Are you a statist?

Very few people consider themselves statists. But the reality is that the state--all over the world--has and continues to grow at an exponential rate.

(Anti)Statism is a sliding scale. Different issues have varying levels of importance. How do you stand? Are you a statist or are you an anti-statist?

Created by: Guapo

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What is the correct economic status of private property?
- Property is at the heart of most serious inequalities and oppressions in modern civilization. Only by regulation, transfer payments, redistribution of property, and common ownership can society arrive at fairness, justice, and human dignity for all.
- Property is a naturally arising relationship between human beings and material things. Property and enforceable property rights make possible economic calculation, a wider and more productive division of labor, and therefore increasing levels of prosperity. Indeed, civilization itself is inconceivable in absence of private property. Any encroachment on property results in loss of freedom and prosperity.
- Property is central to prosperity and economic growth. Accordingly, it is of the utmost importance that the state, or more abstractly the law, maintain and modify the bundle of property rights in such a way as to allocate transactions costs in such a way as to promote maximum growth and economic efficiency. Property does not arise naturally, but is the end product of the legal system.
- Property is an important component of our social system but its status as a "right" is contingent. It must be subject to regulation and modification for the general good. The state must intervene to prevent abuses of economic power, even at the cost of reducing traditional prerogatives of owners.
What is the reason for the interest rate, and should it be regulated?
- Interest payments compensate investors for their loss of liquidity when they sink cash into a business project or lend it out for a certain period; the interest rate is the price of liquidity. Interest is a monetary phenomenon, not a "real" one (as the classical economists thought). Modern economics recognizes the role of expectations or what might generically be called "confidence in the future." For example, if the interest rate jumps from 5% to 10%, this does not mean that people have become more oriented towards present consumption; it could simply reflect heightened anxiety about the economy. Government manipulation of the interest rate is certainly one of several tools needed to smooth economic fluctuations, but by itself this approach is relatively impotent. If everyone fears a worsening recession, employers will not hire more workers or build more factories, no matter how low the interest rate is pushed.
- Interest payments are a return on capital, and the interest rate in equilibrium equals the marginal product of capital. The situation is perfectly analogous to labor, where the wage rate equals the marginal product of labor. There are various technological recipes yielding output at various future dates, and consumers have preferences for consumption at various future dates. On the margin, present consumption will be preferred to future consumption, and an extra unit of capital invested will yield an increment in output (available in the future) that just makes the consumer indifferent between consuming now or waiting an additional unit of time and consuming the higher yield made possible by the productivity of capital. The government should not meddle with interest rates, for the same reasons that the government should not meddle with wage rates.
- "Interest" is just a codeword for profit; a capitalist earns interest when he spends less on wages and raw materials than he earns from selling the final product. This surplus value arises from the exploited workers hired by the capitalist. Under the wage system, workers are paid the bare minimum they need to survive, even though the full product of their labor far exceeds their compensation from the employer. In this respect, the wage system is no different from traditional slavery, where the slave owner keeps the product yielded by his slaves' toil, and from this fund only "pays" them enough to maintain their bare survival. Obviously interest is a barbaric feature of capitalist societies, and will disappear once the system of wage slavery is overturned.
- Interest payments reflect the higher value of present goods over future goods. Other things equal, everyone wants to consume sooner rather than later. The current price of a computer might be $1,000, but the price of a claim to a computer delivered in one year would currently sell for less than that, say $900. An entrepreneur might invest $900 in labor and raw materials in order to sell a product next year for $1,000; his implicit interest return is due to the fact that the factors of production represent technological "claims" on future consumption goods, and thus their current price (the $900) is less than their ultimate sale price ($1,000). Obviously the government need not interfere with the market interest rate, since it merely reflects the subjective premium individuals place on a marginal present good over a marginal future good.
What is the source of economic value?
- Physical objects such as a banana or an automobile do not possess intrinsic economic value. On the contrary, only a human mind can attribute value to such items, and only then do economists classify them as goods. An object is valuable only because there is at least one human being who believes that this object can help satisfy his or her subjective desires. For example, even if a particular root cures cancer, if no one knows this fact, then the root has no economic value, and people will not trade money for it. Consequently, value is caused by an individual's subjective desires and his or her beliefs about the causal properties of a particular item.
- The value of a commodity is equal to the amount of total labor used in its construction. If one bicycle has the same market value as, say, 500 eggs, then we can write 1 bicycle = 500 eggs. In what does this equality consist? Obviously the bicycle is not "equal" to the eggs because of any of its physical properties. If we examine the matter carefully, we will conclude that the one thing that the two have in common is the amount of labor used in their construction.
- The value of a good is determined by the interdependence of supply and demand, or what might be called the interaction of cost and utility. In contrast to some schools of thought, which try to explain value on the basis of utility alone, the correct approach is that of Alfred Marshall, who realized that economic value is due to both subjective preferences and to objective technological conditions. To see this most clearly, consider that if the costs of production go up for a particular good, in the new equilibrium its final price must be that much higher.
- Economic value is a complex matter that cannot be explained through simple formulas. To understand why the people in a particular society value some things more than others, we must study their culture and history. For example, a Native American tribe might have valued a particular animal as sacred. The white Europeans, of course, did not share this value system and thus slaughtered the animals. The same is true of a good or service on the market.
What is money and how does it originate?
- Money can emerge from barter, but private interests will probably not develop it to suit the needs of a modern economy. We need central banks to sustain the financial sector. Efforts to manipulate the economy using the money supply will at best fail, and at worst cause severe problems. Monetary authorities should not increase the money supply at their discretion. They should increase it at a steady rate, matching the long term growth rate of the economy.
- Money is a vehicle for exploitation that distorts real values. Money is neither necessary nor desirable, but is an arbitrary artifact of history. Social progress will lead to revolutionary social changes, including the elimination of money. This will end exploitation and result in a society that aims at satisfying real values, instead of aiming at private financial profit.
- Money always emerges out of barter. The difficulties of finding trading partners under barter systems results in the emergence of commodity monies. Durable, portable, and divisible commodities, like gold and silver, typically fit the bill as money best. Money and related institutions emerge as an unintended consequence of self interested trading. The evolution of such institutions is best left to the competitive market forces that created them in the first place, as governmental intervention will result in inflation and other distortions.
- Money is a creature of the state. Sound monetary institutions require planning and a central bank. Central banks can also stabilize markets. Central bankers can counteract booms and busts in the private sector by expanding the money supply during recessions and slowing it during booms. Public control of the institution of money is key to running the economy.
What causes the business cycle?
- Variations in the money supply cause GDP growth to deviate from its general trend. Absent these variations the economy is relatively stable. Variations in the money supply cause inflationary booms and crashes. Lags in the adjustment of wages with these cycles mean that financial booms and busts will entail significant changes in unemployment rates.
- Competition in the face of declining profits and increasing monopolization generates increasingly large crises under capitalism. Capitalists invest in labor saving devices to keep unemployment high and wages down. Competition leads to falling profit rates and crashes. Some capitalists will then get good deals on capital from bankrupt capitalists, raising their profitability for the moment. However, the tendency of capitalism to reduce profit rates will lead to further unemployment and another crash.
- Expansion of the money supply artificially reduces interest rates. This causes a boom in consumer and investor spending. With businesses thinking longer term, and consumers thinking shorter term, a discoordination emerges in the economy. The time relationship between saving and investment, production and consumption, is disrupted. Market processes reveal that many investments are not really profitable but instead are clusters of errors. Businesses then liquidate these investments, causing a recession.
- Booms begin in excessive optimism, often prompted by technological shifts, resulting in speculative frenzies. Deficient total spending then causes recessions/depressions. When total savings exceed total investment, total spending on goods falls. This decreases the demand for labor to produce these goods. Then pessimism among business investors leads to insufficient aggregate demand and economic hard times.
What is the right anti-recession policy?
- Recessions serve as a reminder to society that laissez-faire is a failed policy. Policymakers should learn from recessions that it is long past time to reign in stock speculators and out-of-control corporations. More sectors should be brought under public control, even if it means nationalizing industry. We owe it to the real victims of boom and bust: the workers.
- The recession reveals underlying discoordinations and malinvestments brought about through reckless monetary policy. It is an essential phase that should be permitted to run its course. Countercyclical policy is counterproductive. Future recessions can be prevented by reforming the monetary system that creates the boom in the first place.
- The Federal Reserve can stimulate the economy through low interest rates, and Congress can increase aggregate demand, even if it results in deficits. Once the economy gets back on course, the Fed can permit rates to rise and Congress can curtail spending.
- In addition to traditional fiscal and monetary measures, it is essential that government protect industries hit particularly hard during recession. Government should also protect workers from layoffs and provide benefits for the unemployed. Consumers should not to hoard cash but rather spend, while the business sector should freely borrow from both banks and government to restore a productive equilibrium.
What is the proper size and scope of government in relation to markets?
- Markets deliver ordinary consumer and producer goods in a relatively efficient fashion. However, for various economic and political reasons, private transactions for fundamental services and institutions, like law, money, and defense, fail badly. There is no sense in even discussing markets without the prior need of a state. Government must exist to enforce the 'rules of the game' for society to emerge from chaos. Government must establish and enforce basic rules for society, but avoid discretionary or destabilizing intervention into markets.
- Markets fail to provide fundamental institutions and suffer from serious imperfections concerning ordinary goods and services. For example, instability in markets causes recurring crises and leads to growing inequality. We should retain markets for most goods and services, but government must have discretionary authority to intervene in every market based on observed failures. In this way, the state and market can work together in a public-private partnership model.
- Markets are an arena for powerful business interests to exploit workers and consumers. Capitalism impoverishes and alienates the masses while enriching a few elites. It also devastates the environment and entrenches violence. A truly humane society would abolish private property, except for personal possessions (e.g. clothing and shoes). Communal arrangements in the production and distribution of goods deliver a more just and fulfilled society for all.
- Order in society can emerge through voluntary transactions between individuals. People can engage in private transactions for anything they value, including laws and security. Since all choices concern alternative future states of the world, each individual alone understands which goods best suit him or her, including protection and dispute resolution. Ideally, government would be limited to protecting rights, but government as we know it serves elites and violates rights to self-ownership, and efforts to limit governmental powers tend to fail. Private institutions for security and arbitration are more efficient and moral than public equivalents.
Who should regulate consumer products and how?
- Empirical studies indicate that consumer preferences do not change much in response to things like advertising. Consumers react rationally to information concerning products, so consumer safety is not necessarily a big issue. Governmental safety regulations may have perverse effects that increase harm to consumers, but government might play a positive role in providing better information to consumers, insuring that retailers and others tell the whole truth and nothing but the truth.
- Consumer products develop through experimentation. Consumer preferences also change and develop gradually through time. To meet them requires entrepreneurial judgment. Aside from a few innate demands concerning hunger and temperature, consumer preferences emerge as a result of interaction between many individuals. Each consumer regulates the consumer products he consumes by spending money. There is no good substitute for the market process concerning the development and dissemination of consumer goods.
- Capitalism has within it a culture industry that manufactures false preferences. People might think that modern consumer culture satisfies them best, but this is not true. Businesses gain through wasteful competition among consumers for social status and the creation of preferences for goods that no one really needs. Capitalism alienates consumers from their true selves while businesses exploit them for profit. Proper consumer products regulation requires revolutionary changes in society.
- Businesses mislead and manipulate consumers with advertising and other marketing devices, drawing them to and from products, creating an artificial sense of need, and bringing about waste. This can result in serious harm to consumers, or at least excessive prices. Faulty or dangerous products and fads are serious problems that government can and should address. There are also "merit goods" that consumers do not appreciate adequately, and should therefore get public subsidies.
What are wages?
- Wages are the basis for capitalist exploitation. All value derives from labor. But capitalists pay workers less than the value of their work so as to collect profits. Common ownership of the means of production will eliminate wage exploitation by eliminating private profits.
- Wages represent the discounted productivity of labor in satisfying consumer demand. Demand for consumer goods translates into demand for workers. Markets enable us to calculate the value of different types of labor, so that we can direct the use of labor to its most highly valued uses. Governmental intervention in labor markets (e.g. minimum wage laws) cause unemployment among less productive workers.
- Wages determine the income that creates demand for products. Raising wages increases demand for goods, and leads to prosperity. Capitalists will often pay workers too little to generate full employment. Government should pay subsidies to households and push for higher wages because this will increase demand and improve economic conditions.
- Wages represent the productivity of workers in satisfying consumer demand. However problems with monitoring workers cause employers to pay higher wages to increase productivity. This increases unemployment among low productivity workers. Governmental subsidies can correct this failure of markets, but this is not always necessary.
What causes economic growth?
- A balanced relationship between aggregate demand and aggregate supply is the leading determinant of economic growth. Because private markets cannot always provide this, stable institutional environments are necessary. The public sector plays a vital role in securing economic growth by providing a framework of legal and financial institutions. A variety of public-sector efforts such as low-interest rates and subsidies may also play a positive role. A limited amount of regulation is necessary, but this is not necessarily true.
- Private consumer demand is not enough for economic growth. Overall private spending is often too little, too manipulated by business, and rife with choices that overlook social priorities. Consumers may save too little or too much. This sometimes makes public deficit spending necessary to stimulate the economy. Also, private spending fails to supply public goods. Public spending in such areas is necessary for economic growth"”particularly in education, infrastructure, and scientific research.
- The capitalist process causes economic growth, but this is a non sequitur. While capitalism is the most productive system, the distribution of wealth under capitalism is wrong. Whole classes of citizens are left out. Capitalists take advantage of workers by paying them the lowest possible wage instead of the value of their labor. So capitalism delivers the goods, but to the wrong addresses. What we need are workers' democracies where productivity can go hand-in-hand with a more just distribution of wealth.
- The source of economic growth is mutually beneficial, voluntary exchange. Within the exchange economy, consumers spend part of their income on goods and services to satisfy their most immediate wants. This drives current production. Consumers save part of their income according to their less immediate wants. This drives entrepreneurial investment in future production and leads to the development of sophisticated capital markets. Private contracts, competition in markets, and private institutions that allow for capital investment and accumulation are all you need to attain optimal economic growth.
What do taxes fund?
- Taxes often serve corporate interests and the wealthy. Businesses want private revenue and profits, but socialized costs. This is due to the inordinate influence of business and the rich on politics. True democracy would not allow for this. Measures like campaign finance reform or public funding of elections might help greatly. Better still, movements towards community ownership of industry by the workers will make industry responsive to public needs, rather than private profit. This is important because the laissez-faire system leaves the public largely unserved in their essential needs
- Since markets are imperfect, public spending could go to subsidize the provision of some of a variety of public or merit goods that the market would not otherwise provide. Taxes can also mitigate social costs and deter the consumption of goods that should not be made available through the market. Ideally, political competition between interest groups transfers income to those who value it most. It is possible that taxes are employed in uneconomical ways, but political competition will probably mitigate the worst examples of governmental waste.
- Taxes make up for the deficiencies of private expenditures, which do not reflect the benefits that the general public derives from some goods. Taxes fund public goods like law and order, roads, education, and scientific research that benefit the public at large. There are also social costs (i.e., pollution) of private production that need to be countered. Taxes also fund "merit goods" whose worth is not apparent to the general public, as well as discourage some "demerit goods" that the public should not want, but does. Experts in government can and should tax demerit goods and the sources of social costs to fund public and merit goods.
- Taxes raise money for transfers to special interests and public employees. In contrast to private businesses that supply the goods that consumers are willing to buy, public officials have no means to assess data as to what consumers truly demand, much less how to go about meeting those demands economically. Lacking the ability to act economically, public officials respond to interest groups, so tax money will necessarily end up with narrow interest groups rather than going to fund the provision of public goods. Taxes typically go to waste or to special interests that do not and should not own the funds.
Do markets create and sustain monopolies and what should be done about it?
- If the history of capitalism shows us anything, it is that it leads to business concentration. With fewer and fewer firms dictating the terms, the result is ever higher prices combined with ever lower wages. Unions and antitrust enforcement have had some measure of success in curbing this, but neither institution goes far enough to counter the trend toward monopoly within market settings. We must also question the idea that competition itself should be a policy goal. Most often, it is socially wasteful and a slogan repeated by monopolists to justify exploitative behavior. The ideal of cooperation between all, a truly democratic economy, should be the ideal.
- The market tends to generate monopolies of varying sizes and types. Business should not be permitted to exercise monopoly power in pricing. It can be detected by various formulas comparing costs with output price according to a perfectly competitive model. Geographic monopolies may not be as important as they once were due to advances in transportation technology. What we face today are a variety of technologically driven monopolies, such as the example of Microsoft shows. Still, regulators need to be constantly on the lookout for businesses that attempt to employ market power, enriching themselves at consumer expense. Competition needs rigorous enforcement.
- Economists of the classical school were right to define a monopoly as a government-grant privilege, for gaining legal rights to be a preferred producer is the only way to maintain a monopoly in a market setting. Predatory pricing cannot be sustained over the long haul, and not even the attempt should be regretted since it is a great benefit to consumers. Attempted cartel-type behavior typically collapses, and where it does not, it serves a market function. The term "monopoly price" has no effective meaning in real market settings, which are not snapshots in time but processes of change. A market society needs no antitrust policy at all; indeed, the state is the very source of the remaining monopolies we see in education, law, courts, and other areas.
- Monopoly regulation has caused more harm than good by protecting particular competitors, not competition. Some types of regulation against trusts are based on flawed models that fail to understand that some firms gain market share solely because of their products' desirability to consumers. Most cited cases of "path dependency" turn out to be mythical. What is left for regulators to do? As Adam Smith said, they should prevent business conspiracy, blatantly predatory behavior, and otherwise assure a level playing field leading toward genuine competition. Finally, some goods lend themselves to being best provided by monopolies, e.g. courts and defense.
What are the economic implications of national defense?
- National defense is neutral to the market. On the one hand, it cost taxpayers money, but, on the other, it provides a stable environment that permits peace to flourish and rights to be protected. By its very nature, government should maintain a monopoly over the use of force, and defending the nation against external and internal foes flows from this primary obligation. Before we can even talk about economic production, government-provided security and defense must be firmly in place. Otherwise, we are back to the Hobbesian jungle.
- National defense is desirable on its own terms, but the strongest economic impact, as with many public-sector programs, is that it creates jobs and boosts incomes to strengthen the economy. It is especially beneficial to the GDP because so much of military production involves heavy industry. The funding does more good for the nation overall if spent on large projects than if spent on small consumer goods. Moreover, public funding generates technological spin offs that assist all of society, and also employs many people who otherwise would lack the training and discipline to earn high wages in a market setting. The military, in fact, is a great example of government planning at work, serving all of society.
- Government spending on the military is a social cost that crowds out private alternatives, even as its alleged benefits are unquantifiable. Security, like any good desired by individuals in society, can and is provided by the market economy, which is to say, by individuals organizing themselves voluntarily within the matrix of private property and exchange. Private security works vastly better than the government system that squanders trillions, is riddled with bureaucracy, provokes enemies, and doesn't actually work to defend the nation. Governments have used the excuse of "defense" to start wars that reinforce the power of the state over the market.
- National defense supplies a public demand that would not otherwise be produced in sufficient quantity if supplied only by the market. This is because national defense is an example of a public good. Everyone benefits from it and these benefits are not excludable in the way market goods are. Because of free riders, and the sheer expense associated with its provision, individuals have no particular incentive to purchase the good for themselves. This is why most societies from time immemorial have charged government with the main obligations of security provision. The benefits surely outweigh the costs.
What are the economic implications of warfare?
- Warfare reduces economic welfare by destroying real resources. It can benefit a select few who benefit from military spending on the winning side only. For most consumers and businesses it means drastically reduced prosperity. The only justifiable reason for a war is pure self defense.
- War reduces economic welfare by destroying real resources. It may benefit only a select few from military spending, but could also be important in terms of national goals. If diplomacy fails, the general welfare of society may increase as a result of attaining important national objectives via warfare. Defensive wars are always justified. Offensive wars may be good in some circumstances.
- Warfare stimulates the economy by increasing demand. While wars appear to be destructive, we generate more wealth by rebuilding the things that wars destroy. This employs idle resources and makes for increased prosperity.
- Warfare exists to increase capitalist profits. As competition forces profit rates for domestic ventures down, capitalists go overseas to collect profits. This leads to conflicts between capitalists in different nations. Nations go to war over such competing imperial claims. Capitalism is the main force behind wars. Warfare will end with the end of Capitalism.
Who serves society best?
- Legislators and policy experts, along with consultation from a variety of advisory groups, have the public interest in mind when they formulate and execute policies. They are willing and capable of improving the welfare of society. Entrepreneurs pursue profit, and care little for overall public welfare. They serve the public interest only insofar as they earn a profit in the process. Given numerous and severe defects in the way markets work, informed civic leaders officials need to work to improve public welfare"”a viable project provided that we limit the influence of business interests in politics.
- Entrepreneurs play an indispensable role in society. Entrepreneurs are alert to profit opportunities and make judgments concerning the future. Competition concerning these opportunities results in profit and loss statements that generate prices for labor and capital. This competition directs resources to the satisfaction of the most urgent consumer wants. Successful politicians are those who are the best at retaining and wielding political power. These are typically the most ruthless people in our society.
- Capitalism serves entrepreneurs and entrepreneurs serve themselves. The capitalist system is predicated on the exploitation of consumers and workers. The only solution to these problems is to do away with capitalism, and with it the capitalist class of entrepreneurs. A truly democratic or socialist society will end exploitative tendencies. People will no longer pursue private profit because private profits will no longer exist. People will have better motives and be more publicly spirited under socialism. The leaders, if there are any, in the future socialist society will promote the common good.
- Politicians pursue their own interests, but political competition and the public-policy process leads them to serve the public to some extent. Entrepreneurs also serve the public to some extent, because they earn a profit by serving customers. The question as to whether civic leaders or entrepreneurs serve the public best is an open one. This depends upon particular circumstances of time and place. The democratic society has shown itself capable to sorting out questions of social management over time.
What is the state?
- The State, which is in a position to calculate the marginal efficiency of capital goods on long views and on the basis of the general social advantage, should take an ever greater responsibility for directly organising investment; However, this is much more easily adapted to the conditions of a totalitarian state, than is the theory of the production and distribution of a given output produced under conditions of free competition and a large measure of laissez-faire.
- The state can be divided into three subject areas: pre-capitalist states, states in the capitalist (i.e. present) era, and the state (or absence of one) in post-capitalist society. The executive of the modern state is nothing but a committee for managing the common affairs of the whole bourgeoisie.
- liberty leads to favorable consequences, such as prosperity, efficiency, or peace, and for that reason alone should be supported, advocated, and maximized. But the democratic state should reserve the right to define what liberties maximize positive utility. Where liberty interferes with a desired end, state force may be a necessary intervention.
- the State is that organization in society which attempts to maintain a monopoly of the use of force and violence in a given territorial area; in particular, it is the only organization in society that obtains its revenue not by voluntary contribution or payment for services rendered but by coercion. While other individuals or institutions obtain their income by production of goods and services and by the peaceful and voluntary sale of these goods and services to others, the State obtains its revenue by the use of compulsion; that is, by the use and the threat of the jailhouse and the bayonet.

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