LTE: Rational Economy

Economic woes are the result of regulation and intervention
Tim Peck | Asheville Citizen-Times | December 28, 2008

Dear Editor,

In his guest commentary, “This is a great time to invent a truly rational economy,” (AC-T, Dec. 19), Bill Branyon characterizes the inevitable consequences of government interference in the marketplace as the “current crisis of capitalism.”

There is no free market in this country – and never has been. And it certainly cannot have magically become the cause of any “current crisis.”

On the contrary, our current crisis is due precisely to government intervention and regulation, and not from any lack of them. Far from it, our hampered economy is heavily regulated; most notably, the banking, housing, and auto industries.

Capitalism, on the other hand, is the social system of freedom and it demands a strict wall of separation between economy and state. (Ironically, Mr. Branyon would have us believe that we are prisoners of freedom?)

For a slave, there are no degrees of freedom. He is either fully free or some variety of slave. Neither are there degrees of capitalism. Any form of “mixed economy” is simply a species of statism; whose key contributions to the economy are the destruction of liberty and wealth.

Mr. Branyon glibly informs us that we are “prisoners of the invisible hand of capitalism.” The only thing invisible in this matter is Mr. Branyon’s grasp of economics and history.


Gordon Smith wrote:

Is it also fair to attribute economic boomtimes to government interference?


Yes, the government is responsible for boom-bust business cycles by manipulating the money supply and interest rates.

The “boomtimes” are entirely artificial and must inevitably bust. It is a falsification of reality by the government and this causes malinvestment, poverty, inflation and unemployment — none of which are articles of “faith.”

These booms help the rich and well-connected and the busts hurt the poor and middle class.(Just recall the so-called “Roaring 20s” and the subsequent wrenching Great Depression.)

It is not the job of the government to run the economy and its interference is the cause of the (artificial) booms and (very real and painful) busts.

What we see in the economy today is a repeat of the ill consequences of intervention and regulation of an otherwise free market that continually seeks equilibrium. The only thing preventing those market corrections is the disastrous meddling of government in the economic affairs of free individuals.

For a more detailed analysis of the Austrian Business Cycle Theory, I recommend reading Ludwig von Mises on the subject. As Rothbard succinctly states:

“The classical, and now the Mises, theories have been generally scorned by modern writers, and mainly for this reason: that Mises locates the cause of business cycles in interference with the free market, while all other writers, following Mitchell, cherish the idea that business cycles come from deep within the capitalist system, that they are, in short, a sickness of the free market. The founder of this idea, by the way, was not Wesley Mitchell, but Karl Marx.”


Austrian Business Cycle Theory: A Brief Explanation
Dan Mahoney | Mises Institute | 5/7/2001
The media’s favorite phony solution to the economic downturn is for the Fed to drop interest rates lower and lower until the economy registers an upturn. What is wrong with this approach? Printing money—which is what reducing interest rates below the market rate amounts to—is an artificial means of recovering from the very real effects of an artificial boom. This point, however, is completely lost on most commentators, because they haven’t the slightest understanding of the Austrian theory of the business cycle.

Austrian Theory of the Trade Cycle
by Mises, Rothbard, Haberler, and Hayek
Booms and busts are not endemic to the free market, argues the Austrian theory of the business cycle, but come about through manipulation of money and credit by central banks

The Fraud of Government Intervention
By Robert Tracinski | Intellectual Activist | December 31, 2008
The top story of 2008 is undoubtedly the revival of the left. After nearly two decades on the defensive following the collapse of the Soviet empire–the definitive example of the failure of socialism–advocates of a government-controlled economy are trying to make a comeback. How brazen has this leftist revival become? It has gotten so far out of hand that some on the left are openly defending central planning. Yes, comrades, you read that right…

Capitalism and the Moral High Ground
Craig Biddle | Objective Standard | Winter 2008
Economists from Adam Smith to Ludwig von Mises to Henry Hazlitt to Thomas Sowell have elucidated the general mechanics of a free market and demonstrated the unassailable practicality of capitalism. They have shown how freer markets provide better and cheaper health care, cleaner air and water, safer automobiles and airplanes, ample food and energy, better and cheaper schools, and so on. But their arguments have not convinced the world to embrace capitalism. On the contrary, people today are condemning the system of private property as loudly as ever.


About Tim Peck

Unaffiliated Objectivist
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