Category Archives: capitalisminstitute.org

capitalisminstitute.org – Why We Should Privatize Public Schools

The following was written by Mark Bautista, a 15-year-old student residing in Cleveland, Ohio. 

Generally, I’m not one to conceal my true political ideology. Although Libertarianism is not too common in my or any other public school, I’m typically able to voice my opinions with mild opposition. However, there is one issue that cannot be mentioned without creating a maelstrom of outrage: the privatization of public schools.

The arguments against this seemingly radical proposition are unchanging. Lower-class citizens won’t get a good education! How do you expect people to pay the outrageous cost of private schools? I believe that my opinion is founded on good reason. Public schools are not getting any better. We’re one of the most prosperous nations in the world, yet our schools hardly reflect that.

According to the Huffington Post, the US received ratings of approximately 500 on an international education rating. The scale goes up to 1,000, putting us on the map as “average” and in some cases “below average.”

CBS reports that among American eighth graders, proficiency rates are as low as 34% in math, 29% in science, and 33% in reading. Considering our influence in the modern world, that hardly seems like where we should be.

The idea of the alleged “great education at a low cost” that public schools provide has been hammered into the minds of students by the state. But is any of this valid? Let’s take a moment to look at the inefficiency of the United States public school system.

The True Cost of Public School

A typical argument against privatization is that public education is available to all at a fraction of the cost of a private school. And according to the cost-per-student presented by public school districts, this seems to be true. However, what the public school districts don’t tell you makes for a shocking revelation.

The Houston School District reported a cost of $8,418 per student in 2009. Yet this official figure is far from the truth. The supposed cost of $8,418 accounts only for basic funding like books and teachers. The district failed to include major costs like funding for classrooms and school buildings, benefits for current and past employees, athletics, and many more. There is absolutely no reason for this exclusion. All of these programs are funded by taxes just the same.

According to the CATO Institute, adding these concealed costs to the official figure makes for a grand total of $12,534 per student. This is completely different from the previously reported cost. And this revealing truth is not exclusive to Houston.

In Los Angeles, the official claim of $10,053 was dwarfed by the actual cost: $25,208 per student. This inconsistency is present in almost every major school district throughout the nation. If this sum of these costs is enough to send students to some of the most distinguished schools in the United States, then why do we continue to pay for schools that are constantly declining in quality? And so we reach a conclusion:There is no logical reason for the taxpayer to do so. But we must ask: Why are public schools producing students of lesser intelligence than those of a private school for about the same price?

One Size Does Not Fit All

Imagine for a moment that you are inside ObaMart, your local state-run general store. You are looking for a dress shirt, as you find them to be more attractive and comfortable. To your dismay, you can’t find one. When you approach an employee and ask where you may be able to locate a dress shirt, he informs you that since 65% of shoppers wear t-shirts, it would be economically harmful to carry both kinds of shirts.

As you are walking away, you hear a man complaining that he cannot find a turtleneck sweater. Leaving the store with your new t-shirts, you begin to think that the government does not care about your individuality. You begin to fathom the idea of stores owned by people. You even go as far to fathom stores that fit needs of particular demographics.

This example is perfectly applicable to the public school system. Because public education is designed to accommodate all students, the students’ individuality is not taken into account. It is a commonly known fact that students learn differently. Some are “verbal learners,” some are “visual learners.” Yet the government provides an education for all the people in the same way, regardless of the children’s distinct differences. This makes for a less than proficient education for a specific student. As we’ll discuss later, private schools avoid this fatal flaw.

The Government Monopoly

Monopolies. Most of us associate dishonest and deceitful businesses with the word. They dominate a specific market and are accountable to no one for the quality of their service or their prices. However, we Americans seem to make an exception for the government.

In the United States, the public school systems enjoy what is primarily a monopoly. The only private schools are not easily affordable to the bulk of American citizens, and present a minuscule amount of competition to public schools. As a monopoly, public schools are easily able to get away with doing only what is required to get by. They have almost no risk of being shut down. If you’re a middle class parent who is unsatisfied with your child’s education, too bad. Where else are you going to go? You likely pay for the equivalent of one public school, another is out of the question.

The Negation of Critical Thought

Public schools are expected to maintain a high level of political correctness, just like any other government institution. This is because public schools are paid for by all demographics people thus making it inappropriate for faculty members to teach in a manner that may seem to emphasize or antagonize a particular opinion. One word that is considered offensive to a particular group can have catastrophic implications for the school and ultimately the state. However, sometimes it is necessary to speak in terms that may be considered politically incorrect.

Consider the Russian Revolution, a major event in history. In a public school, this event may only be presented in terms of fact. Yet this method of teaching leaves a major question unanswered: why? Why were so many people willing to create and support a state that so quickly turned into a violent totalitarian regime?

Political correctness dictates that these important lessons be skipped over in order to ensure no one is offended. Yet this process of thought does not teach students to think critically. This thought process does not teach students to look deeply into any matter and find the truths behind it. A private school is not required to adhere to such intellectually harmful safeguards.

Your New Parents, the State

In order for our democratic process to function correctly, we must ensure that citizens are constantly questioning authority and its actions. Yet in a school run by the government, how can we believe that students from public schools will question the very people that had a major role in shaping their opinions?

“Taxes are good and help everyone. The army serves all people and is loved by everyone. A big government is necessary to ensure the welfare of a nation.”

All of these things are subtly slipped into public education. I believe a quote from Lenin will summarize the point I am trying to make:

“Give me just one generation of youth, and I’ll transform the whole world.”

And even today, we see the state continuing to seize power from the parents and put it into its own hands. With programs like sex education and D.A.R.E., the “one-size-fits-all education” is again put into play. While a parent may not agree with what is being taught, the majority will rule.

To quote NPR, “15 percent of Americans say they want abstinence-only sex education in the schools, 30 percent of the principals of public middle schools and high schools where sex education is taught report that their schools teach abstinence-only.”

Forty-seven percent of their schools taught abstinence-plus, while 20 percent taught that making responsible decisions about sex was more important than abstinence.”” This shows the great division in the opinions of parents. Those who disagree with the majority will be left having their children taught ideas contrary to their own.

It seems that American public schools aren’t the best option for our youths’ education. But how could we fix this? More funds? The money spent on education has about tripled since the 1960′s only to see schools decline further. Therefore, I’ll propose a solution accepted by most Libertarians: privatize it.

Competition Creates Accountability

If all schools were to be privatized at this very moment, what would happen?

Let’s look at two of these imaginary private schools. John Doe’s son attends School A. School A has repeatedly cut core courses to redirect the funds toward buying new equipment for the football team. Since this is downgrading the education of the students there, many parents, including John Doe, choose to transfer their children to School B. School B is much more focused on education and better reflects the views of John Doe.

With the great loss that School A has suffered, it has several options. It may attempt to market itself as a primarily athletic school, assuming there is a market for it, it may adjust its academic standards, or it may not change a thing and go out of business.

Competition is a core function of capitalism. Private schools MUST adjust their price and quality competitively or they risk going out of business. Here we see the direct accountability of the school to the parents.

Competition Creates Choice

I’ll now briefly expand on the concept of the plethora of choices a nation of private schools provides.
Assume that you are a Christian. The school that your child attends leans toward a more secular viewpoint. Since this is not consistent with your views, you may choose to move your student to the Catholic school down the street.

Again assume that your child is not learning well with the primarily visual practices of his/her current school. You, being the parent, can choose to send your child to a school that emphasizes a learning process that suits your child.

This example is the same throughout the country. Schools of all kinds of practices and ideas would exist if all schools were privatized. If these schools raise their prices to be too high, customers will go where they receive a better value. Competition and the choice that it provides makes for the best possible education for a specific student. I’d like to propose a simple equation that illustrates the benefits of private schools:

  • Privatization = Competition
  • Competition = Choice, Quality, and Competitive Pricing
  • Choice, Quality, and Competitive Pricing = The best education for and student or family.

However, each time I present this argument, I am told that the poor would not be able to obtain an education. Not true.

In the world of department stores, there does not exist only high-priced establishments that allow the poor to go unclothed. There is Walmart, and then there is Nordstrom’s. Stores are available to citizens at every economic level. Keep in mind that citizens no longer pay the ridiculously high prices of public school.

However, wouldn’t this mean that the poor are left only able to obtain lesser educations? Nope.

Imagine again the example of ObaMart. It is accountable only to the government and may not maintain a high standard of service and products.

However, Walmart is accountable for the products it sells. It will provide a much better product because if it does not provide products that satisfy the people, they will go elsewhere to a store that meets their needs and put Walmart out of business. Therefore, even the schools with lower pricing have a much higher standard of education than that of a public school.

If the United States was ever to privatize schools, I strongly believe that we would see a monumental increase in our national education standards. Our intelligence and promotion of individuality would skyrocket. But with things as they currently are, the majority of Americans must make use of their educations courtesy of Uncle Sam, no matter how flawed the system may be.  http://www.capitalisminstitute.org/privatize-public-schools/

Murray Rothbard – Education: Free and Compulsory.

capitalisminstitute.org – What is Capitalism?

For over a century, leftists have used the word “capitalism” as a type of curse word, the cause of all economic ills. “Oh, well that’s capitalism for you”, they’ll mutter when they read a story that involves anything economically negative. They see “capitalism” as a system where the rich wage war on the poor, or where corporations use the government to trample the rights of minorities and the defenseless.

Of course, they’re dead wrong. And sadly, because they misunderstand what capitalism is, their “solution” to the problem is essentially more of exactly what causes the problems in the first place — theft, the violation of rights, and people waging economic war on each other.

In the end, the only economic system that prevents unjust wars, the nanny state, and promotes liberty at all is the system of capitalism. It’s not just a good system — it’s the only moral system.

When we talk about “capitalism”, we mean something very different than what the socialists try to imply:

Capitalism is an economic and political system that is based on protecting the natural rights of life, liberty, and property. By extension, this means enforcing contracts and banning all fraud.

In such a system, the use of capital almost instantly arises. People will trade out of self-interest, and “money” makes trade infinitely easier. Because of the prevalence of capital, the label “capitalism” was born.

Capitalism does not include any violation of the rights of the rich or the poor. The bailouts weren’t capitalism. Obamacare isn’t capitalism. Agribusiness being paid to not grow crops isn’t capitalism. Oil subsidies aren’t capitalism. Anti-small-business regulations aren’t capitalism.

Those are part of a very different economic system — corporatism. That system — the system of corporatism — is where the government is used to give “special privileges” to corporations and the rich. This is absolutely not capitalism. It’s corruption, a violation of the rights of the people, and should be instantly ceased.

Where Socialists and Capitalists Should Agree:

Capitalism doesn’t allow for theft — whether it’s the rich robbing the poor or the poor robbing the rich. It doesn’t allow for corporations to be bailed out with tax money. It doesn’t allow for so-called “welfare” programs funded out of the pockets of the middle class and rich.

We capitalists hate corporatism just as much as the socialists. We hate theft by anybody — rich or poor. We hate corruption by anybody — rich or poor. We hate it when corporations use the government to manipulate the law to punish small business. We hate it when corporations are at the receiving end of laws that violate liberty, like the insurance companies which benefit from forced insurance under Obamacare.

Because of this, there are plenty of topics where capitalists and socialists and moderates should be on the same page: ending corporate subsidies, ending all bailouts, ending the Federal Reserve, ending fractional-reserve banking, ending legally enforced monopolies, as well as dozens of other topics.

Capitalism: The Unknown Ideal.

Perfect capitalism will obviously never be perfectly achieved. There will always be something wrong — we’re talking about politics after all. But that doesn’t mean that the blame lies with capitalism — that means the blame lies with not having capitalism.

It’s vital that people understand what capitalism is, and understand that the problem with Wall Street isn’t economic liberty — it’s not that theft is banned. It’s that theft is going on — only for the rich and the businesses.

The solution to our economic ills isn’t to change who’s stealing from who. It’s to stop the theft for absolutely everybody. There’s only one way out of the economic insanity we’re in: to move toward the economic protection of life, liberty, and property — for absolutely everyone, rich and poor alike.

As Ayn Rand explained:

“Capitalism is a social system based on the recognition of individual rights, including property rights, in which all property is privately owned.

The recognition of individual rights entails the banishment of physical force from human relationships: basically, rights can be violated only by means of force. In a capitalist society, no man or group may initiate the use of physical force against others. The only function of the government, in such a society, is the task of protecting man’s rights, i.e., the task of protecting him from physical force; the government acts as the agent of man’s right of self-defense, and may use force only in retaliation and only against those who initiate its use; thus the government is the means of placing the retaliatory use of force under objective control.”

That’s it. That’s the definition of capitalism.

http://www.capitalisminstitute.org/what-is-capitalism-definition/

capitalisminstitute.org – This is Not the Study of Economics by Jason Hughey, Capitalism Institute staff writer

Individuals who lack a solid understanding of economics generally make a plethora of errors in reasoning, particularly when they are faced with the opportunity to articulate their viewpoints on contemporary economic issues.

While this problem may be true for individuals who lack an understanding in other fields of study (i.e. calculus, physics, biology, philosophy, etc.), the glaring holes in reasoning become much more apparent in economics because they are manifested in every day public policy.

Usually, when an individual fails to understand the reproductive system of an extinct lizard, it will not have any bearing on how he votes. However, when individuals vote for political leaders based upon faulty misconceptions of economics, such errors will eventually become manifest in ruinous policies that negatively affect our jobs, our income, and our overall standard of living.

Thus, it is important to cleanse our thinking of the faulty ideas about economics that dominate the minds of many people (including political leaders). All of these misconceptions are highly tempting at first glance because they over-simplify economics to make it something that it is not. However, with some clear thinking, it is possible to reject these misconceptions in favor of a more holistic view of what economics really is all about—namely, the study of human action.

Economics is not about money

People very easily fall into the temptation of equating economics with money. This could not be further from the truth. Although economics does teach us about the nature of money, how it is used in economic transaction, how changes in its supply affect productivity, etc., economics is not simply about money.

Money by itself is static, boring, and completely worthless. It is human action that imputes value into money as a medium of exchange, that determines how it should allocate goods and services, and that uses it in trade. Viewing economics as simply about money completely removes our ability to understand how money really should function in a society.

In public policy, this error is manifested whenever people assume that providing more money for a particular project will result in its success. Consider the following example:

Some people would say that if students in a particular school are getting Cs, Ds, and Fs, then that obviously means the school needs more money than it had before. There’s obviously no way teachers could have been ineffective and no way students could have been unwilling to learn. There’s no way that the money from the school’s previous budget was mismanaged behind a veil of inefficiency and corruption. Therefore, the solution is simple! Give the school more money and grades will surely rise.

Reality, however, teaches us that this is completely false. The goal of economics with regard to money is not to make us worshipers of money so that we can throw it at our problems like a magic spell. This is a gross oversimplification of economics that can lead to poor policy outcomes.

Economics is not about jobs

This second error is as prevalent and malicious as the first. Many people look at the economy and think it needs to provide us with jobs. Yet, economics, rightfully understood, does not even really bother with this idea.

You see, jobs are easy. In fact, when an economy is in trouble, jobs might be one of the easiest problems to fix. Simply give everyone a shovel and have them dig a trench. Then have them refill the trench they just dug. Repeat ad nauseum and your country will have full employment.

If economics were primarily about how to maintain high employment, we could be done studying it at the third grade. It would also make economics absurd and useless. Admittedly, economics does cover issues of employment/unemployment, however this can never rightfully be the focus of economics. As with the issue of money, economics teaches us about jobs because it teaches us about human behavior. In relation to jobs, it also teaches us about what constitutes real wealth, about the importance of productivity (as opposed to just being “busy”), and much more.

Yet, today, politicians discuss high unemployment as if it were a unique economic problem unto itself—its own separate field of study. As far back as 1946, Hazlitt observed that “Wages and employment are discussed as if they had no relation to productivity and output” (p. 72). When this type of attitude guides economic policy, it results in “domestic job-creating” regulations (e.g. minimum wage, tariffs, subsidies) which eliminate the competitiveness of poorer laborers, both in the United States and abroad. Not only that, but such programs minimize efficiency and nullify productivity simply for the sake of “doing something.” In education, that’s called busywork, but in our government, it’s called a stimulus job.

Economics is not about math, graphs, or statistics

Many people think of economics as purely statistics and graphs. As a result, they perceive economists as being obsessed with supply-and-demand graphs, GDP, average income, interest rates, equations, formulas, and a host of other mathematic concepts. While some economists have done nothing to mitigate this misperception, it remains a misperception.

It is simply impossible to make economics into the kind of mathematical science that many believe it to be. As I previously stated, economics simply is the study of human action. The problem this poses for mathematically-minded economists is that human action carries with it a virtually limitless amount of variables that cannot be controlled. This makes economic research impossible to repeat (as we can do in scientific research).

Admittedly, some graphs and statistics are useful both to the economist and the student of economics, but one cannot overemphasize the fragility of mathematical models in economics. A supply-and-demand graph only represents a brief snapshot of a conglomeration of human action. In reality, this conglomeration will always be in flux as each new variable comes into play. It is easy for markets to adapt to these variables, but the same cannot be said for the mathematical models.

In public policy, this misperception of economics as a mathematically precise science has resulted in a glut of central planners who regulate economic activity according to their highly limited economic models. They assume that economic growth is a mathematical formula that includes some quantity “C” for private consumption, some quantity “I” for gross investment, and some quantity “G” for government spending. Somehow, it is assumed, that if we can just increase these values (by the force of government), then we can achieve growth.

Unfortunately, economics is not nearly this simple. Even more unfortunately, the cost of reducing economics to this level of mathematical simplicity in public policy has been high.The Great Depressionthe Dot Com bubble, and the housing bubble are just a few examples of what happens when we allow central planners to make policy according to preconceived mathematical models of what the economy should look like.

Conclusion

Admittedly, each of the above concepts coincidentally fall under economics in some respect or another. However, that does not mean that any of them should be considered as the foundational paradigm by which economics should be studied. Properly understood, economics is the study of human action, which causes it to rise above minute details regarding money, jobs, and graphs. Admittedly, the focus of human action which economics deals with tends to relate to things such as trade, labor, money, interest rates, business cycles, etc. However, all of these issues are informed by the holistic view of economics as the study of human action, not the other way round.

This is not meant to disparage the importance of thinking about these concepts rightly. Economics has valuable insights to give us about money, labor, and statistical findings. Yet, we cannot force economics to become something that it is not. We cannot add to economics by subtracting its most essential tenet of human action.

“Economics, as a branch of the more general theory of human action, deals with all human action, i.e., with man’s purposive aiming at the attainment of ends chosen, whatever these ends may be.” – Ludwig von Mises, Human Action (1949), p. 880.

References

Hazlitt, H. (1946). Economics in one lesson. New York: Three Rivers Press.

Mises, L. (1949). Human Action. New Haven: Yale University Press.

http://www.capitalisminstitute.org/not-economics/

capitalisminstitute.org – The Simple Reason Socialism Always Fails

Modern sociology is essentially based on the teachings of Karl Marx. Few people mention the man with such reverence as a professor teaching how societies interact, evolve, and function. In a typical sociology classroom, the students and professor will learn about class warfare, economics, the survival of the fittest, as well as plenty of examples where the rich are “exploiting” the poor.

Karl Marx is considered the intellectual godfather of hundreds of thousands of professors, intellectuals, elitists, and anti-capitalists. He invented what’s known as the “Conflict Theory”, the notion that change occurs because of conflict between two groups of people. He was right about that, but he was hideously, deadly wrong about how he applied it.

Marx saw political conflict — people using resources and force to enslave other people — and he concluded that it wasn’t the use of force that was wrong, but the existence of capital. It’s a completely incoherent logical leap, and it had grave consequences for the rest of humanity.

Missing the Point With The Communist Manifesto

Karl Marx’s infamous “The Communist Manifesto” is the most important document he wrote, because it was the intellectual rallying cry of anti-capitalists everywhere.

It was the justification for confiscating trillions of dollars worth of property and then mismanaging it in the most incompetent economic planning the world has ever seen.

It was the justification for public executions of capitalists — people like myself, who own and use capital to produce even more.

Hundreds of millions of capitalists were murdered because of Marx’s philosophy. Families were wiped out, husbands were hanged, children made orphans, economies destroyed, and during the Cold War, the world itself almost met its fiery end due to the insane delusions of equality by the power-greedy communists.

In this document, Marx wrote the following:

“Let the ruling classes tremble at a Communist revolution. The proletarians have nothing to lose but their chains. They have a world to win. Working men of all countries, unite!”

What laughable insanity. This man of a giant beard and a small mind referenced power as the reason the poor were “victims”, and yet his response wasn’t the downfall of the ruling classes — it was taking political inequality and unleashing it in a manner the world had never seen before.

Consolidating power to the state doesn’t end inequality — consolidating power fosters inequality. Not all men are free to rule their neighbors, because that is outlawed under socialist dogma. Under socialism, a handful of men determine the rules, the economic planning, and the rations that the rest of the “workers” will receive.

The end-goal, socialists argue, is a society where power isn’t necessary. But to get there, they explain, we need to consolidate power in a socialist economy. A handful of men need to be given the power to decide what to do with everyone’s property, what ideas can be discussed, what lives can be ended, and what freedoms must be deleted for the sake of the eventual “common good”.

Learn the Lessons of History

Anyone who understands human nature sees the flaw here. Men abuse; absolute power tends to the abuse of power. But instead of people trying to manipulate others with money and resources through marketing, they created a society where negotiation began and ended with force — violence, prisons, executions, starvation.

The greatest source of inequality in the 20th century was socialism itself.

The greatest cause of poverty in the 20th century was socialism itself.

The greatest catalyst for exploitation in the 20th century was socialism itself.

They realized that the “ruling class” was wrecking havoc on society, and then concluded that it wasn’t the power — it was the money itself. The irony of such a misplaced philosophy and a self-defeating movement would be humorous if it hadn’t wrecked havoc with an evil the world had never seen before.

Let the ruling classes tremble? They tremble in excitement because they will be the ones who control your socialist empire.

Nothing to lose but your chains? Communism enslaves billions. Nothing to lose? Except your families to starvation, your friends to execution, your material well-being through rationing, and your freedom itself.

Working men of all countries? We have no time for angry and violent riots — we are carrying your world on our shoulders.

The Real Conflict is: Liberty Vs. Slavery

Marx was right about one thing: social movement occurs from perceived class conflict. The poor are progressively becoming more and more socialistic in America, not because the rich are harming them, but because they perceive the world as being owned, controlled, and regulated by a handful of the super rich — even though this is economically, historically, and politically inaccurate.

No one will ever argue that some of the rich do not abuse their wealth with regulations, bailouts, and subsidies — but the problem isn’t the existence of capital; the problem is political force itself.

For example, I am a capitalist. I take my wealth and multiply it through leverage, business projects, and other endeavors. I will not, however, use my money to manipulate the system in order to destroy other businesses. I will not take my money to manipulate the economy so I get an advantage over others.

Other companies, like Wal-Mart and Microsoft, almost always utilize their wealth to buy politicians in order to take down their competitors. This is not a flaw of capitalism — this is a flaw of corruption. It is not a flaw of freedom when someone abandons it — that is a definitional impossibility and a self-defeating concept.

The root of all social evil is unwarranted force — the violation of the rights of others. Murder, theft, rape, war — these are the things of evil. The free market doesn’t include any of these concepts. Once we understand this, all else follows, and we’ll soon come to realize that capitalism is the only moral economic system that protects and respects the rights of all men — regardless of their class.

http://www.capitalisminstitute.org/tragedy-of-marx/

capitalisminstitute.org – The 10 Principles of Economics You Should Know

Economics is the study of human behavior — of how people interact to get what they want and whether what they want is possible for them to get. It’s a science in the sense that there are uniform laws guiding the field of economics — invisible forces at work that guide the market. But it’s not a science in many ways, because it involves peoples’ decisions, which are anything but scientifically predictable.

When approaching economics, it’s incredibly important to understand that the first step is to know what to look for — natural laws guiding human behavior, society’s production, individual trade, and wealth building itself. In other words, the study of economics is simply the study of economic principles and their application. That’s about it.

This, of course, just begs the question: what are the principles of economics? Below are list of 10 basic economic principles, inspired by great economists like Henry Hazlitt, Adam Smith, and Greg Mankiew.

The 10 Fundamental Principles of Economics:

  1. People respond to incentives.
  2. People face trade offs.
  3. Rational people think within the margin.
  4. Free trade is perceived mutual benefit.
  5. The invisible hand allows for indirect trade.
  6. Coercion magnifies market inefficiency.
  7. Capital magnifies market efficiency.
  8. Supply and demand magnify resource efficiency.
  9. There’s no such thing as a free lunch.
  10. Desires are infinite; resources are finite.

I’ll go into detail with a short summary of how these economic principles work in economics. Of course, a longer explanation is necessary but is too much for a single article. I’ll continue to write longer explanations of each principle in the following weeks. If you’d like to read them, make sure to subscribe to our newsletter at the right or at the bottom of any page on this website.

The 10 Undeniable Principles of Economics Explained:

  • People respond to incentives. This is an unavoidable concept found in human behavior. It’s just how people function. We respond to incentives. Incentives aren’t necessarily “selfish” in the traditional sense, but they all appeal to our values — whether conscious or subconscious. Examples would be accepting a job to make money, donating to charity to help the poor, going to church to learn about God — anything where we essentially do what we want. People respond to incentives.
  • People face trade offs. It’s impossible to get everything you want at the exact same time. It’s impossible for me to sleep all day and work all day. It’s impossible for me to grill a steak at home while also dine at Olive Garden. This means people face trade offs. We have to trade one thing for another thing — there’s no other option. This is why people often barter with others. People are willing to trade 7 years of college work for the ability to become a lawyer, lot’s of money for a house, and pretty much every other choice in life. People face trade offs.
  • Rational people think within the margin. Thinking within the margins means trying to get the best result. In other words, if you have the option of choosing a good car or a perfect car, the rational choice is the perfect car. All things being equal, the better option is better. Thinking within the margins is essentially believing in net benefits — focusing on the best thing possible. Rational people think within the margins.
  • Free trade is perceived mutual benefit. When people trade in a free market, it’s because they are both responding to peaceful incentives. For example, an employee trades time for money because they want money. An employer trades money for labor because they want the labor. Both sides are acting in a way that they think benefits them as much as peacefully possible. This is true for all trades. People buy stuff because they’re reacting to incentives. This is a critical concept, especially when we mix it with the above principle of rational people thinking within the margin. People act in a way they think benefits them.
  • The invisible hand allows for indirect trade. The invisible hand is the market force that does what no individual could do on his own. For example, no single country on earth has all of the resources and industry necessary for the creation of a single pencil. It takes a dozen companies and several countries working together through trade to make that pencil. Not all of those who contribute to the creation of the pencil will ever meet or even know of each other — that’s why it’s referred to as the miracle of the invisible hand. The market does more on it’s own than any individual can possibly do on his own because the invisible hand allows for indirect trade.
  • Coercion magnifies market inefficiency. The invisible hand operates through the free market. That is, through people acting in a way that benefits them. The people mining lead, for example, aren’t doing it because they’re thinking about your ability to use a pencil. They don’t even know where the lead they’re mining is going. They’re acting on the basis of the free market, and the free market’s invisible hand is taking care of the rest. Using coercion — that is, manipulating the incentives people respond to — focuses on less production and more exploitation. What this means is that instead of everyone focusing on how to peacefully produce and trade for as much as possible, it changes the rules so that it’s possible to just take or force others to give you what you want. This makes about as much sense as a farmer eating his milk cow. The more coercion in a market, the less efficient it is. For examples of this in action, just look at any socialized nation in the history of mankind. Coercion magnifies market inefficiency.
  • Capital magnifies market efficiency. Capital is the magic behind the invisible hand. It allows people who have never met to barter. Capitalism is essentially juiced up barter economy. A pig farmer is trading pigs for stuff at Wal Mart — he’s just using currency for the sake of making the bartering more efficient. The existence of capital means that you can produce one thing, earn money, and trade that money for something else entirely — without the person you’re trading with needing to accept what you’re producing. Capital is an ingenious method of allowing anyone to trade with anyone, as long as both are productive people who produce more than they consume. Capital magnifies market efficiency.
  • Supply and demand magnify resource efficiency. Market forces work so that if there’s a demand for something as well as a potential supply of it, the market will try to unleash the supply to meet the demand. This will eventually lead to market equilibrium where the demands are quenched as much as possible by the market. This is honestly just an end conclusion of the very first principle of economics — people respond to incentives. Making money filling market demands is an incentive that nearly everyone reacts to during their lives.
  • There’s no such thing as a free lunch. This is a simple concept. Nothing is free. All wealth must be earned. You can’t use black magic economics to create something out of nothing. Every bit of wealth has to be earned. Welfare gets the money from someone. Government spending takes money from somewhere. Even if one person benefits without paying for it, someone else has to pay for it. There’s no such thing as a free lunch.
  • Desires are infinite. Resources are finite. We don’t live in a magical world where stuff is created from nothing. Everything that is produced is based on a complicated, long train of trade offs. The question isn’t whether we can judge each trade off individually — the question is how we determine to make those trade offs. People who support socialized medicine often completely miss this basic concept, and believe that capitalists just want the poor to die or stay sick. This is absurd. There are only so many doctors and nurses — the question is how to take what we have and disburse it in a manner that doesn’t cause rationing and inefficiency. That’s why socialized medicine always creates health slavery and rationing. It’s not “free”, because nothing is free.

Studying these principles of economics will give you a road-map for understanding economic events. You’ll see why most government economic plans fail, why capitalism always works, why socialism always fails, why peace always produces, and why war always destroys.

If you want to keep learning — if you want to become economically educated — get our free newsletter below and begin your journey to learning every week about free markets, property rights, and the art and science of economics.

http://www.capitalisminstitute.org/principles-of-economics/

capitalisminstitute.org – Property Rights 101: The Foundation Of Capitalism Explained

The foundation of capitalism is property. Every non-capitalist system requires violating property rights. Socialism steals almost all property, the nanny-state bans some property and regulates others, the welfare system steals and gives away property, and cronyism both steals and regulates property in a way that makes the corrupt rich; all violations of capitalism requires violating property in some way.

This is why it’s fundamental for capitalists to understand why we believe in a system of property rights, why we should defend property, and what property rights do entail. The fundamental debate about capitalism is a debate about property. We can’t lose sight of how important this debate is. As property rights go, so goes capitalism.

Property rights are interesting concepts, because they’re based on the fact that it’s impossible to get everything we want out of life unless we establish a kind of rationing system. Otherwise, we experience the “tragedy of the commons”, and every resource is depleted and every action begins to have little to do with what’s best for the long-term. In the short-term, people starve, and civilization becomes literally impossible. But let’s back up and start from the beginning.

You Can’t Always Get What You Want

“…like the philosopher Jagger once said, ‘You can’t always get what you want.’”
-House MD

At some point in history, two cavemen realized they both wanted the same rock. So they fought over it to the bloody death. At a later point in history, two cavemen realized they both wanted the same deer. So they fought over it to the bloody death. At a later point in history, two cavemen realized they needed a system for deciding who could “own” what without someone having to die. Thus, the idea of property rights was invented.

There’s more to it, of course. There are moral, economic, rationing, and even philosophically axiomatic reasons for believing in property rights. It’s an important discussion, and at the root of the discussion is the answer to anarchy, libertarianism, conservatism, Objectivism, and every other kind of political-ism. If we understand what property is and why we have it, we begin to understand why a social system of capitalism isn’t just good for us — it’s necessary for survival itself.

Definition of Property: What Are Property Rights?

Property rights are when someone has the authority over something. They have the authority to buy, sell, trade, give away, destroy, fix, etc — they have the authority over something.

If a house is your property, you can live in it, sell it, rent it, burn it, fix it, paint it, ignore it, or do anything else you’d like to it. If you own enough land you can even build a new structure entirely.

If you own your body you can sell it (that’s what a job is, and there’s nothing inherently wrong at all with selling time/labor for money), tattoo it, wear makeup, eat brownies, drink beer, etc. Regardless of what happens to you in life, you own your own body and can do what you want — within the confines of the property rights of others.

Why Property Rights Exist

Property rights are vital for the prosperity and opportunity of society. They’re also moral and are directly derived from the principles of justice. Let’s look at the 6 basic arguments for property. There are more, of course, but these are the most common that mix together nicely:

1. The Rationing Case

The tragedy of the commons is one of the most important economic, or “pragmatic”, reasons to accept a system of property rights. The argument is simple: if we don’t divvy up “stuff” on the basis of ownership, then everyone will destroy the “stuff”.

An example of this would be, much to the annoyance of many environmentalists, the lumber industry. Unless we divide up forests according to property rights, then no lumberjack would have any incentive to replant trees and re-harvest them there later. That’s too much work. He’d instead want to move on and cut down trees somewhere else.

If he replanted the trees but didn’t have the exclusive control over them for his own harvesting and profits, then another lumberjack could move in and cut them down without ever having to work to plant trees. This is the “tragedy of the commons”, and is a problem in a world without property rights. People begin consuming without a desire to produce or invest, because they don’t get to reap what they’ve sown.

In a sense, it could be understood that a property-rights system is a response to the tragedy of the commons. If we believe in private property, it’s because we’re rejecting non-ownership and we’re rejecting common ownership. This is why I can claim a spot of land and stop other people from entering it — they can’t own what I own without my permission. It’s my land. It’s my property.

This is an important distinction, because property rights don’t mean that violence is somehow never morally accepted — it means that there is a time and a place for when violence is accepted, and that context is always in relation to a property owner defending what is rightfully his/hers.

Property rights, in a sense, aren’t just about “stuff”. They’re about when we have the right to use violence.

2. The Economic Case

The economic case for property rights is a kind of derivative of the rationing case. If people own their own stuff, they are more likely to take care of it. But they are also more likely to invest because they’ll want to see the results of their investment.

This idea of being able to reap what is sown is critical to capitalism — in fact, the root word of capitalism is “capital”, and “capital” what happens after we work, produce, and have some left over for savings.

This profit-seeking mentality makes everyone wealthier, so long as it’s facilitated with trade. Without the ability to profit through property rights, people won’t work. If a farmer knows that a crop will be stolen completely by the local mayor, he won’t focus on growing crops. Everyone loses without property rights, except a handful of hunter-gatherers.

This is why it must be understood that property rights are the foundation of civilization. Property must exist in some form for civilization to exist. The only question is in what form they exist. We’re capitalists, and that means we believe private property is easily the best theory and framework possible.

3. The Philosophical Case

The moral case for property rights is simple: man must survive, and the only system which accepts the notion of survival and of civilization is a system of property rights. No other moral system makes sense. The others are contradictory. Socialism is fundamentally irrational. Private property, is, therefore, the logical result of accepting that man should survive and prosper.

As Ayn Rand famously wrote:

“Man has to work and produce in order to support his life. He has to support his life by his own effort and by the guidance of his own mind. If he cannot dispose of the product of his effort, he cannot dispose of his effort; if he cannot dispose of his effort, he cannot dispose of his life. Without property rights, no other rights can be practiced.”

4. The Religious Case

Every major religion establishes a concept of property rights. In Christianity, one of the Ten Commandments is, “Thou shalt not steal.” Christ and the Apostle Paul both tell their people that charity must be given freely and voluntarily — not through violence or theft.

In the Old Testament, the Bible is clear about keeping ancient boundaries in tact. In other words, property rights don’t depend on a particular generation or a particular context to be “good”. They transcend culture and time and person — they exist whether we violate them or respect them. Property rights are a fundamental moral principle for civilization.

In Exodus 22, the Bible makes it clear that killing a thief at night was justified, but that one should just detain them if it was during the day:

“If a thief is caught breaking in at night and is struck a fatal blow, the defender is not guilty of bloodshed; but if it happens after sunrise, the defender is guilty of bloodshed.”

5. The Axiomatic Case

Everyone believes in a type of property. Talk to a Marxist about how you need to take their coat because you need one, and you’ll soon see that “common property” arguments are essentially just complete lies people tell themselves so they can take swings at the only economic system that makes sense.

The same goes with aggression in general. People presuppose that we should deal with one another with reason — and logical consistency leads to respecting this as a universal, natural law system. It’s impossible for someone to not believe that they have control over at least themselves on some level. The only question is the extent of the property rights.

5. The Consistent Case

If I don’t own my body, then I know you don’t either. That is, in a nutshell, the axiomatic “case” for property rights. Whenever someone talks about taking your property, remember that they aren’t getting rid of property — they just want to transfer ownership.

Someone has to control something. This is why socialism collapses — it takes from the rightful owners who produced and earned the property, and gives it to someone else. This violates the moral and economic principles found in natural order, and is a type of rebellion against reality itself. And I can promise you, that’s one rebellion the leftists have never won.

6. The Natural Order/Law Case.

The best philosophy is one which accepts reality and reacts to it in a way to achieve one’s basic, fundamental goals. The most basic goals of all are, generally: survival, prosperity, and offspring. Capitalism, the system of protecting property rights, is easily the best system for this.

It rewards the best in society, punishes the worst, and stops men from violating the rights of others. If someone wants to find happiness, their chances are best under capitalism. If they want to be rich or poor, both are made available.

The universe is harmonious. It sometimes seems almost fine tuned for the prosperity of humanity, if only we would just analyze it and follow through with reason. Economics, natural order, and natural law all work together perfectly in capitalism, and reward the most productive, punish the lazy, and provide for those who can’t earn on their own.

Whether you believe in a God who fined-tuned everything or that man evolved to mix perfectly with all of nature, it should be clear that the rights of man and the principles of economics work perfectly together, and protecting one leads automatically to maximizing the other.

It’s bad economics to violate natural law, which include property rights. It’s immoral to ignore the principles of economics. Life works out. If there’s one thing that has not been emphasized enough, it’s how all the branches of human thought point to private property, natural rights, and the liberty of humanity.

If you want to learn more about the basic principles of property and liberty, check out our article on what capitalism really means, and what libertarianism is all about.

http://www.capitalisminstitute.org/property-rights/