Video Series on Economic Indicators

Video Series on Economic Indicators
By Alex Merced

I’ve been doing videos on economic theory for years at LearnEconomicsNow.com but am now doing a project more geared towards application of economic knowledge.

Last weekend I picked up the book “the secrets of economic indicators”, and decided to do a series of videos about all these indicators.

In these videos I discuss these indicators impact on the market, what they tell you about the economy, and how they are put together.

I have created a playlist just for this series which you can find at indicators.learneconomicsnow.com.

If you enjoy my work and would like to show a token of support please make a pledge at patreon.com/alexmerced of as little as $1/mo or more.

Advertisements

Libertarianism & Free Exchange

from Alex Merced

I’m Libertarian and I’m for Free Exchange, which are not exactly me saying the same thing twice.

When I say I’m libertarian, I’m just saying I value an individuals right to their property and don’t want me or others to aggress on their property, mainly cause I don’t want anyone to do that to me so it only makes sense I should approach others the way I want them to approach me. Although this does not imply any particular doctrine of what is the optimal property rights framework, economic system, or make up of society… just that I don’t want people to aggress on each others property (which includes you body in just about all property right frameworks)

When I say I’m for free exchange, I am making a normative statement, that a world where the barriers to exchange between individuals are as little as possible will yield better social results. Thus, I do believe in removing barriers that come from aggression (basically government intervention, organized crime and cartelization, etc.) but I also believing in making non-aggressive (so fixing without policy) efforts to remove non-aggressive barriers to exchange (social intolerance, lack of access to information, technological barriers).

Although Libertarianism and Free Exchange line up when it comes removing aggressive barriers to exchange, Libertarianism in it’s purest broadest has nothing to say about what or whether anything should be done about non-aggressive barriers.

Point I’m saying is ones own personal philosophical framework is never made up of one principal or value, but of many.

And honestly, keeping them separate is probably for the better since it makes working through problems and communicating clearer and easier.

Reality Shows, Market Forces, and Tolerance

by Alex Merced

I am admittedly of pretentious cultural tastes enjoying television shows with complex thought provoking writing and production values and enjoying complex and unique musical genres. Although, while my personal aesthetic often finds me raising my nose at mainstream popular culture, there is beauty in its role in the evolution of societies values and its interplay with the laws of economic forces. In particular I’m referring to my belief that the growing proliferation of reality shows has had a role to play in what seems a rapidly increasing proliferation of tolerance of groups and individuals of all types.

The Economics

First of all, the growth in reality tv is a story of economics and scarcity. While the profit margins of television shrank as more alternatives for entertainment came to existence also diluting the supply of prime advertising space driving the cost of ad space down, there was demand to create low cost programming to increase the profit margin on shrinking ad revenue. With the success of shows like The Real World, Survivor, and Big Brother it became clear reality television would fill this gap.

The Tolerance

This easy and cheap to produce culture created a rush of finding subjects that would capture the audience in this genre saturated with programming. The result is that may channels sought to display groups and individuals that many would have a  curiosity about such as polygamist, gypsies, drag queens, and more. So while these shows sensationalize and sometimes can be seen as “exploiting” (how I so dislike that word) these groups and individuals for profit, the end result often shows the humanity in these diverse groups of people which in my opinion led sometimes initial curiosity of the audience to turn into empathy and tolerance as they interact with the diverse world around them.

In short, growing scarcity led to decisions for ones own benefit that in my opinion had great social externalities. Yes, the market works, and it works well.

Why Taxing Wealth is a bad idea?

by Alex Merced

In his new book, “Capital in the 21st Century“, Piketty advocates for a global tax on wealth as a way to curb growing income inequality. Of course, as a libertarian you can probably guess I think this is a bad idea but for good reason. I have discussed income inequality in previous articles I’ve written, and disagree with Piketty that the correlation between the return on capital and income inequality means the capital growth is cause of the inequality (thus taxing it the cure). Instead, I believe my other article on how monetary policy and inflation increase income inequality not only explains the correlation (inflation increases returns to capital and decreases return on wages) but also just makes more sense in explaining the trends discussed by Piketty.

Although in this article I’m less concerned with what is the true cause and cure for income inequality, but with how bad a solution a global tax on wealth would be. Taxing wealth would not only have the effect of reducing and confiscating wealth which of course is abhorrent from a libertarian perspective, but it will also make capital gravitate to more risky investments than they otherwise would, destabilizing the capital structure of the economy.

So why would higher taxes mean riskier investments?

From an investors point of view, you are generally not just looking for a high % return but generally a return after you adjust for inflation and taxes. The higher the taxes and the higher the rate of inflation the higher return needed to survive both.

For example:

Let’s say you have a 10% (which is pretty good) with a tax rate of 35% and inflation rate of 3%

After taxes you will have a 7.5% return (10 – 35%)

Adjust that for 3% inflation (7.5 – 3)

your at a 4.5% return (and this ignores state and other taxes, also ignoring any issues in measuring inflation)

The point being is that as the hazards of inflation and taxes build up, one must seek more return and the name of the game is “more risk, more reward” meaning that higher returns will be found in increasingly risky investments.

Why do riskier investments return more?

Imagine a world where investments of all levels of risk gave you a 10% return, which one would you choose to put your money in?

If you answered the safest, that would be quite rational and would be what many others would do as well. The result is, that everyone wanting the safest investment will bid up the price which in turn reduces the return on investment (your giving up more for the same thing) and the return will continue to go down until the return goes so low it’s not worth it to investors to bid it any higher.

These investors would then do the same with the next safest investment, etc. By the time you start getting to the riskier investments there will be less potential buyers so they won’t be bid as high, and when you get the riskiest of investments they may be bid down (because maybe 10% return is not worth the risk) so a lower price would give you a higher return (giving up less for the same thing).

Bottom line, investments are generally priced heavily based on risk and reward. So more taxes and inflation will just lead to an increased demand for risk, which at some point will create a scenario that bad investments may outweigh good investments and growth turn into a slump.

The Mechanics of the Minimum Wage [Video]

by Alex Merced

Often times when you try to create protections or regulations of the market, the result is to create an undue burden on those least able to bear them. The result is those at the very bottom can seem stuck there, and those who are somewhat to very well off find themselves relieved of a lot of competition, allowing them to take a bigger participation in the ever changing economic pie. The minimum wage is one of the policies that have these results. Although due to the amount of labor that may already be working at bottom of the income ladder can be limited, the result of this policy for good or worse can be hard to truly measured or seen. Yet, understanding the impacts of market intervention on economic disparities and in turn economic tolerance needs to be more part of the economic discussion.

Why Economics, Choice and Tolerance are Inseperable

by Alex Merced

Often times people define issues into two categories, economic and social, as if there is no influence these have on each other. I contend a world with a more robust competitive economy would also be a world of greater tolerance. Many social and caste divides are born out of economic scarcity, out of a demand for a reason to justify taking more of the economic pie for “us” and leave less for “them” because the sentiment is that there isn’t enough for everyone. If anything history, I think, shows pretty clearly that wealth is more abundant when more of us cooperate and compete with each other to provide value (aka the FREE market) instead of competing over limiting market access to others (protectionism/regulated markets/no markets). Although these divisions over time get ingrained in the culture of these arbitrary groups and can lead to generations of resentment, hostility, and sometimes violence which is why a focus on robust free market policy is an imperative for wealth building but also social cohesion (if you are prosperous you’re less likely to resent other people for being prosperous, or try to prevent them from being so).

So, essentially, economic performance will make people more tolerant of each other, which in turn improves economic scale. So, essentially, any discussion of promoting tolerance can’t be separated from people’s quality of life (which is partly determined by the wealth, and in other part determined by internal factors which often come from peoples ability to pursue their interests and attain property). As people’s quality of life drops, whether from losing their economic (wealth) or autonomous (choice) means to pursue their ends (goals), they begin to look for scapegoats to blame.

Bottom line: A libertarian world view which focuses on empowering peoples economic opportunities and individual choices, is the formula to having a more tolerant socially cohesive society.

The Law, Legislation, and Tolerance

by Alex Merced

As mentioned by George Mason University economist Don Boudreux, F.A. Hayek had important insights into society’s institutional behavior in his distinction between the Law and Legislation.The distinction being that legislation are rules formally instituted by a legislative body (think government) and laws are the rules we universally and informally follow.

Driving home the distinction:

– It is legislation that prohibits the sale and use of marijuana in the United States, but it’s not necessarily a piece of legislation people follow strictly because this has weakened over time as social law.

– While there is no explicit rule to not cut people in line, we all know not to and generally don’t. This would be an example of a social law.

Often times legislation is guided by law, because legislation that runs contrary to the societal laws of the time will often be difficult to pass, much less enforce, without political consequences. From a libertarian standpoint, this creates several implications that libertarians should concern themselves with.

1. Societal Law can be a barrier to Coercive Legislation: While politics is not really an ideological sphere of society (politicians use ideology to gain power successfully more so  than ideologues use politicians to shape society successfully). So if libertarians are concerned with the size of government and equality under the law (meaning legislation that does create arbitrary societal divides), then the societal law (culture, norms, ethics etc) should hold these things in high regards so that legislation that runs counter to these goals finds it difficult to exist or be enforced. Luckily, the United States has a deep historical culture of inclusiveness (melting pot), skepticism of central rule (revolutionary war, Nixon Scandals, NSA), and celebration of individual achievement (when we think of Steve Jobs, Bill Gates, and other entrepreneurs, we think of their individual achievement first, and barely, if ever, think of any indirect or direct government involvement in their enterprises). So the United States societal law has always been primed to keep certain lines difficult to cross more so than other nations (not that they haven’t been crossed, or that these barriers haven’t weakened at all).

2. Not participating in shaping societal law can make the fight against coercive legislation an uphill battle: If we don’t, through cultural transmission channels like family (how many laws/manners did you learn from your parents), media (how much did you learn from certain TV shows and movies), and the education system, attempt to make or keep things like property rights, non-aggression, and appreciation/tolerance of the individual part of societal law we will find legislation drifting further into larger violations of these values that libertarians hold dear.

So, distinguishing the external forces that shape our behavior and choices into law and legislation can be a very useful tool in solving the types of problems and issues us libertarians concern ourselves with. Another useful taxonomy is that of Institutions and Organizations from economist Douglass C. North. In this breakdown, institutions are the formal and informal human constructs that we allow to limit our behavior (legislation, laws, etc.) and Organizations are the hierarchies of how individuals organize to accomplish a shared goal. So if we look at a university, the distinction between the organization (the president, faculty, and their powers) and the institution (the formal school rules and informal traditions that have developed) can be broken down to help understand the social dynamics.

Libertarians making an effort to use these types of insights to improve and strengthen our understanding of society within the framework of Libertarian philosophy present a great opportunity to push forward the importance and argument for our cause.

A Landscape of Liberty Friendly Institutions

by Alex Merced

In every libertarian evolution, we go through a lot of different phases as we discover our core convictions and views. At different points in my ideological journey I’ve identified with labels such as classical liberal, conservative, minarchist, and anarcho-capitalist, and then I got to the point where I stopped worrying about all these nuances and labels and just said, “I’m a libertarian concerned more with promoting libertarian thought and libertarian means than focusing on any particular ideal power structure.” (Is there any ideal anything? If there was, would it always remain ideal?) At the end of the day, looking at issues from the perspective of, “Is there government intervention (bad), or not (good),” while totally agreeable in its implications, I feel it overlooks a great point. It’s a point which I think many more cutting edge libertarian philosophers and economists are starting to see. Our individual lives and ability to make choices regarding that life, and the property we’ve accumulated in that life, are affected by much more than just government. Institutions such as family, religion, etc. all play a role in our ability to make choices regarding our lives, property, and ability to pursue happiness. Appreciating this reality doesn’t imply any consent for the use of force, instead it just recognizes another dimension of the battle for liberty.

This dimension is molding institutions (social norms, laws, family, etc.) in ways that are conducive to a  view that respects an ability for an individual to make choices about their life and property.  This goal does not need force, but instead participation in social discourse through participation in these institutions so they can be reformed from the inside, through education, so others may make voluntary choices that reform these institutions, and through research so that we can learn more about how these institutions can be improved. (Are there better governance or management systems we can voluntarily adopt? What dynamics make successful families work that other families can adopt?)

In helping understand what reforms and institutions are liberty friendly, I’ve defined four characteristics of institutions that are liberty friendly and liberty hostile (notice how government often encompasses many of these features in the latter category):

Open (Friendly) vs. Closed (hostile): an open institution has very low barriers to participation. Due to this, the market/choice mechanism allows the institution to evolve. A closed institution has high barriers to entry which limits participation, giving the participants an over sized share of power in the institution which they often use to keep others out, slowing down its ability to evolve with other institutions.

Dynamic (Friendly) vs. Static (hostile): a dynamic institution has the flexibility to evolve with changing situations and circumstances while a static institution does not. This eventually will lead to its fighting liberty to protect itself from becoming obsolete.

Transparent (friendly) vs. Opaque (hostile): An institution that is transparent and allows a more free flow of information will enable people to make better choices. While an opaque institution hides information, often not allowing individuals to make proper assessments and choices of different situations (think the NSA).

Voluntary (Friendly) vs. Compulsory (hostile): A voluntary institution has a better feedback mechanism in peoples choices to determine if it’s providing value. A compulsory does not have this mechanism at all, which often leads to the development of the other three hostile characteristics.

So, to make the world more liberty friendly, as libertarians we should discuss how to make institutions more libertarian friendly and take the appropriate non-coercive methods to achieve these reforms.

A Discussion of the Civil Right Act of 1964

by Alex Merced

Having started an organization dedicated to building tolerance in a libertarian framework, I might as well go ahead an attack the elephant in the room when it comes to libertarians and issues like these. Often times when libertarians take on the mantle of social progress absent of government by discussing things like marriage equality or ending the drug war, progressives attempt to dismiss us libertarians by arbitrarily bringing up the Civil Rights Act of 1964 and its public accommodations clause. In order to show why this dismissive argument is unfair and a distraction from modern discussions, let’s first learn about the contents of the 11 articles of the civil right act and see what libertarian reservations would be.

Article I – Banned unequal application of voting laws. I can’t imagine any libertarian having a problem with this particular clause. It’s the epitome of “equality under the law.” Although, all this did was end unequal application of current laws, it didn’t end other forms of voting disenfranchisement. This was later done in the Voting Rights Act of 1965, which was weakened in 2013 by the Supreme Court. I personally think the voting rights act was a reasonable law. It’s not about state or federal rights but preventing oppression by government and any tool that can prevent any oppression is fine with me. (From my understanding the VRA doesn’t violate any property rights, instead it restrains state governments from limiting the participation of it’s citizens in democratic elections.)

Article II – Often referred to as the public accommodations clause, it prohibits discrimination in hotels, restaurants, etc. engaging in interstate commerce (exempting private clubs, so essentially you can create an establishment only open to private members if you really want to be discriminatory). I will discuss the controversy over this particular clause and my take on it after I finish all the articles of the CRA.

Article III – This banned discrimination in public institutions like public parks and restrooms. While libertarians are generally for privatizing most public property, anything that is publicly owned should be open to well, the public. In other words, this is a no brainer for libertarians. It’s like marriage. While many libertarians don’t think a marriage license should exist, as long as it does it should be available to everyone.

Article IV – This enabled the desegregation of public schools. For libertarianism this is perfectly fine by the same logic as Article III.

Article V – Strengthened the Civil Rights Commission that was created in 1957, which only investigates and makes recommendations. From a libertarian perspective this is mild since it can’t really compel anything but it costs taxpayer money to maintain such a commission. I understand the need of a feedback mechanism for issues like these, but like them or not, don’t organizations like the NAACP and ACLU kind of serve this purpose with mostly voluntary donations?

Article VI – Bans discrimination by agencies that receive federal funds. While libertarians aren’t really big on public funds in the first place, I don’t see why regulating the use of public funds and public institutions would bother any libertarians. You’re not messing with anyone’s property that wasn’t already confiscated via taxation.

Article VII – Bans discrimination by employers of 15 or more (also exempts business where the trait you’re discriminating against is vital to the job). Myself along with most libertarians don’t think people should segregate their business or be discriminatory in hiring based on things like race. But, it’s always uneasy with libertarians when you set a precedent for telling people what do with their property (for many their business is their property). So this along with clause II is what usually gets us libertarians in trouble with the orthodoxy.

Article VIII – required the collection of race and gender data in voting. Aside from the cost to the taxpayer, I can’t think of anything to really complain about here. The data can be useful. Although when you collect data like this, you make people think of data in terms of race and gender vs. other traits and characteristics that may highlight other trends. (You can’t measure everything, but what one measures does shape how people think about things, which is worth thinking about)

Article IX – This article made it easier to take a state case ruled on by a segregationist judge and move it to the federal courts. I don’t see any problems with this, if someone is in a situation where they can’t receive a trial from an impartial judge there should be recourse.

Article X – Created the Community Relations Service, which helps communities resolve disputes over discrimination. Aside from the funding, I don’t see any particular thing to be offended about.

Article XI – Allows placing the violators of the other articles in criminal contempt for up to $1000 fine and up to 6 months in jail. Aside from the enforcement of charges against private property use I don’t see a particular problem with this.

My Personal Opinion

The civil rights act isn’t on anyones radar to repeal for two reasons:

– There are laws that create actual problems that need to be dealt with like Sarbanes Oxley, Affordable Care Act, and Dodd Frank. Usually this half-century old law only comes up as political fodder to entrap libertarians.

– When I look at all the articles I find that I can more often agree with than disagree with the law. (Although, in principle, the clauses that violate private property rights can make me feel slightly uncomfortable. However the clauses preventing local governments from segregating public spaces makes me feel good and makes up for the previously stated discomfort.)

The controversy

Most libertarians probably aren’t fully aware of all the articles in the CRA, but libertarians like myself are very hard pressed to ever express any kind of flexibility on our resolution of private property rights (because they are integral to functioning markets, and we tend to really appreciate how small concessions can lead to large losses of other freedoms over time).

At the end of the day if I was a libertarian congressman in 1964 (probably wouldn’t have been back then considering I’m Latino), I would probably have to cast my vote for the act due to the value of it’s restraints on government power to compel discrimination. While many libertarians are very split on this pointless hypothetical that is often given to us I think it is generally a worthwhile law with fewer flaws than many others.

This Think Tank’s Name is Ironic (Sort of)

by Brian William Waddell

The Libertarian Center for Tolerance. Think about it. If you’re a libertarian, or a Libertarian, or an anarchist, or a Republican with libertarian views, or even a civil libertarian you probably understand why this is ironic. Libertarians, in all their stripes, can barely tolerate each other’s views. I’ve seen liberty loving people arguing (albeit usually more intelligently than the arguments I’ve seen between the “two” “major” parties) over tiny points of disagreement that mean nothing in the larger scheme because neither side would ever push to have government step in and regulate the issue. I’ve been guilty myself at times. We need to be tolerant, and accepting, of the views of all liberty lovers because we are all on the same team. We need that team to be as strong as possible to accomplish the shrinking of government intrusion that we all desire.

Big “L’s” Small “l’s” and Other Letters

Yes, there is a difference between a libertarian and a Libertarian. Many libertarians are Libertarians, but not all. Many Libertarians are also libertarians, but still, not all. I’m not helping am I? Look at it this way, someone who believes in the philosophy of libertarianism is a libertarian. Somebody who registers as a member of the Libertarian Party is a Libertarian. There is also a difference between these two and anarchists and civil libertarians. Anarchists sit on the absolutist end of the liberty scale: They want zero government and each individual to be free to do as they please as long as they don’t harm others. How that works, and if it’s even possible, is fodder for another post, but for now just know they’re on the side of liberty. Civil libertarians tend to be the ones who are registered Democrats, and are fine with government intrusion into your wallet, but will fight to keep the government out of your bedroom or reproductive system. These are the people who are valuable allies in many situations and should not be alienated despite their generally big government leanings. Their belief in liberty bears as many caveats as the Republicans with libertarian views, but the caveats tend to be opposites.

In short, the liberty philosophy continuum goes something like this: anarchists::voluntaryists::libertarians::constitutionalists::civil libertarians and Republicans with libertarian views::Republicans and Democrats. All these differences should not divide liberty lovers of any type from one another. Our diversity should be our strength, not our weakness. The ability of liberty in any form to find a place in the hearts of humans should be celebrated and nurtured. We shouldn’t ridicule or ostracize those with slightly different views as long as they are working in the same direction, and everyone on the continuum up to Republicans with libertarian views is working in the same direction at least part of the time. Don’t get me wrong, healthy debate is fine. But when’s the last time you saw a truly healthy debate on Facebook?

Why the Name Works

The Libertarian Center for Tolerance. Most outside of the liberty movement don’t think of tolerance when they think of libertarianism. This is ironic, too. Tolerance and acceptance are cornerstones of libertarian philosophy. Just because I don’t agree with how you live doesn’t mean I can, or should, stop you from doing it. As long as one doesn’t steal or injure, a person’s decisions are their own.

The reality is, those who understand libertarianism and have been around the liberty movement for a while will see the name of this think tank as both redundant and ironic at the same time. Libertarianism is tolerance. It also needs a dose of it among its own members. But, it’s important to have that “Libertarian” out in front of the title so that more people start to realize how liberty, tolerance, and acceptance really do go hand in hand.