Saturday, August 11, 2018

Darwin, Evolution, the pre-1960s Left and Human Races

Charles Darwin – the discover of evolution by natural selection – wrote a book called The Descent of Man and Selection in Relation to Sex (1871), with a second edition of the book published in 1874.

Chapter 7 of The Descent of Man is called “On the Races of Man.”

There is no doubt that Darwin thought evolution applied to human beings, and that all humans descended from a common ancestry and species. But he also thought that there were distinct races or sub-species of man (Darwin 1874: 162, 176).

Darwin is of course worshipped by much of the modern Liberal and even radical Left, but his actual views about evolution and human beings would probably get him arrested for “hate speech” in much of Western Europe.

Shockingly for the modern Left, Darwin also accepted racial differences:
“There is, however, no doubt that the various races, when carefully compared and measured, differ much from each other,—as in the texture of the hair, the relative proportions of all parts of the body, the capacity of the lungs, the form and capacity of the skull, and even in the convolutions of the brain. But it would be an endless task to specify the numerous points of difference. The races differ also in constitution, in acclimatization and in liability to certain diseases. Their mental characteristics are likewise very distinct; chiefly as it would appear in their emotional, but partly in their intellectual faculties. Every one who has had the opportunity of comparison, must have been struck with the contrast between the taciturn, even morose, aborigines of S. America and the light-hearted, talkative negroes. There is a nearly similar contrast between the Malays and the Papuans, who live under the same physical conditions, and are separated from each other only by a narrow space of sea.” (Darwin 1874: 163–164).

“The variability or diversity of the mental faculties in men of the same race, not to mention the greater differences between the men of distinct races, is so notorious that not a word need here be said. So it is with the lower animals. All who have had charge of menageries admit this fact, and we see it plainly in our dogs and other domestic animals.” (Darwin 1874: 26).
So Darwin clearly did believe in racial differences, although he tended to prefer the term “sub-species” to race (Darwin 1874: 176).

How long will it be before the insane Cultural Left demands that we ban Darwin’s works, tear down Darwin’s statues, or ban the teaching of evolution?

For Darwin, quite clearly, thought that there were general, or average, differences in certain cognitive, mental and behavioural traits between the races. So did Thomas Henry Huxley, Darwin’s friend and scientific colleague, who was a famous 19th century British Liberal (see Huxley 1895 [1865]: 66–67).

Contrary to the modern blank-slate Left, these views were normal up until about the 1950s, and even normal and widely believed on the Left itself (though, of course, many people also did have some absurd and false ideas on the issue).

For example, Karl Marx and Friedrich Engels believed in the reality of races (even if they seem to have been confused and slipped into Lamarckian evolutionary ideas at times), and so did many of the Marxists who led the Socialist Party of America such as Ernest Untermann and Victor L. Berger. And even the radical leftist anarchists Pierre-Joseph Proudhon (Proudhon 1869: 221–222) and Mikhail Bakunin noted racial differences (see Bakunin’s book God and the State: “The idealists, all those who believe in the immateriality and immortality of the human soul, must be excessively embarrassed by the difference in intelligence existing between races, peoples, and individuals” [Bakunin 1910: 46, n.]).

Bertrand Russell – who was one of the most radical (but non-Marxist) Leftists/Liberals of his day – thought that racial differences existed (Russell 1929: 266).

John Maynard Keynes, too, also accepted race was real (Toye 2000: 151).

In one respect, Libertarians like Thomas Sowell and Murray Rothbard – though their economics and general political beliefs are flawed and charlatanry – were correct when they noted that much of the early 20th-century progressive Left did in fact endorse the view that race was real and racial differences were real (see here and here).

So were the 20th-century progressive Leftists correct when they thought that race was real and some evolutionary racial differences in average mental traits were real?

The answer is: yes, they probably were, and now the genetic evidence is accumulating rapidly from science, even if there is a desperate attempt to suppress it:
(1) For objective classifications of races based on differences in “tandem repeats” or DNA repeats, see:

Rosenberg, N. A., J. K. Pritchard, J. L. Weber, H. M. Cann, K. K. Kidd, L. A. Zhivotovsky, and M. W. Feldman. 2002. “Genetic Structure of Human Populations,” Science 298: 2381–2385.

(2) For classification of races based on Single Nucleotide Polymorphism (SNPs), see:

Li, J. Z., Absher, D. M., Tang, H., Southwick, A. M., Casto, A. M., Ramachandran, S., Cann, H. M., Barsh, G. S., Feldman, M., Cavalli-Sforza, L. L., and Myers, R. M. 2008. “Worldwide Human Relationships inferred from Genome-Wide Patterns of Variation,” Science 319.5866: 1100–1104.

(3) Admission of the existence of race by a leading geneticist (but with the absurd, dishonest and desperate lie that it is still just a “social construct”):
David Reich, “How Genetics is Changing Our Understanding of ‘Race’,” March 23, 2018,

(4) For the shocking suppression of genetic evidence of racial differences in IQ by the academic world:

Lance Welton, “‘This Will Not Stand’: Academic Establishment Suppresses Italian Anthropologist’s Proof That Race IQ Differences Are Genetic—For Now,” May 5, 2018,
When the Leftist media is increasingly faced with such evidence of the objective reality of race, there are horrified cries that this “vindicates” the far right.

In reality, it can just as easily be seen as a vindication of early 20th-century progressive Leftists and Liberals, who accepted race realism. It could even be seen as a vindication of early American race-realist Marxists like Ernest Untermann and Victor L. Berger.

And the trouble is this: at some point, the modern Left will be faced with an overwhelming mountain of genetic evidence about the objective reality of race, and the only people honestly talking about it will be libertarians like Stefan Molyneux (who holds crackpot economic ideas) or the far right (some of whom support outright authoritarianism). As on many issues (like its irrational opposition immigration restriction), the modern Left will be utterly humiliated and defeated.

At some point, the Left will have to rediscover its own earlier intellectuals and intellectual tradition that accepted the reality of race, and think up humane and civilised new ideas about the policy implications of such truths.

Bakunin, Mikhail Aleksandrovich. 1910 [1882]. God and the State. Freedom Press, London.

Darwin, Charles. 1874. The Descent of Man and Selection in Relation to Sex (2nd edn.). Merrill and Baker, New York and London.

Huxley, Thomas H. 1895 [1865]. “Emancipation–Black and White,” in Thomas H. Huxley, Science and Education: Essays. MacMillan and Co., London. 66–75.

Proudhon, Pierre-Joseph. 1869. La guerre et la paix (new edn.). A. Lacroix, Verboeckhoen & Cie. Paris and Brussels.

Reich, David. 2018. Who We Are and How We Got Here: Ancient DNA and the New Science of the Human Past. Oxford University Press, Oxford.

Russell, Bertrand. 1929. Marriage and Morals. Liveright Publishing Corporation, New York.

Toye, John. 2000. Keynes on Population. Oxford University Press, Oxford.

Wade, Nicholas. 2014. A Troublesome Inheritance: Genes, Race and Human History. The Penguin Press, New York.

Sunday, August 5, 2018

Dinesh D’Souza as a Charlatan

Could there be anything more absurd than the spectacle of Dinesh D’Souza?

His new movie is called Death of a Nation: Can We Save America a Second Time?.

Some videos below give us a summary of his ideas:

The fundamental thesis of Dinesh D’Souza is, in essence, that the Democratic Party and American progressive Liberalism are linked to Nazism and are, by implication, on a moral level with Nazism. Furthermore, D’Souza thinks that Nazism (or German National Socialism) was a fundamentally left-wing ideology.

D’Souza’s narrative and his “arguments” plumb the depths of idiocy.

Dinesh D’Souza is really nothing more than a free market Classical Liberal, as are much of the so-called American “Conservatives” who represent the pre-Trump GOP. D’Souza’s ideology stems from Classical liberalism, which was a 19th-century left-wing movement.

If anything, one could make a much stronger case that Dinesh D’Souza and his free market, individualist “Conservatives” are really just a modern manifestation of 19th-century Leftism, and, furthermore, they are infected with fundamental Cultural Leftist ideas of the late 20th century, e.g., that ethno-nationalism is evil, and that genetic and biological factors that cause individual and group differences do not exist.

First of all, let us take some fundamental points that Dinesh D’Souza never addresses. He strongly implies that the Democrat Party of the early 20th century was somehow unique and anomalous within the American political spectrum for supporting racial segregation and being a kind of “white nationalist” movement.

But what kind of nation did the American founding fathers actually envisage?

We need look no further than United States Naturalization Law of March 26, 1790, passed by the first Congress of the United States:
“Be it enacted by the Senate and House of Representatives of the United States of America, in Congress assembled, That any Alien being a free white person, who shall have resided within the limits and under the jurisdiction of the United States for the term of two years, may be admitted to become a citizen thereof on application to any common law Court of record in any one of the States wherein he shall have resided for the term of one year at least, and making proof to the satisfaction of such Court that he is a person of good character, and taking the oath or affirmation prescribed by law to support the Constitution of the United States, which Oath or Affirmation such Court shall administer, and the Clerk of such Court shall record such Application, and the proceedings thereon; and thereupon such person shall be considered as a Citizen of the United States. And the children of such person so naturalized, dwelling within the United States, being under the age of twenty one years at the time of such naturalization, shall also be considered as citizens of the United States. And the children of citizens of the United States that may be born beyond Sea, or out of the limits of the United States, shall be considered as natural born Citizens: Provided, that the right of citizenship shall not descend to persons whose fathers have never been resident in the United States: Provided also, that no person heretofore proscribed by any States, shall be admitted a citizen as aforesaid, except by an Act of the Legislature of the State in which such person was proscribed.”
As even the basic discussion of the 1790 United States Naturalization Law here points out, this legislation excluded “American Indians, indentured servants, slaves, free blacks, and Asians” from US citizenship. So the founding fathers of America envisaged the United States as a colony for European people, and if the Democrats of the early 20th century were “Nazis” or “white nationalists” than so were the American founding fathers. Obviously, the founding fathers of America would never have even given Dinesh D’Souza citizenship.

Furthermore, D’Souza’s account of the US Immigration Act of 1924 is also laughable. The Immigration Act of 1924 essentially limited immigration to Europeans, and excluded Africans, Arabs and Asians, and was quite clearly designed to preserve the white European majority in America. This was signed into law by the Republican president Calvin Coolidge (president from 2 August 1923 to 4 March 1929) and passed in both houses by a Republican-controlled 68th United States Congress (4 March 1923–4 March 1925). D’Souza lamely falls to mention this and pretends that it only passed because of “progressive Republicans” (who mysteriously were not real Republicans at all).

Secondly, Dinesh D’Souza compares Donald Trump with Abraham Lincoln, but what did Abraham Lincoln – the first Republican party president – actually think about African Americans?

On 14 August, 1862, Abraham Lincoln received a deputation of African Americans at the White House. This is what Abraham Lincoln said:
“… President [Lincoln], after a few preliminary observations, informed them that a sum of money had been appropriated by Congress, and placed at his disposition for the purpose of aiding the colonization in some country of the people, or a portion of them, of African descent, thereby making it his duty, as it had for a long time been his inclination, to favor that cause; and why, he asked, should the people of your race be colonized, and where? Why should they leave this country? This is, perhaps, the first question for proper consideration. You and we are different races. We have between us a broader difference than exists between almost any other two races. Whether it is right or wrong I need not discuss, but this physical difference is a great disadvantage to us both, as I think your race suffer very greatly, many of them by living among us, while ours suffer from your presence. In a word we suffer on each side. If this is admitted, it affords a reason at least why we should be separated. You here are freemen I suppose.

A VOICE: Yes, sir.

The President – Perhaps you have long been free, or all your lives. Your race are suffering, in my judgment, the greatest wrong inflicted on any people. But even when you cease to be slaves, you are yet far removed from being placed on an equality with the white race. You are cut off from many of the advantages which the other race enjoy. The aspiration of men is to enjoy equality with the best when free, but on this broad continent, not a single man of your race is made the equal of a single man of ours. Go where you are treated the best, and the ban is still upon you.

I do not propose to discuss this, but to present it as a fact with which we have to deal. I cannot alter it if I would. It is a fact, about which we all think and feel alike, I and you. We look to our condition, owing to the existence of the two races on this continent. I need not recount to you the effects upon white men, growing out of the institution of Slavery. I believe in its general evil effects on the white race. See our present condition – the country engaged in war! – our white men cutting one another's throats, none knowing how far it will extend; and then consider what we know to be the truth. But for your race among us there could not be war, although many men engaged on either side do not care for you one way or the other. Nevertheless, I repeat, without the institution of Slavery and the colored race as a basis, the war could not have an existence.

It is better for us both, therefore, to be separated. I know that there are free men among you, who even if they could better their condition are not as much inclined to go out of the country as those, who being slaves could obtain their freedom on this condition. I suppose one of the principal difficulties in the way of colonization is that the free colored man cannot see that his comfort would be advanced by it. You may believe you can live in Washington or elsewhere in the United States the remainder of your life [as easily], perhaps more so than you can in any foreign country, and hence you may come to the conclusion that you have nothing to do with the idea of going to a foreign country. This is (I speak in no unkind sense) an extremely selfish view of the case.

But you ought to do something to help those who are not so fortunate as yourselves. There is an unwillingness on the part of our people, harsh as it may be, for you free colored people to remain with us. Now, if you could give a start to white people, you would open a wide door for many to be made free. If we deal with those who are not free at the beginning, and whose intellects are clouded by Slavery, we have very poor materials to start with. If intelligent colored men, such as are before me, would move in this matter, much might be accomplished. It is exceedingly important that we have men at the beginning capable of thinking as white men, and not those who have been systematically oppressed.

There is much to encourage you. For the sake of your race you should sacrifice something of your present comfort for the purpose of being as grand in that respect as the white people. ….

The colony of Liberia has been in existence a long time. In a certain sense it is a success. The old President of Liberia, Roberts, has just been with me – the first time I ever saw him. He says they have within the bounds of that colony between 300,000 and 400,000 people, or more than in some of our old States, such as Rhode Island or Delaware, or in some of our newer States, and less than in some of our larger ones. They are not all American colonists, or their descendants. Something less than 12,000 have been sent thither from this country. Many of the original settlers have died, yet, like people elsewhere, their offspring outnumber those deceased.

The question is if the colored people are persuaded to go anywhere, why not there? One reason for an unwillingness to do so is that some of you would rather remain within reach of the country of your nativity. I do not know how much attachment you may have toward our race. It does not strike me that you have the greatest reason to love them. But still you are attached to them at all events.

The place I am thinking about having for a colony is in Central America. It is nearer to us than Liberia – not much more than one-fourth as far as Liberia, and within seven days' run by steamers. Unlike Liberia it is on a great line of travel – it is a highway. The country is a very excellent one for any people, and with great natural resources and advantages, and especially because of the similarity of climate with your native land – thus being suited to your physical condition.

The particular place I have in view is to be a great highway from the Atlantic or Caribbean Sea to the Pacific Ocean, and this particular place has all the advantages for a colony. On both sides there are harbors among the finest in the world. Again, there is evidence of very rich coal mines. A certain amount of coal is valuable in any country, and there may be more than enough for the wants of the country. Why I attach so much importance to coal is, it will afford an opportunity to the inhabitants for immediate employment till they get ready to settle permanently in their homes.

If you take colonists where there is no good landing, there is a bad show; and so where there is nothing to cultivate, and of which to make a farm. But if something is started so that you can get your daily bread as soon as you reach there, it is a great advantage. Coal land is the best thing I know of with which to commence an enterprise.

To return, you have been talked to upon this subject, and told that a speculation is intended by gentlemen, who have an interest in the country, including the coal mines. We have been mistaken all our lives if we do not know whites as well as blacks look to their self-interest. Unless among those deficient of intellect everybody you trade with makes something. You meet with these things here as elsewhere. ….

I shall, if I get a sufficient number of you engaged, have provisions made that you shall not be wronged. If you will engage in the enterprise I will spend some of the money intrusted to me. I am not sure you will succeed. The Government may lose the money, but we cannot succeed unless we try; but we think, with care, we can succeed.

The political affairs in Central America are not in quite as satisfactory condition as I wish. There are contending factions in that quarter; but it is true all the factions are agreed alike on the subject of colonization, and want it, and are more generous than we are here. To your colored race they have no objection. Besides, I would endeavor to have you made equals, and have the best assurance that you should be the equals of the best.

The practical thing I want to ascertain is whether I can get a number of able-bodied men, with their wives and children, who are willing to go, when I present evidence of encouragement and protection. Could I get a hundred tolerably intelligent men, with their wives and children, to ‘cut their own fodder,’' so to speak? Can I have fifty? If I could find twenty-five able-bodied men, with a mixture of women and children, good things in the family relation, I think I could make a successful commencement.

I want you to let me know whether this can be done or not. This is the practical part of my wish to see you.”;view=fulltext
So, in other words, Abraham Lincoln was what would now be called a race realist and an ethno-nationalist, who thought that African Americans should be given their own nation in Africa or Central America, and that they should all immigrate to that new home. Lincoln favoured racial separation, much like the Democrats of the early 20th century, except that Lincoln was more extreme and wished to see African Americans immigrate overseas.

And then we have the bizarre attempt to blame the 19th century American colonisation of the West and dispossession of Indians on the Democratic Party (which supposedly inspired Hitler’s colonial ambitions in the East), even when the Republican administrations were also deeply involved in this project: Republican Presidents ruled America between 1869–1885, and presided over the Comanche Wars (1867–1875), the Battle of the Little Bighorn (1876), the Nez Perce War (1877), the Great Sioux War of 1876–1877, Bannock’s War (1878), the White River War (1879) and Geronimo’s War (1881–1886), all of which dispossessed Native Americans.

Naturally, Dinesh D’Souza cannot discuss any of these points. There are also numerous other dishonest and simply hare-brained narratives that D’Souza has, such as the idea that Nazis were “left-wing.” This usually hinges on the idea that the German National Socialists had some left-wing economic ideas. This is true, but it is a complete myth that Conservatives cannot support left-wing economics. For example, the American Republican president Eisenhower once said: “Anyone who questions the New Deal doesn’t belong in the political system.”

In fact, most mainstream Conservatives after 1945 accepted the Keynesian Social democratic consensus right up until the early 1970s. And even from the 19th century until today, Conservatism has had its anti-capitalist factions, though their influence has waxed and waned.

By D’Souza’s retarded logic, all such Conservatives were really Leftists.

D’Souza also argues that the Nazis took some of their ideas from progressive American Democrats, like eugenics.

Now the essence of German National Socialism was as follows:
(1) an authoritarian ideology hostile to democracy and Classical Liberalism;

(2) extreme hostility to Communism/Marxism, German Social Democracy, and all other left-wing political ideologies and anti-Semitism;

(3) an extreme German ethno-nationalism and militarism, which extended to the idea of colonising the lands of other Europeans to the east of Germany;

(4) a blend of social conservatism with certain other ideas which were often widely held in the early 20th century like racial theories and eugenics;

(5) an animus towards free market capitalism but not to the extent of abolishing private property or nationalising all industries.
American progressive Democrats did not hold (1), (2), or (3). At most, progressive Democrats supported (5) and of course many would have endorsed race realism and eugenics, which were widely believed all over the political spectrum by the 1920s or 1930s.

In particular, eugenics had prominent Conservative supporters in America and Europe, such as Reginald Ruggles Gates, Madison Grant and Lothrop Stoddard. Indeed, the First International Eugenics Congress (held at the University of London in 1912) had the former Conservative Prime Minister of Britain Arthur Balfour deliver its inaugural address – and in the audience was none other than Winston Churchill, who was at that time a Liberal and First Lord of the Admiralty.

If anything, the eugenics movement of the early 20th century was a bipartisan movement, which included Conservatives, Liberals, socialists, and even some Marxists.

Notably, the Americans Madison Grant and Lothrop Stoddard were both Republicans, and Dinesh D’Souza is forced to invoke the “No True Scotsman” fallacy in his book Death of a Nation and pretend that they were RINOs (Republicans in Name Only).

So the idea that eugenics was somehow only an early 20th century progressive idea is ridiculously false. In reality, eugenic ideas were widely held by diverse figures all over the political spectrum, including Conservatives.

In fact, free market conservative supporters of eugenics used Social Darwinian ideas to attack Leftist proposals for a welfare state and free health care, because they believed such policies would be dysgenic. Paradoxically, it was the die-hard Classical Liberal free market individualists who were fanatical supports of Social Darwinism, the very same people who are arguably the intellectual forefathers of Dinesh D’Souza’s own dumb free market, individualist “Conservatism.”

Monday, July 30, 2018

Robert P. Murphy on Rothbardians versus Free Bankers

Robert P. Murphy recently gave a talk on fractional reserve banking and free banking:

Listening to this video really brings home what a lame cult of losers American libertarians actually are.

Murphy repeats the same tired lies about fractional reserve banking we have all heard before: e.g., that a demand deposit involves two entities (the bank and depositor) owning the same money (when this is a blatant falsehood), and the fake legal history of fractional reserve banking peddled by Rothbard and Huerta de Soto.

A bank is, by nature, an institution that borrows money from “depositors” (a misleading word) by means of the mutuum contract, so that the bank becomes the legal owner of all money “deposited.” The bank client legally forfeits all property rights in the money. In return, the bank customer becomes a creditor to the bank and receives a promise to repay the debt on demand (or whatever specific terms are used): in other words, the bank client simply receives an IOU from the bank. There is nothing fraudulent about this relationship.

The mutuum contract goes back to the ancient Roman law and banking practice, and was the basis of Western banking.

The Rothbardian charlatans failed to understand the nature of the mutuum contract and have falsified the history of fractional reserve banking (see here, here, here, here, here, here).

By creating 100% reserve banks or warehouses, Austrians like Murphy would create an inherently deflationary economy that would tank private sector investment, and cripple the endogenous money system on which capitalism relies.

On the economic consequences of fractional reserve banking, the real problem is poorly regulated financial systems that can blow asset bubbles and create excessive private debt used for speculative purposes. The solution to this is rigorous financial regulation, not abolishing fractional reserve banking.

The few decent points Murphy makes come at the end, when he points out that the claim of free bankers that Canada and Scotland had stable free banking systems is not credible. Worse still, free bankers fail to look at Australia, where free banking was a disaster.

As for free banking in Canada, this was the reality of Canada’s pre-1935 bank system:
(1) the “Canadian Bank Act of 1871” regulated banks and prohibited banks from lending on real estate, a sensible regulatory measure that is hardly in line with free banking;

(2) in 1907, the Canadian government lent $5 million in Dominion notes to the private sector banks to end a credit squeeze that threatened the agricultural sector and wider economy;

(3) the Finance Act of 1914 permitted Dominion banks to borrow notes directly from the Canadian Department of Finance with no gold-reserve requirement;

(4) the consequences of (3) were that from 1914 onwards Canada had a lender of last resort in the form of government-issued money;

(5) in 1924, the Dominion and Imperial Banks experienced runs and turned not just to other banks, but to the Department of Finance for liquidity to avert a crisis.
One can hardly speak of a free banking system when Canada had a de facto government lender of last resort from 1914.

In response to George Selgin’s comment below, there is a straightforward response: in order to test whether any particular pre-1933 – or relatively free market – banking system was better than the system I advocate, you need to compare the latter with the period from c. 1945 to the early 1970s, when the finance sector in the Western world was (generally) subject to effective financial regulation. In this period, there were hardly any financial crises, serious asset bubbles largely absent, and the banking sector much more stable than the more laissez-faire periods that preceded it and the Neoliberal era that followed.

I could post all sorts of data here, but let us just look at this graph:

This speaks for itself.

Further Reading
Here are my posts on fractional reserve banking refuting the Rothbardian nonsense below:
“Hayek’s Original View of Fractional Reserve Banking,” February 29, 2012.

“Fractional Reserve Banking, Option Clauses, and Government,” January 31, 2012.

“Are the Public Ignorant of the Nature of Fractional Reserve Banking?,” December 17, 2011.

“Why is the Fractional Reserve Account a Mutuum, not a Bailment?,” December 17, 2011.

“Callable Option Loans and Fractional Reserve Accounts,” December 16, 2011.

“Future Goods and Fractional Reserve Banking,” December 15, 2011.

“Rothbard on the Bill of Exchange,” December 11, 2011.

“Hoppe on Fractional Reserve Banking: A Critique,” December 11, 2011.

“The Monetary Production Economy and Fiduciary Media,” December 11, 2011

“Fractional Reserve Banking: An Evil?,” June 26, 2010.

“The Romans and Fractional Reserve Banking,” February 23, 2011.

“Gene Callahan on Fractional Reserve Banking,” February 18, 2011.

“Lawrence H. White refutes Huerta de Soto on Fractional Reserve Banking,” February 22, 2011.

“Selgin on Fractional Reserve Banking,” June 1, 2011.

“Schumpeter on Fractional Reserve Banking,” June 12, 2011.

“If Fractional Reserve Banking is Fraudulent, Why isn’t the Insurance Industry Fraud?,” September 29, 2011.

“The Mutuum Contract in Anglo-American Law,” September 30, 2011.

“Rothbard Mangles the Legal History of Fractional Reserve Banking,” October 1, 2011.

“More Historical Evidence on the Mutuum Contract,” October 1, 2011.

“What British Law Says about the Mutuum Contract,” October 2, 2011.

“If Fractional Reserve Banking is Voluntary, Where is the Fraud?,” October 3, 2011.

“Huerta de Soto on the Mutuum Contract: A Critique,” August 11, 2012.

“A Simple Question for Opponents of Fractional Reserve Banking,” August 17, 2012.

“Chapter 1 of Huerta de Soto’s Money, Bank Credit and Economic Cycles: A Critique,” August 31, 2012.

“Huerta de Soto on Justinian’s Digest,” September 1, 2012.

“Huerta de Soto on Banking in Ancient Rome: A Critique,” September 2, 2012.

“Bibliography on the Irregular Deposit (depositum irregulare) in Roman Law,” September 6, 2012.

“Rothbard on ‘Deposit’ Banking: A Critique,” July 22, 2014.

“Carr versus Carr (1811) and the History of Fractional Reserve Banking,” July 23, 2014.

Mutuum versus Bailment in Banking,” July 24, 2014.

“Foley versus Hill and the History of Fractional Reserve Banking,” July 29, 2014.

“A Critique of Murray Rothbard on the Origins and Legal Basis of Fractional Reserve Banking,” July 30, 2014.

“Coggs v. Bernard and the History of English Bailment Law,” July 31, 2014.

“The Mutuum Contract in Henry de Bracton and English Law,” August 1, 2014.

“Fractional Reserve Banking is a Fundamental Part of Capitalism,” August 8, 2014.

“A Critique of Rothbard on the History of English Bailment Law,” August 11, 2014.

“The Banking Contract in 19th Century US Law,” August 16, 2014.

“Rothbard on how Fractional Reserve Banking would be illegal in Anarcho-Capitalism,” March 2, 2016.

“The Filthy Anti-Capitalist Mentality – of Austrian Economics,” October 17, 2015.

Wednesday, June 27, 2018

Friday, June 8, 2018

Steve Keen on Can we avoid Another Financial Crisis?

Steve Keen gives a talk below on 22nd March, 2018 at the Bournemouth Labour Party members’ meeting on “Can we avoid Another Financial Crisis?”:

Saturday, May 5, 2018

Steve Keen on Banking and the Money Multiplier

Steve Keen gives a talk here on banking and the money multiplier (published on 2 May 2018):

Thursday, April 26, 2018

Steve Keen on Alternative Foundations for Macroeconomics

Steve Keen gives a talk here on alternative (non-Neoclassical) foundations for macroeconomics:

Saturday, April 21, 2018

Steve Keen on Endogenous Money and a Tribute to Basil Moore

Steve Keen gives a talk in March 2018 here on endogenous money as tribute to Basil Moore:

Friday, April 13, 2018

No War on Syria!

Stephen Cohen points out how dangerous the current drive to military action in Syria is:

Fortunately, there are signs that, if any US missile strikes happen, it will essentially be a PR stunt with the Russians being warned in advance of the targets, as Russia Insider has reported. If true, the real danger is that mistakes can be made and things could get out of control quickly, especially if wider Middle East tension erupts and military intervention is taken by Israel, Iran or Hezbollah in Lebanon, which could ignite a regional war. We are approaching the moment of truth.

Friday, March 30, 2018

The Witch Hunt against Sam Harris

Back on April 22, 2017, Sam Harris had Charles Murray on his podcast.

You can hear it here:

Since then, Sam Harris has been hysterically attacked by all the usual suspects: blank slate Liberal journalists, Cultural Leftists, Marxists and so on. The latest attack is here.

But most of these attacks are pure lies, fraud and charlatanry. Rarely do the critics of Sam Harris have anything of substance in their criticisms when it comes to the actual science.

There are certainly a few mistakes that Sam Harris made: for example, he claimed nothing much can be done to increase the IQ of children (at 2.14 in the video above). In fact, the genetic component of children’s IQ seems to be less strong than in adulthood, and so childhood IQ is more malleable, and you can make IQ gains in childhood years. But, unfortunately, it remains true, as Charles Murray has pointed out, that the genetic component of IQ rises as a child becomes an adult, so IQ gains in childhood are generally lost as the person becomes an adult and the genetic determination of IQ rises to something like 75%.

But most of the major contentions of Charles Murray, which are actually just the findings of modern psychometrics, have never been refuted. These include the following:
(1) Culturally unbiased, fair IQ tests measure a person’s general faculty of intelligence, or what is now called Spearman’s g (general intelligence), which is clearly a unified, single cognitive trait of human beings. IQ has extraordinary predictive power in predicting school and academic achievement, socio-economic status, wealth, job productivity, and success in life.

(2) the consensus of psychometrics is that differences in individual variance of IQ between people is about 0.75 heritable. Even the liberal/leftist American Psychological Association (APA) admitted this in the 1990s and accepted the 0.75 figure (see Neisser et al. 1996: 96). Worse still for Leftists, even the democratic socialist James R. Flynn (after whom the “Flynn Effect” is named) – the leading environmentalist on gaps in IQ between population groups – himself accepts that current evidence shows that the heritability of IQ variance between adults is probably about 0.75 (Dickens and Flynn 2001: 346). Very good evidence for this comes from twin studies (especially genetic twins adopted and separated at birth) and adoption studies (Plomin and Petrill 1997; Bouchard 2009 and 1998), and increasingly genetic science. The particularly strong evidence is that siblings (either fraternal or genetic) adopted at birth or infancy will have IQs strongly correlated with their biological parents, while a correlation with their adopted parents is either very low or almost zero (Petrill and Deater-Deckard 2004; Hunt 2011: 230–231; Haier 2017: 47).

(3) Moreover, the heritability of IQ rises with age, so that by the time one is an adult perhaps as much as 80% of IQ is heritable (Plomin and Spinath 2004; Plomin and Deary 2015).

(4) There are real differences between the IQs of men and women. Men and women have a different distribution of IQs when plotted on a bell curve graph: the IQ scores of women tend to cluster around the average (with less distribution in upper and lower ranges), while male IQs tend to be distributed less around the average and more in the upper and lower ranges as compared with the IQ distribution of women (see Hedges and Nowell 1995; Lubs 1999; Roberts 1945; Deary et al. 2007). There may well be a small difference between the average IQ of men as compared with that of women (Lubs 1999; Johnson and Bouchard 2007; Nyborg 2005). Men appear to have a slightly higher average IQ, with about a 3–5 point advantage over women. By examining the sub-tests of IQ tests, we have discovered that – in terms of sub-tests and specific cognitive abilities – men and women also differ. Women tend, on average, to be much better at verbal abilities and language, but men tend on average to outperform women on numerical/mathematical and spatial cognitive abilities (Neisser et al. 1996; Wechsler 1958: 144–149; Lubs 1999; Johnson and Bouchard 2007; Johnson et al. 2008; Halpern et al. 2007).

(5) The average IQs of different human population groups who have been subject to divergent evolution in different regions as measured by modern psychometrics is different. You can see the data as organised by region and by nation here. The average IQ for European people is about 100. We can see the average IQ of population groups as follows:
(1) Ashkenazim | 107
(2) East Asians | 105
(3) white Europeans | 100
(4) Inuit-Eskimos | 91
(5) South East Asians | 87
(6) Native American Indians | 87
(7) South Asians & North Africans | 84
(8) Sub-Saharan Africans | 82.
Notably, the most recent metastudy of Wicherts et al. (2010) finds that the average IQ of sub-Saharan Africans is just 82.

It would appear that these differences in average IQ between populations may well have an evolutionary, genetic and environmental explanation, not just a purely environmental one.
Everywhere we look modern science is exploding the religious cult of blank slateism and social constructivism, as can be seen here, here, and here. But blank slateism remains a fanatical quasi-religious article of faith for Liberals, Leftists and even some Conservatives.

For example, take the case of violence in human societies. Contrary to Leftist mythology, the finding of modern social science is actually that violence cannot be properly explained by poverty or unemployment (see Pinker 2011: 142; Zimring 2007: 63; Levitt 2004). If you think about it and look at the data, the “poverty” explanation is absurd: for example, women are subject in all societies to extreme poverty to varying degrees, but why is it the case that women commit hardly any violent crime at all?

Instead, it is very likely that the general phenomenon of violence is explained by biology: it is a combination of certain genetically-determined cognitive traits that causes a human being to be violent and aggressive. These traits are likely to be as follows:
(1) low impulse control + high time preference;

(2) a high genetically-determined predisposition to aggression and violence, driven either by high levels of testosterone, or the Warrior gene (MAOA-L) and other undiscovered polygenetic factors, and

(3) low IQ.
Notably, it is men who commit the overwhelming majority of violence, not women, and men who are most affected by these traits, which are distributed unevenly in the male population. But the combination of these traits in certain men is deadly: most violence will be from the minority of men who have the misfortune to have inherited these traits, and so most violence in society, fundamentally, has a biological explanation.

At any rate, the hysterical attacks on Sam Harris (or Charles Murray) over IQ and average IQ differences are absurd, because Sam Harris isn’t the source of the scientific data on IQ and genetics that are discrediting the blank slateist Left: the actual source is just mainstream science itself.

But Cultural Leftists and Liberals need a figure of hate to blame their own humiliation and intellectual failure on. That figure is Sam Harris at the moment.

Bouchard, Thomas J., Lykken, David T., McGue, Matthew, Segal, Nancy L. and Auke Tellegen. 1990. “Sources of Human Psychological Differences: The Minnesota Study of Twins Reared Apart,” Science n.s. 250.4978: 223–228.

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Haier, Richard J. 2017. The Neuroscience of Intelligence. Cambridge University Press, New York, NY.

Halpern, Diane F., Benbow, Camilla P., Geary, David C., Gur, Ruben C., Hyde, Janet Shibley and Morton Ann Gernsbacher. 2007. “The Science of Sex Differences in Science and Mathematics,” Psychological Science in the Public Interest 8.1: 1–51.

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Levitt, Steven D. 2004. “Understanding Why Crime Fell in the 1990s: Four Factors that Explain the Decline and Six that do Not,” Journal of Economic Perspectives 18.1: 163–190.

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Wicherts, Jelte M., Dolan, Conor V., and Han L. J. Van Der Maas. 2010. “A Systematic Literature Review of the Average IQ of Sub-Saharan Africans,” Intelligence 38.1: 1–20.

Zimring, Franklin E. 2007. The Great American Crime Decline. Oxford University Press, Oxford.

Tuesday, March 13, 2018

Clement Attlee on Immigration into Britain in 1948

As noted in this post here, even in 1948 low level immigration into the UK from its colonies caused a number of Labour Party MPs to oppose mass immigration, and they sent a letter to Clement Attlee, as follows:
“This country may become an open reception centre for immigrants not selected in respect to health, education, training, character, customs and above all, whether assimilation is possible or not.

The British people fortunately enjoy a profound unity without uniformity in their way of life, and are blest by the absence of a colour racial problem. An influx of coloured people domiciled here is likely to impair the harmony, strength and cohesion of our public and social life and to cause discord and unhappiness among all concerned.

In our opinion colonial governments are responsible for the welfare of their peoples and Britain is giving these governments great financial assistance to enable them to solve their population problems. We venture to suggest that the British Government should, like foreign countries, the dominions and even some of the colonies, by legislation if necessary, control immigration in the political, social, economic and fiscal interests of our people.

In our opinion such legislation or administrative action would be almost universally approved by our people.”

Letter to the Prime Minister, 22 June, 1948.
Prime Minister Clement Attlee replied to them, in the following letter:
Letter from Prime Minister Attlee to an MP about immigration to the UK, 5 July 1948 (HO 213/ 715)

10 Downing Street,
5th July, 1948

I am replying to the letter signed by yourself and ten other Members of Parliament on the 22nd of June about the West Indians who arrived in this country on that day on board the “Empire Windrush”. I note what you say, but I think it would be a great mistake to take the emigration of this Jamaican party to the United Kingdom too seriously.

It is traditional that British subjects, whether of Dominion or Colonial origin (and of whatever race or colour), should be freely admissible to the United Kingdom. That tradition is not, in my view, to be lightly discarded, particularly at this time when we are importing foreign labour in large numbers. It would be fiercely resented in the Colonies themselves, and it would be a great mistake to take any measure which would tend to weaken the goodwill and loyalty of the Colonies towards Great Britain. If our policy were to result in a great influx of undesirables, we might, however unwillingly, have to consider modifying it. But I should not be willing to consider that except on really compelling evidence, which I do not think exists at the present time. We have not yet got complete figures on the disposal of the party which arrived on the “Empire Windrush”, but it may be of interest to you to know that of the 236 who had nowhere to go and no immediate prospects of employment, and who were therefore temporarily accommodated at Clapham Shelter, 145 had actually been placed in employment by the 30th June and the number still resident in the Shelter at this last week-end was down to 76. It would therefore be a great mistake to regard these people as undesirable or unemployables. The majority of them are honest workers, who can make a genuine contribution to our labour difficulties at the present time.

You and your fellow signatories say that Colonial Governments are responsible for the welfare of their peoples. That is true, and all the Colonial Governments have their ten-year plans of development, assisted from the Colonial Development and Welfare Act of the United Kingdom. But they, like this country, are embarrassed by shortages of skilled directing personnel as well as to some extent the universal dollar shortage. These factors prevent them driving ahead as fast as they and we would wish.

It is difficult to prophesy whether events will repeat themselves, but I think it will be shown that too much importance – too much publicity too – has been attached to the present argosy of Jamaicans. Exceptionally favourable shipping terms were available to them, and there was a large proportion of them who had money in their pockets from ex-service gratuities. These circumstances are not likely to be repeated; yet even so not all the passages available were taken up.

It is too early yet to assess the impression made upon these immigrants as to their prospects in Great Britain and consequently the degree to which their experience may attract others to follow their example. Although it has been possible to find employment for quite a number of them, they may well find it very difficult to make adequate remittance to their dependants in Jamaica as well as maintaining themselves over here. On the whole, therefore, I doubt whether there is likely to be a similar large influx.

Despite Clement Attlee’s liberal policy, note carefully what he said here:
“It is traditional that British subjects, whether of Dominion or Colonial origin (and of whatever race or colour), should be freely admissible to the United Kingdom. That tradition is not, in my view, to be lightly discarded, particularly at this time when we are importing foreign labour in large numbers. It would be fiercely resented in the Colonies themselves, and it would be a great mistake to take any measure which would tend to weaken the goodwill and loyalty of the Colonies towards Great Britain. If our policy were to result in a great influx of undesirables, we might, however unwillingly, have to consider modifying it. But I should not be willing to consider that except on really compelling evidence, which I do not think exists at the present time.”
This strongly suggests to me that Clement Attlee never envisaged huge mass immigration levels from the Third World radically changing Britain’s demographics. In his time, he simply could never have imagined the insane levels of mass immigration that were inflicted on Britain from the 1990s onwards.

Rather, when Attlee said at the end of his letter he did not envisage another “large influx,” he was referring to just 492 Jamaican immigrants (who had arrived on the “Empire Windrush”), not even thousands, or hundreds of thousands.

Attlee regarded such Commonwealth immigration as likely to be small and not likely to cause serious problems precisely because it would remain small in numbers.

Moreover, the very fact that Attlee was – for perfectly good reasons – not in favour of a “great influx of [sc. immigrant] undesirables” into Britain would probably get him indicted for hate speech in today’s vicious, authoritarian and politically correct Europe.

Attlee would probably get expelled from the modern Labour Party, as would James Keir Hardie – the very founder of the Labour Party – given that Hardie famously opposed immigration into Scotland and remarked: “Dr. Johnson said God made Scotland for Scotchmen, and I would keep it so.”

If we could only resurrect Clement Attlee and show him Britain in 2018.

I think he would have closed the borders immediately and abandoned liberal immigration policies.

Friday, March 2, 2018

Academic Agent on “Six Key Lessons from Classical Economics”: A Critique

“The Academic Agent” has a video here on what he calls “Six Key Lessons from Classical Economics” (but actually from both Classical and Neoclassical economics):

Of course, not all of his points are wrong. And, since I assume various followers of “Academic Agent” will read this, let me state: I support Post Keynesian economics, a non-neoclassical version of Keynesianism.

But let us break this down as follows, point by point:

(1) “Wealth is not Money”.

This is true. Money is clearly not wealth (if we understand by “wealth” the good and services we consume). Money cannot be consumed in the way that commodities can. Libertarians are fond accusing Keynesians of saying that “money is wealth” or that “money creation is wealth creation.” But I can’t even recall seeing any left heterodox economists who even say this. The maxim that money is not everything – which many people on the Left are fond of saying – is even a subtle admission of the point.

One can readily agree that money is not wealth. Money is (1) a unit of account, (2) a medium of exchange and (3) a store of value.

So this point, while true, is largely a straw man, if it is supposed to be directed against Keynesian economists.

Further reading here:
Money: Is it Wealth?, October 12, 2010.

(2) “The Economy is not a Zero Sum Competition”.

While there are numerous economic activities in modern capitalism that are indeed not zero sum games, there clearly do exist economic activities which are precisely that.

Many speculative activities are like this: for example, activity on secondary financial asset markets where two (or more) parties engage in a trade in which one loses and the other gains. If I “bet” on a futures option or on a currency trade, I win or lose. This is a type of zero sum game.

It is notable that “The Academic Agent” doesn’t even bother to discuss financial markets, which are a fundamental part of modern capitalism.

Furthermore, if a person goes to a casino and gambles (which is clearly a form of capitalist exchange), he wins or loses. Either he comes out with more money than he went in with or less. This is a zero sum game. One could argue that, even if a person loses, he got in return the possible thrill of winning.

But this is a specious argument, because one can also point out that gambling addicts “lose” not only their money but also social well-being as they experience devastating negative personal and social consequences as the result of gambling problems. Such people are losers, and their gambling is a zero sum game.

Of course, plenty of other economic activities and transactions are not zero sum games, but the point remains.

(3) “International Trade is not a Zero Sum Game.

Once again, while a lot of international trade may well be mutually beneficial, not all trade is.

“The Academic Agent” relies on Ricardo’s Principle of Comparative Advantage, which claims that free trade is always mutually beneficial to nations engaging in it.

Ricardo’s argument takes the example of cloth and wine production in Portugal and England. Ricardo’s argument is simple: Portugal can produce more wine by concentrating on the production of wine (where it has a comparative advantage in needing less labour), and import cloth from England, even if (as in Ricardo’s example) it takes fewer labourers to produce cloth in Portugal than in England. The aggregate effect of England concentrating on producing cloth (where its comparative advantage lies in needing fewer workers or labour hours per unit) and Portugal producing wine is that a greater quantity of these commodities can be produced in total, and Portugal and England can exchange them to mutual benefit, instead of producing fewer goods in isolation and autarky.

But this argument contains all sort of unrealistic assumptions, and a fatal flaw in that Ricardo (like other Classical economists) assumed a pre-Marxist Labour Theory of Value.

First, the argument for unrestricted free trade by Ricardo’s principle of comparative advantage requires a number of stated or hidden fundamental assumptions to work properly, as follows:
(1) if a nation focusses on comparative advantage, domestic capital or factors of production like capital goods and skilled labour are not internationally mobile, and will be re-employed in the sector/sectors in which the country’s comparative advantage lies and within that nation;

(2) workers are fungible, and will be re-trained easily and moved to the new sectors where comparative advantage lies.

(3) it does not matter what you produce (e.g., you could produce pottery), as long as you do it in a way that gives you comparative advantage;

(4) technology is essentially unchanging and uniform; and

(5) there are no returns to scale in all sectors.
Assumption (1) doesn’t hold today and what happens is movement of capital under the principle of absolute advantage. By practising free trade a nation could experience capital flight and severe de-industrialisation. This results in a type of race to the bottom for industrialised countries that do not protect their industries. Movement of capital to a place where it has absolute advantage tends to cause de-industrialization in Western countries, as capital moves to nations with the lowest unit labour and factor costs, and higher wage countries experience falling wages, high unemployment and rising trade deficits.

Assumption (2) is plainly untrue.

Assumptions (3), (4) and (5) are utter nonsense.

In essence, Ricardo’s argument ignores the long-run benefits of industrialisation (a sector which gives increasing returns to scale), and manufacturing and industrialisation are the only real way to escape the grinding rural poverty of underdevelopment (unless of course you are lucky enough to be one of the minority of nations that has lucrative commodities like energy, or to be some tiny city-state that can get by on service industries).

In the long run, Portugal is better off producing cloth and other manufactured goods, not just wine. By adopting free trade, Portugal will reduce its future aggregate output and reduce its future per capita wealth.

Finally, there is also another devastating flaw in Ricardo’s argument: Ricardo actually uses a naive Labour Theory of Value assumption in its argument! (see also Reinert 2007: 301–304 for discussion). To be more precise, one of Ricardo’s crucial arguments in favour of free trade by comparative advantage is based on the idea that specialising in the production of some commodity is inherently better just because of the comparatively lower labour time involved in production. But this is false.

Even if it takes more labour hours and human labourers to produce manufactured goods, in the long run this is a key to becoming rich, whereas dead-end production of commodities with diminishing returns to scale, even if it requires fewer labour hours and labourers, is a path to Third World poverty.

Erik S. Reinert explains the flaw here:

So, quite clearly, international trade can be a zero sum game in that some nations engaging in free trade will lose, in the sense that they will have much lower future aggregate output and lower future per capita wealth.

It also follows that protectionism may be a better policy to create industries that gave increasing returns to scale (generally manufacturing) – rather than dead-end “diminishing returns to scale,” since this is what marks successful economic development. Once the new manufacturing sectors become internationally competitive, it is possible to reduce or eliminate tariffs. Note also that this policy is perfectly compatible with the fact the other types of tariffs (protecting inefficient rent seekers) or poorly targeted tariffs can be harmful to economic development.

Further reading here:
“Robert Murphy’s Debate on Free Trade,” August 7, 2016.

“The Cult of Free Trade in a Nutshell,” July 4, 2016.

“Ricardo’s Argument for Free Trade by Comparative Advantage,” July 5, 2016.

“Erik Reinert versus Ricardo on Free Trade,” July 5, 2016.

“Erik S. Reinert on Heterodox Development Economics,” July 9, 2016.

“Britain’s Protectionism against Indian Cotton Textiles,” July 12, 2016.

“Mises on the Ricardian Law of Association: The Flaws of Praxeology,” January 25, 2011.

(4) Say’s Law.

“The Academic Agent” seems to define Say’s Law in two senses, as follows:
(1) you must produce commodities before you consume them, and

(2) supply and demand are not independent of one another, but dependent in the sense that factor payments by producers or income to producers provide the source of demand for other goods.
No serious economist even disputes (1) or (2), and certainly not Keynesians, who would merely add that the creation of credit money within capitalism (for example, by banks) is a further source of demand for goods.

The trouble is that “The Academic Agent” then proceeds to garble Say’s law and what it actually says.

He also seems unaware that historians of economic thought like Thweatt (1979: 92–93) and Baumol (2003: 46) conclude that Jean-Baptiste Say’s role in formulating the law is grossly overrated, and that Adam Smith was in fact the real father of what is recognisably Say’s law in Classical economics, with the major work in developing the idea conducted by James Mill (1808), not Jean-Baptiste Say himself.

Furthermore, Keynes did not misrepresent what the 19th century economists had said about “Say’s Law.”

If we look at how Say’s law was formulated by the Classical economists, as defined by Thomas Sowell (1994: 39–41), it was as follows:
(1) The total factor payments received for producing a given volume (or value) of output are necessarily sufficient to purchase that volume (or value) of output [an idea in James Mill].

(2) There is no loss of purchasing power anywhere in the economy. People save only to the extent of their desire to invest and do not hold money beyond their transactions need during the current period [James Mill and Adam Smith].

(3) Investment is only an internal transfer, not a net reduction, of aggregate demand. The same amount that could have been spent by the thrifty consumer will be spent by the capitalists and/or the workers in the investment goods sector [John Stuart Mill].

(4) In real terms, supply equals demand ex ante [= “before the event”], since each individual produces only because of, and to the extent of, his demand for other goods. (Sometimes this doctrine was supported by demonstrating that supply equals demand ex post.) [James Mill.]

(5) A higher rate of savings will cause a higher rate of subsequent growth in aggregate output [James Mill and Adam Smith].

(6) Disequilibrium in the economy can exist only because the internal proportions of output differ from consumer’s preferred mix—not because output is excessive in the aggregate” [Say, Ricardo, Torrens, James Mill] (Sowell 1994: 39–41).
It is not clear that (1) is true, since most real-world prices include a profit mark-up and their aggregate value is much higher than the aggregate value of factor payments paid out in the production of the commodities.

Ideas (2), (3) and (6) are ridiculously false, since people can hoard money. In reality, people can hold money without purchasing goods and services. Furthermore, money can be spent on secondary financial or real asset markets where it is not used to purchase commodities.

This will lead to a situation where aggregate output is excessive, since some people do not wish to purchase commodities at all but save their money, hoard it, or spend it on financial assets.

In any real world economy, money from income streams from production, either to capitalists or workers, can become diverted to asset markets and may not be spent on goods. For this reason alone, Say’s law is a grossly unrealistic picture of market economies. Moreover, capitalists themselves have subjective expectations about the future and the future profitability of investment, and when their expectations are shattered, they will not necessarily invest out of retained earnings.

Lastly, as a matter of historical interest, eventually Jean-Baptiste Say actually repudiated the strong form of Say’s law that we call “Say’s Identity” in his letters to Malthus.

But “The Academic Agent” is blissfully unware of this.

More reading here:
“Say’s Law: An Overview and Bibliography,” April 13, 2013.

(5) “Every part of the economy is connected to the whole of economy… .”

While this is true, this does not vindicate Léon Walras’ Neoclassical economics, which “The Academic Agent” cites as his source for this insight, which has quite specific assertions about capitalist economies.

“The Academic Agent” argues against government intervention in the economy (by quoting a passage of Thomas Sowell) and tacitly invokes Walrasian Neoclassical theory and Austrian economic theory that envisage a capitalist economy as a self-correcting or self-equilibrating machine, which gravitates towards a long-run general equilibrium state.

But this is a profoundly mistaken view of market economies, and is wrong for the following reasons:
(1) both Austrian and Neoclassical theory ultimately hold that free markets have a tendency towards general equilibrium, and hence economic coordination by means of a flexible wage and price system, and a (supposed) coordinating loanable funds market that equates savings and investment. This is an empirically false view of market economies: it is essentially the product of Marginalists from the 1870s onwards who had physics envy and wanted to model a market economy like a self-equilibrating physical system.

(2) the core Neoclassical and Austrian model in (1) is false because:
(i) market systems are complex human systems subject to degrees of non-calculable probability and future uncertainty, so that market economies would not converge to general equilibrium states even if wages and prices were perfectly flexible. This makes human decision-making highly different to the fundamental model proposed by Neoclassical economics (even with their modern ad hoc models that invoke asymmetric information and bounded rationality), and, even if Austrians supposedly accept subjective expectations in decision making, they fail spectacularly to apply it properly in their economic theory. At the heart of this failure of both Neoclassical and Austrian theory is the mistaken ergodic axiom.

Investment is essentially driven by expectations which are highly subjective and even irrational, and come in waves of general optimism and pessimism;

(ii) the loanable funds model is a terrible model of aggregate investment (partly because the mythical natural rate of interest can’t be defined outside one commodity worlds) but very importantly because of (i) (which is the point that kills both Austrian economics and Neoclassical loanable funds models).

(iii) the price and wage system is highly inflexible, and even if it were flexible all sorts of factors prevent convergence to equilibrium states anyway (e.g., the reality of a non-ergodic future, subjective expectations, shifting liquidity preferences, failure of Say’s law, spending of money on non-reproducible financial assets, wage–price spirals, debt deflation, failure of the Pigou effect);
(3) the quantity theory of money is virtually useless, because of the following reasons:
(i) the modern money supply is endogenous because broad money creation is credit-driven (that is, created by private banks and its quantity is determined by the private demand for it), and, furthermore, a truly independent money supply function does not actually exist in an endogenous money world, since credit money comes into existence because it has been demanded, and so the broad money supply is not independent of money demand, but can be demand-led;

(ii) money can never be neutral, neither in the short run nor in the long run.

(iii) the direction of causation is generally from credit demand (via business loans to finance labour and other factor inputs) to money supply increases, contrary to the direction of causation as assumed in the quantity theory, and

(iv) changes in the general price level are a highly complex result of many factors, and not some simple function of money supply.
(4) the (non-Keynesian) Neoclassicals and Austrians have an obsessive-compulsive fixation with the supply-side, but this cripples their economic theory. In our capital-rich Western economies historically (and once we re-implement some kind of industrial policy now), what mostly constrains our prosperity is the demand-side, not the supply-side.
Once we realise there is no reliable or automatic tendency to general equilibrium in capitalist economies, then nearly all arguments against government interventions to promote economic activity collapse. The whole basis of Neoclassical and Austrian economics collapses.

For example, the assumption of “The Academic Agent” that a government program to build a bridge would automatically destroy private sector jobs, or harm the economy, does not follow at all, and certainly not if we have a recession or depression and vast resources are idle, and there is no private sector impetus for using such idle resources on capital investment or production.

Finally, George L. S. Shackle summed up the essence of Keynes’ theory as follows:
[sc. Keynes’s] ... theory of involuntary unemployment is perfectly simple and can be expressed in a paragraph, or in a sentence. If you express it in a sentence, you simply say that enterprise is the launching of resources upon a project whose outcome you do not, and cannot, know. The business of enterprise involves investment, the investing of large amounts of resources--huge sums of money--in things whose outcome you cannot be certain of, which could perfectly well turn into a disaster or a brilliant success.

The people who do this kind of investing are essentially gamblers and they can lose their nerve. And if they decide to withdraw from trade, they sweep their chips up from the table. If they decide it’s too risky, if their nerve gives out and they can’t bring themselves to go on investing, they cease to give employment and that is the explanation.
When business is at all unsettled--when there’s any sign at all of depression--or when there’s been a lot of investment and people have run out of ideas, or when their goods are not selling quite as fast as they have been, they no longer know what the marginal value product of an extra man is—it’s non-existent. How can you say that a certain number of men have a certain marginal productivity when you can’t know what the per unit value of the goods they would produce if you employed them would sell for?”
“An Interview with G.L.S. Shackle,” The Austrian Economics Newsletter, Spring 1983.
This is actually a splendid summing up of what Keynes’s theory is about, and why both Austrian and Neoclassical economics are nonsense.

More reading here:
“The Essence of Keynesianism is Investment,” December 8, 2012.

“Steve Keen, Debunking Economics, Chapter 6: Wages,” February 12, 2014.

“Steve Keen, Debunking Economics, Chapter 5: Theory of the Firm,” February 13, 2014.

“Kaldor on Economics without Equilibrium,” March 9, 2013.

“Kaldor on the Irrelevance of Equilibrium Economics,” May 15, 2013.

“Steve Keen on Consumer Theory,” March 14, 2014.

“What is Wrong with Neoclassical Economics?,” March 30, 2014.

“The Law of Demand in Neoclassical Economics,” June 1, 2013.

“What is the Epistemological Status of the Law of Demand?,” September 19, 2013.

“Steve Keen on the Law of Demand,” September 20, 2013.

“Price, Average Total Cost, Average Variable Cost and Marginal Cost,” November 28, 2013.

(6) “Marginal Utility”.

“The Academic Agent” ends with pointing out the “value” in the sense of desiring or evaluating commodities is subjective. This is true, but does not take you very far.

The law of diminishing subjective marginal utility states that, as a person consumes an additional unit of the same good (or a homogenous good), then the satisfaction or utility derived from the consumption of that good diminishes and continues to diminish with each additional good.

As a general empirical principle, it is true, but there are important exceptions, as can be seen here. But this general principle does not refute the case for government intervention in the economy.

Moreover, most prices in modern capitalist economies are not determined by the dynamics of supply and demand, but in reality are cost-based mark-up prices, which tend to be relatively inflexible downwards. Moreover, this is now the overwhelming conclusion of the Neoclassical empirical research literature itself, as can be seen here (with full citation of literature on price determination).

The relative downwards price rigidity in modern capitalism (largely an outgrowth of businesses and corporations themselves trying to avoid flexible price markets) also destroys the whole basis of the correction mechanism envisaged in Neoclassical and Austrian economics, since they think that product markets have a tendency to clear by highly flexible prices, when in reality this is confined to a minority of markets.

More reading here:
“The ‘Law’ of Diminishing Marginal Utility,” March 7, 2014

Mark-up Pricing in 21 Nations and the Eurozone: the Empirical Evidence.
Baumol, William J. 2003. “Retrospectives: Say’s Law,” in S. Kates (ed.), Two Hundred Years of Say’s Law: Essays on Economic Theory’s Most Controversial Principle. Edward Elgar Pub, Cheltenham and Northampton, Mass. 39–49.

Reinert, Erik S. 2007. How Rich Countries Got Rich, and Why Poor Countries Stay Poor. Carroll & Graf, New York.

Sowell, T. 1994. Classical Economics Reconsidered (2nd edn.). Princeton University Press, Princeton, N.J.

Thweatt, W. O. 1979. “Early Formulators of Say’s Law,” Quarterly Review of Economics and Business 19: 79–96.

Friday, February 23, 2018

The Catastrophic Failure of Multiculturalism

Explained in this interesting and concise video:

In reality, human beings evolved to have ethnic identity and ethnocentric cooperation. This is the real basis of socialism as a political or economic form of political organisation within a modern nation state.

Multiculturalism and multi-ethnic mass immigration will undermine and destroy a society that has a strong level of social and ethnic cohesion with democratic “socialism” in the non-Marxist sense (that is, a welfare state, generous social security, universal health care, and interventionist government policies to promote the common social and economic well-being of the community).

The modern left is too stupid and deranged to understand that (1) ethnic nationalism must be the basis of progressive liberalism, old-fashioned Social Democracy, or democratic socialism, and that (2) the Cult of Diversity is, ultimately, a death sentence for economic and social progressivism or socialism that many on the Left support.

Saturday, February 17, 2018

Opposition to Mass Immigration in the British Labour Party of 1948

In 1948 after World War II, Britain started to receive low-level immigration from its colonies. But – even within the British Labour party of that era – there were those who sensed that this could be the beginning of mass immigration on a scale likely to cause serious problems in Britain.

For example, the Prime Minister Clement Attlee was sent a letter on 22 June, 1948 signed by eleven Labour members of parliament who opposed mass immigration into Britain.

This letter said the following:
“This country may become an open reception centre for immigrants not selected in respect to health, education, training, character, customs and above all, whether assimilation is possible or not.

The British people fortunately enjoy a profound unity without uniformity in their way of life, and are blest by the absence of a colour racial problem. An influx of coloured people domiciled here is likely to impair the harmony, strength and cohesion of our public and social life and to cause discord and unhappiness among all concerned.

In our opinion colonial governments are responsible for the welfare of their peoples and Britain is giving these governments great financial assistance to enable them to solve their population problems. We venture to suggest that the British Government should, like foreign countries, the dominions and even some of the colonies, by legislation if necessary, control immigration in the political, social, economic and fiscal interests of our people.

In our opinion such legislation or administrative action would be almost universally approved by our people.”

Letter to the Prime Minister, 22 June, 1948.
The notion that Liberals and Leftists have always accepted open borders and mass immigration into the West is a lie.

In reality, concern about mass immigration on political, social, economic, and even demographic grounds was firmly part of the pre-1960s Left, and there has even been a strong tradition of support for severe immigration restriction on sectors of the Left too.

The eleven dissident Labour members of parliament in 1948 were also correct that the British people were strongly against mass immigration. Much later when Enoch Powell, a Tory, came out against mass immigration into Britain after his “Rivers of Blood” speech of 20 April, 1968, Powell received massive popular support not only from the middle class, but also from the British working class (see Lindop 1998), as can be seen in this documentary:

It is likely that Brexit too was to a great extent the result of working class hostility to mass immigration.

In short, the British public never voted for Third World mass immigration, and never desired it. Instead, it was a policy implemented from above by both Labour and Conservative governments who did not have a mandate for a policy that would have such far-reaching economic, social and demographic effects on Britain.

See my posts here:
“James Keir Hardie’s Views on Mass Immigration,” August 26, 2017.

“The 1908 Resolution against Mass Immigration by the Socialist Party of America,” August 4, 2017.

“The Mass Immigration Debate within the Socialist Party of America from 1910–1912, Part 1,” August 2, 2017.

“The Mass Immigration Debate within the Socialist Party of America from 1910–1912, Part 2,” August 3, 2017.

“Keynes’ Early Views on Population and Immigration,” April 1, 2017.

“Henry Sidgwick on Open Borders and the Free Movement of People,” April 5, 2017.

“The Old Left and Mass Immigration,” August 17, 2016.

“Ha-Joon Chang on Wage Determination in First World Nations,” July 6, 2016.

“Mass Immigration is the Last Fraud of Neoliberalism,” March 24, 2016.
Lindop, Fred. 1998. “Racism and the Working Class: Strikes in Support of Enoch Powell in 1968,” Labour History Review 66.1: 79–100.