or a strong majority, can be reached from differing philosophic assumptions and starting points, then the resulting judgment ought to be compelling for all neutral observers. On the basis that the Fed’s efforts are likely to result in a marked rise in inflation, we argue that every one of these four moral theories ultimately renders a negative judgment. As such, we conclude that the Fed is pursuing an immoral course.
Without Borders is an interesting fee-based monthly newsletter subtitled “Dispatches for Intellectual Adventurers, Investors and Speculators” published by one Fitzroy McLean, its “Chief Bon Vivant and Speculator.” The newsletter “is one part finance and investment, one part geopolitics and one part globalist libertarian philosophy.” McLean tells me the newsletter is an “account of how I spend my time and allocate my capital with a healthy dose of capitalist and libertarian rhetoric.”
McLean is an interesting character–a West Point graduate and former Army Ranger and Special Operations Officer who served throughout Europe, Africa, and the Middle East, before being recruited into the CIA’s Clandestine Service where he earned his living running covert and paramilitary operations. But now he’s an anti-government “Libertarian with Anarchist and Hedonist tendencies.” Check it out.
I am skeptical of the technological singularity ever happening–or happening soon, as people like Kurzweil predict–but it’s possible. And, something less is possible too–a substantial increase in the effect of technolgy on productivity–perhaps enough to counteract the bust. See the figure below: this is a sketch of how I have long pictured the business cycle.
In this chart, imagine a free market emerging at the left axis. GDP increases, with ups and downs, before a central bank is formed. When the central bank with fractional reserve banking is introduced, it inflates the supply of money and credit which sets in motion the first boom, and the recurring boom-bust cycle described by Mises and Hayek. The Austrian insight is that not only does this hurt some and harm some (by redistribution or uncertainty effects), but that it also destroys wealth (because of malinvestment). This means that even if there is an underlying average growing GDP (the lower dashed line)—that is, the GDP increases over time despite the cycle—it is less than it would have been if the cycle had never been imposed (that’s the upper dashed line). The cycle in effect exerts a drag on growth; or it reduces the slope of the rate of increase in GDP over time, in addition to making it more volatile and causing redistribution due to inflationary effects.
This point is somewhat addressed in this discussion Every Investment Projection You’ve Seen Is Wrong: The Truth About Compounding, which explains why compounding produces lower returns than would be calculated if you assume a given rate of grown, because the growth is never smooth: any volatility around the average rate of growth reduces the effect of compounding that we would see for the same average but constant rate of growth. I believe something similar happens with the business cycle. Because it causes malinvestment, it results in a lower average annual rate of growth because the malinvestments reduce productivity. But in addition, the increased volatility of the (already lower) average annual productivity growth means the net results—the “compounding” effect—of productivity increases are reduced for this reason as well.
Now see the right elbow of the curve–if some super-advances in technology, or even a technological singularity, occurs, so that it boosts the average rate of growth of productivity and GDP enough, it is conceivable that the “down” or bust part of the cycle would be relative only. We are still worse off than we would have been, but in this case a “recession” would be a period of, say, 4% annual GDP growth instead of, say, 20%.
I am not predicting this. I am only saying it’s an effect. Even on the middle part of the curve, which is what we appear to have had from about the 1910s to the 1970s or so, the average upward growth of GDP ameliorates the bust because it is relative to that general upward trend (which is partly due to increasing technological advances). As a crude example, if we experience a bust, while at the same time the price of computers and electronic devices keeps falling and their qualities are rapidly improving due to technological progress, then consumers experience less of a bust than they would otherwise. It’s just an empirical question of the comparative downward slope of the bust, and the upward average slope of GDP grown. They could cancel out, or one could dominate the other. Up till now the bust of course always dominates, and I don’t expect it to reverse, but it could, or could be signfiicantly ameliorated.
Stephan Kinsella is a libertarian writer and retired patent attorney in Houston, Texas. He has published widely on various areas of libertarian legal theory and on legal topics such as intellectual property law and international law. His publications include Legal Foundations of a Free Society (Papinian Press, 2023), Against Intellectual Property (Mises Institute, 2008), International Investment, Political Risk, and Dispute Resolution: A Practitioner’s Guide (Oxford, 2020), and The Universal Principles of Liberty (2025).
My Failed Libertarian Speaking Hiatus; Memories of Mises Institute and Other Events, 1988–20192025
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