Frequently those who succeed in the market do so because they were lucky or simply in the right place at the right time with the right idea. They need not be especially smart or hard-working; rather they just need to be able to figure out what people want and to get it to them in a cost-efficient way. They also need to be able to adjust on the fly as conditions in the market change. Here, too, the typical notions of merit need not apply.

A critic of markets might respond with “Aha! If you’re right that entrepreneurs aren’t any better than the rest of us, why can’t we just replace them with government bureaucrats?” A fair question! The answer is that the effectiveness of markets does not rest mainly on the qualities of the individuals involved, but rather on the institutional environment in which people operate. Entrepreneurs are able to figure out what people want and how best to produce it not because they are especially intelligent, but because they act in the market, where signals such as prices and profits help them learn what others want and how to produce it.

It’s not that markets do things well because entrepreneurs are smart; rather, entrepreneurs are able to do things well because markets are “smart” in that they are able, through prices and profits, to make more knowledge available to entrepreneurs than political processes do to bureaucrats. This feature of markets is what Nobel Laureate Vernon Smith calls “ecological rationality.”

Forgetting this point and believing in the “myth of merit” poses two dangers for defenders of the market. First, it can seduce us into arguing for markets based on the personal characteristics of entrepreneurs versus bureaucrats. This is an argument we will lose. People are people, and there’s no necessary reason that people who become entrepreneurs are inherently better or smarter than bureaucrats. Many successful entrepreneurs have gone to work for government or have been elected to office and failed miserably. Of course, as Hayek recognized, expanding the political realm may tend to attract into it those who are less moral in the sense of respecting the rights of others, but that is due to the ecological irrationality of politics.

Second, believing the myth of merit can lead us to slide from being “pro-market” to “pro-business.” If one believes that businesspeople are somehow more deserving than bureaucrats, one might be tempted to support government policies that benefit business at the expense of markets, such as the bailouts. It’s not that the managers of GM are inherently smarter or more moral than members of the Obama administration. It’s that in the absence of distortion, the market provides them with knowledge that bureaucrats would not have and couldn’t use as well as entrepreneurs can even if they had it.

Bailing out firms cuts off the profit-and-loss learning process and makes those running the show less able to act efficiently, not to mention creating incentives for them to be more concerned about politics than products.

In days like ours, when the line between businessperson and bureaucrat gets ever more thin, maintaining the distinction between “pro-market” and “pro-business” is more important than ever. Accepting the “myth of merit” risks overlooking that distinction.

Related posts:

1. The Dangers of Growing Up Comfortable
2. The Dangers of Collectivism
3. Bad Samaritans: The Myth of Free Trade and the Secret History of Capitalism

And just a couple of days ago, as I sat in a park in New Orleans with a friend and her son, I was checking my email only to have my friend, who is also an academic, turn to me and say, “Do you ever stop thinking about work?”  As I thought about how to answer that question seriously, I realized that it was based on a flawed premise:  that I perceive what I do as “work.”  That’s not the way it feels.  I answered, “In some sense, no, I don’t ever stop thinking about ‘work.’  But what I do does not feel like work. It’s a calling.  There’s a world out there that needs to be improved.”

For those of us who have imbibed the freedom philosophy, the world never looks the same as it did before.  We see all kinds of problems around us, both in the way the world is and the way many people think it should be, and we feel compelled to respond to them.  When people say things that we know are wrong, we are always ready to engage them (assuming that the social situation allows it to be done).  Those of us who are professional intellectuals feel, perhaps, “called” in this sense, given that we have the knowledge, skills, and reputation to reach more people and perhaps make more of a difference.

The danger of the language of a “calling,” of course, is that can slide to into dogma or in-your-face obnoxiousness.  We’ve all met the person who doesn’t know when to keep politics out of a social setting, and that’s not a person we want to be.  And it’s also not effective in getting the message of the freedom philosophy out.  Integral to this particular calling is trying our best to make our core values and behaviors conform to our preferred social order.  Peaceful exchange and social tolerance are not just political principles but guides to human interaction at all levels.

So engaging in Facebook comment threads, or checking my email at the park, or agreeing to take on this column in the face of a big to-do list, or the general inability of many like-minded folks to say “no” to one more talk or paper, or another trip or conference can all be understood as part of the calling that comes from understanding the freedom philosophy and seeing its power to change the world in ways that would improve the lives of billions of our fellow humans.

Each time we talk, civilly and with an open mind, to those who see the world differently, or write a letter to the editor, and or give our time or resources to deserving organizations, we are taking up that calling to make the world a better place.  For many of us, we just can’t help it.  But that’s okay because we can think of nothing more important that we could do than to respond to that calling.

I hope that this column becomes a place where my calling becomes part of your calling and helps you to spread the freedom philosophy.  I’ll do my best to live up to my end, and I hope you’ll do the same.  One glance at where the world has gone in the last few years should tell you that we need the freedom philosophy more than ever.

Related posts:

1. Neoconservatives and the Freedom Philosophy
2. Murray Rothbard’s Philosophy of Freedom
3. Book Review: Business as a Calling: Work and the Examined Life by Michael Novak

The marvel is the speed with which Woods put together a book of almost 200 pages and Regnery got it on the market. Under the circumstances, one might expect the book to come up short in coverage or depth of analysis, but it doesn’t. In fact Meltdown, despite a couple of minor flaws, is the best one-stop analysis of the recession available, which makes it the book to give anyone who wants to understand how government intervention caused this mess and how Austrian economics can explain those causes and the problems with the proposed cures.

The opening chapter provides an overview of events as well as a taste of the mainstream media analysis of the meltdown. Mostly that consisted in blaming it on “free market,” or “unregulated” and/or “laissez-faire” capitalism, with almost no one asking whether such an assessment of blame makes any sense. That chapter also acknowledges the “elephant in the room”–namely, the Federal Reserve System. Woods rightly notes that almost all the commentary on the recession has ignored any substantive discussion of the role that the central bank played in creating the boom that in turn led to the bust.

The broad case for government as the cause of the meltdown is offered in chapter two. Woods names six “culprits.” First are Fannie Mae and Freddie Mac, the government-sponsored enterprises that dominate the mortgage market. Largely immune from profit and loss, and able to “make markets” in ways that truly private firms are not, Fannie and Freddie created implicitly government-backed markets for trading mortgages and mortgage-backed securities. This encouraged mortgage originators to keep creating new mortgages, however risky, knowing that Fannie and Freddie could use their special line of credit at the U.S. Treasury to buy those up and resell them on the secondary market. This was hardly a “free market.” Rather it was one in which these creatures of government operated without being subject to the market’s own normal regulatory processes–namely, profit and loss and risk management.

Minor culprits include the Community Reinvestment Act and other forms of affirmative action in lending, as well as the ways that government policy stimulated speculation. Among the factors Woods mentions here is the role played by the credit ratings agencies, which are themselves a cartel protected by the Securities and Exchange Commission. This is a point that many observers, even free-market ones, have overlooked in their analyses. Woods is to be commended for bringing it in.

But the bulk of his blame lies with the Fed. Woods offers a complete analysis of the Fed’s role in the context of an accessible account of the Austrian theory of the business cycle. He clearly explains the interaction of savings, time preferences, and interest rates under stable monetary conditions in order to show what happens when the Fed intervenes with an expansionary monetary policy. Chapter five follows up with a good discussion of the myths of the Great Depression.

The final two chapters are on money and “what now?” The key argument of both is that the Federal Reserve System and the other elements of central banking are the real source of trouble and that we should reconsider this institution. Woods includes a nice refutation of a number of arguments against gold and other commodity standards. These two chapters are valuable, although I wish Woods had acknowledged that his implicit monetary theory, including his definitions of inflation and deflation, is not the only one in the Austrian tradition. (It relies on a Rothbardian 100-percent-reserve perspective on money and banking.)

Although in a few places Woods comes across as unnecessarily angry, which might turn off readers not predisposed to his message, Meltdown is in many ways an extraordinary achievement. He has digested complex theory and a whole range of recent history and presented the single best analysis of the current recession out there. It is a terrific example of using Austrian economics and free-market thinking to analyze the real world–and doing it in a way that is highly accessible to the general reader.

Related posts:

1. The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash
2. The Arts in a Free Market Economy
3. How Much Money Does an Economy Need?

But the view that consumption is “stimulative” while saving is harmful is almost the exact opposite of the truth if the goal is to generate sustainable economic growth. Savings is what makes long-term growth possible. It just ain’t so that more consumption is what is needed in a recession.

An Incomplete View

This particular fallacy is essentially a version of the more general fallacy identified by Frédéric Bastiat in the nineteenth century: an inability or refusal to “see the unseen.” Consumption has easily observable effects on the economy. We see people spending on new cars or televisions, and we understand how that means larger profits for firms and more opportunities for employment. So it comes as no surprise that people would think that an increase in saving, defined as the portion of our income we do not devote to consumption, would be bad for the economy. If we are increasing our saving, we are presumably reducing our consumption, which means lower profits and fewer job opportunities in the places where we used to be spending those consumption dollars.

So far, the analysis is not necessarily wrong, just incomplete. A full analysis would then ask, “What happens to the portion of people’s income no longer being devoted to consumption?” What exactly do we mean by “saving?” If people are “saving” by simply increasing their holdings of currency (say under the storied mattress), then the critics have a point. Those resources are being withdrawn from the larger economy, and to that degree they will reduce conventional measures of economic well-being. Of course, those increased currency holdings will improve the well-being of their owner, as he or she is now holding wealth in the preferred form of currency.

This isn’t how it usually goes, though. Most saving takes the form of financial instruments, including everything from basic checking accounts to the fanciest investment tools. If people are keeping higher checking account balances or putting more in savings accounts or money market mutual funds, then that wealth is not withdrawn from the economy. It is simply channeled elsewhere than into consumer goods. Financial institutions that accept such deposits lend them to customers who invest in their businesses. This is the process of creating the capital that is the sine qua non of sustainable, long-term economic growth.

In Bastiat’s terms, we see the lost expenditures at the retail store, but we mostly don’t see the “backdoor” way the savings are channeled to other businesses. More precisely, an increase in the savings rate represents a change in consumers’ time preferences: They are saying they are less interested in current consumption and more interested in future consumption. The beauty of financial markets is that they translate that change in preferences into a change in the flow of resources. Those investments will take time to become consumption goods, but that’s what consumers want.

Saving Creates Growth

So contrary to Isidore’s arguments, restricting consumption does not hamper economic growth. In the long run, economic growth requires saving and the creation of new capital goods.

For savings to contribute to growth this way, financial intermediaries must function properly. The fallacy that increases in saving will frustrate growth finds its most recent theoretical statement in Keynes, particularly in his assumption that the financial system cannot translate savings into investment. In contrast to the classical and Austrian economists, who believed that interest rates would coordinate the supply of savings and the demand for investible funds, Keynes argued that saving was a function of income, and investment was driven by the “animal spirits”—that is, people’s psychology and expectations. As a result, there was no reason to think that increases in saving would make their way back into the economy as investment. Indeed, savings was a “leakage” from the expenditure stream made up of consumption, investment, and government spending.

But Keynes was wrong about how markets, especially financial markets, work—at least when they are left to themselves. As Isidore’s article points out, if banks are reluctant to lend out the funds that savers are supplying, increases in saving will not get translated into investment spending. He argues that is precisely what is happening right now.

If true, the fault lies not with the saving habits of the public, but with whatever is causing the banks to hesitate. Blaming the public for “saving too much” is wrong, as Isidore himself notes in claiming that “a high savings rate is not a bad thing for the economy.” The problem, he argues, is people doing it now when banks won’t lend. Why then are banks reluctant to lend?

One answer is that at the onset of the crisis the Federal Reserve System decided to pay interest on the reserves banks hold in their accounts at the Fed. Combined with very low rates of return on other assets, this made sitting on both the public’s increased savings and the Fed’s newly injected reserves a better choice than lending.

Moreover, the combination of bailouts, quasi-nationalizations, and policy zig-zagging might be making lenders more uncertain about the future and less likely to lend. What economic historian Robert Higgs has termed “regime uncertainty” was responsible for the length of the Great Depression and might be a key reason why banks might lend less than in the recent past. Isidore and others never consider that, in the words of economist Roger Koppl, “Keynesian policies can create a Keynesian world”—that is, bad policy can break the link between savings and investment. In any case, blaming the savers misses the real problem.

And there might not be a problem anyway: A number of economists have disputed the claim that banks have stopped lending. Even at the height of the crisis in October, economists at the Minnesota Fed found no evidence that banks had stopped lending to individuals or nonbank entities. More recent data from the winter show that while the rate of lending growth had slowed, the total quantity of loans to individuals and firms was steady, if not growing slightly. So theory aside, the empirical reality since September does not support the claim that savings is counterproductive.

Related posts:

1. Saving Hunky Town
2. Where Has All the Saving Gone?
3. The Social Security Trust Fund: Savings vs. Saving

The problem with all these “oughts” is that they eventually confront the principle ought implies can. Can the desired end (improving the welfare of the poor, for example) be achieved by the chosen means (income “redistribution”)? If not, then what does the “ought” really mean? “Oughts” without “cans”–ethical pronouncements without economics–are likely to lead to disastrous public policies.

In exploring the relationship between economics and ethics, we can start with two definitions that seem relevant here. The economist David Prychitko once defined economics as “the art of putting parameters on our utopias.” And in a particularly insightful definition, Nobel laureate F. A. Hayek wrote that “The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.” What both definitions suggest is that economics deals with the realm of the possible and in doing so demarcates the limits to what should be imaginable. Before we say we “ought” to do something, perhaps we should be sure we can do it, in the sense that the action is likely to achieve the intended ends. Put differently: ought implies can.

Ethicists can imagine all kinds of schemes to remedy perceived social ills, but none of the aspiring benefactors can afford to ignore economic analysis. Being able to dream something doesn’t guarantee it is possible. Too often ethical pronouncements have an air of hubris about them, as the pronouncer simply assumes we can do what he says we ought to do. By contrast, economics demands some humility. We always have to ask whether it’s humanly possible to do what the ethicists say we ought. To say we ought to do something we cannot do, in the sense that it won’t achieve our end, is to engage in a pointless exercise. If we cannot do it, to say that we ought to is to command the impossible.

So contrary to the commonly heard complaint, it is not that economists ignore ethical issues. Rather we attempt to describe the likely results of putting particular ethical rules into practice. For example, someone can argue that a living wage is an ethical imperative, but that doesn’t change the economic analysis of minimum-wage laws. Those laws increase unemployment and/or lead to reductions in nonmonetary forms of compensation among all unskilled workers, but especially the young, male, and nonwhite. No matter how much we think we ought to pass such legislation as a way of helping the poor, the reality remains that economics shows us that we cannot help them that way. Those who argue we ought to have such a law can still pass it if they want, but they should do it with eyes wide open to the fact that it will not achieve the result they wish, no matter how much they think we ought to have it.

It might be more accurate to say that ethicists ignore economics than that economists ignore ethics. To the extent that good economics shows what we can and cannot do with social policy, it is engaged with ethics. After all, if the point of saying we ought to do X is that we think it will achieve some set of morally desirable goals, then knowing whether or not doing X will actually achieve those goals is, or at least should be, a key part of moral inquiry. One of the tasks that economists should set for themselves is to engage in this sort of dialogue with moral philosophers and others who argue from “oughts.” Economist Leland Yeager’s recent book Ethics as Social Science is a good example of how economics can inform ethical questions just this way.

Studying “Ought,” Ignoring “Can”

The more interesting question is the degree to which moral philosophers are engaged with economics as they develop their theories. It might be true that introductory economics courses do not consider moral questions as often as they might, but it would seem at least as true that courses in ethics and religious studies are unlikely to confront either economic arguments or economic data that relate to their subjects. Exploring the “ought” without broaching the “can” will not get one far in designing policies that will achieve the intended results. One exception to this neglect of economics is the philosopher Daniel Shapiro’s Is the Welfare State Justified? In that book he brings to bear a good deal of empirical data and economic theory on the question of whether the welfare state can do what its proponents claim for it. From the philosophy side, this is the kind of work that needs to be done.

Can Doesn’t Imply Ought

Once we recognize the insight behind “ought implies can,” we can see that the reverse is true as well. Just as we cannot do everything people say we ought, we ought not do everything we can. We see this in the frequent calls for political actors to “do something” in the face of a crisis. There are many things politicians can actually do in a crisis, and doing them is often fairly easy, especially if the politicians can generate a climate of fear to help make the “ought” seem more pressing. But the fact that they can do something does not always mean they ought to. Even if it is true that “yes we can,” understanding the unseen and unintended consequences of what politicians are able to do should help us to decide whether they ought to do it.

Both ways of looking at “ought implies can” put economists in the position of throwing cold water on the plans and designs of social engineers left and right. This is what Prychitko and Hayek mean. Economists are thus often seen as only knocking down the ideas of others without coming up with solutions of their own. There is some truth to this claim. That is how economists spend much of their time. But it’s an important function: showing why a proposed solution would only make matters worse is a valuable contribution to the broader process of solving the problem.

More relevant, however, is that economics teaches us that solutions are much more often found in the actions of individuals and organizations responding entrepreneurially to the situations they face. The notion of a top-down solution to any social problem is going to attract the economist’s critical eye. In terms of “ought implies can,” economists are often reluctant to say what everyone ought to do because no one person or group knows what people can do. If ought implies can, and “can” is particular people in particular contexts developing solutions to their problems, then it is difficult to say what we all ought to do, especially in a crisis. This is the way that Prychitko’s and Hayek’s definitions cash out in the real world.

All the themes above have been on display in the current economic crisis. The bailout of the financial sector is a classic example of both letting the “ought” blot out the “can” and of assuming we ought to do whatever apparently can be done. The original promise of the bailout was that government would buy up the bad assets of troubled financial institutions then later resell the assets, making the real cost substantially less than the original $700 billion. Many critics, including many economists, suggested not only that this plan was counterproductive–because it only enhanced the likelihood that other firms would take unwise risks in the future–but also that the availability of those funds would lead to demands for the government to use them in other equally unproductive ways. That is more or less what has happened, as the bailout expanded to partial government ownership of banks and then demands from the auto and insurance companies to get in on the goodies. The plan changed again when the government announced it wouldn’t purchase troubled assets but instead would inject money directly into banks and other kinds of businesses. But soon all the “oughts” were crashing against the limits of what can be done via government intervention. Meanwhile, the machinery of government did many things it can do–borrow and create money, for example–without the planners thinking very much about whether they ought to do any of those things.

Social scientists who disregard ethical issues abandon one of their central roles in bettering the human condition, and ethicists who ignore social science in formulating their moral prescriptions are negligent for not asking whether those solutions will achieve their stated ends. Only when both realize that ought implies can will we get public policies based on an accurate understanding of human interaction.

Related posts:

1. The Free Market: What it is – What it Implies
2. Visible and Invisible Hands
3. Economics and Ethics in the Public Policy of the Free Society

An excellent example of this tunnel-vision punditry is E. J. Dionne Jr.’s New York Times column of July 11. Dionne argues that a variety of problems facing the economy in 2008 has led to “the collapse of assumptions that have dominated our economic debate for three decades.” The assumptions he refers to are that “Regulation is the problem and deregulation is the solution. The distribution of income and wealth doesn’t matter . . . [and] free trade produces well-distributed economic growth,” among others. In Dionne’s view, these ideas are “failing” and “even conservatives recognize that capitalism is ailing.”

Unfortunately for Dionne, it just ain’t so.

Dionne spends much of the column arguing that the current housing crisis and its spillover effects on the financial industry are the result of, in Rep. Barney Frank’s words, “excessive deregulation.” There has been some deregulation of the financial markets in the last couple of decades, and much of that deregulation has actually produced incredible benefits for the American public. Aside from the customer-service gains that have come from the legalization of interstate banking and the ability of banks to offer an array of products under one roof, the expanded range of investments that banks can take on enables them to diversify and lower their exposure to risk.
Yes, a number of banks have had problems in the last year (more below), but the number of bank failures since the 1999 deregulation has been exceptionally low.

Between 1999 and 2007 only 40 U.S. banks failed, which is substantially lower than the same nine-year periods starting in 1969, 1979, and 1989. Only two years since 1934 have had no bank failures: 2005 and 2006. If the 1999 overturning of the Depression-era Glass-Steagall regulations is such a problem, why were the eight years to follow among the healthiest in U.S. banking history? Assuming deregulation did not have a built-in time delay, this year’s banking problems must have some other source.

Those problems are almost all linked to the troubles in the housing market. Here too, blaming deregulation is at odds with some important facts. True, financial firms have developed many new tools during the last 25 years. Some of those, such as the adjustable-rate mortgages at the center of the difficulties, were necessitated by previous government intervention in markets—in this case, the Fed-generated inflation of the 1960s and ’70s.

More important, though, is the role played by institutions such as Freddie Mac and Fannie Mae, both of which are not the products of laissez-faire capitalism
or any sort of “deregulation.” Those government-sponsored enterprises have artificially supported elements of the housing market that might not have been economically justified. Other government regulations, such as the Community Reinvestment Act, which requires that banks make a certain proportion of loans to low-income customers in their communities, have forced banks to take on excessively risky investments in housing. Finally, meddling politicians can cause banks to fail by spreading unwarranted concern about their balance sheets, as some have argued Senator Charles Schumer did in the case of the now-failed IndyMac Bank.

In sum, nothing in the current housing and banking troubles indicates some sort of systematic failure of capitalism that can be laid at the feet of deregulation.

Problematic Claim

Dionne also makes a passing comment about the way in which “The Great Depression discredited the radical laissez-faire doctrines of the Coolidge era.” This claim is problematic in three ways. First, the 1920s were hardly “laissez-faire,” especially in the financial markets. The United States had a government-run central bank along with a host of banking regulations, not to mention all the other economic regulations born out of the Progressive Era and World War I. Second, the Great Depression itself resulted not from the failures of capitalism, but the Fed’s monetary mismanagement in the 1920s and 1930s, and its length and depth were caused by the protectionism and interventionism of the Hoover and Roosevelt administrations. The New Deal and World War II did not get us out of trouble; only the explosive growth generated by the freer postwar economy did so. Third, many of the very regulations that emerged from the Great Depression, such as federal deposit insurance, enabled banks to do exactly what Dionne wrongly blames on the market: profiting when they lent well, but shifting losses to others when they messed up.

Finally, Dionne’s claim, echoed by Frank, that free trade and capitalism more generally have benefited the wealthy at the expense of the poor also does not hold up to scrutiny. Frank’s concern for the “most vulnerable people in the country” is admirable, but free trade, by making cheaper imports available to lower-income Americans and by creating jobs in export industries, has done more for “the most vulnerable” than any government program.

It is also ironic that a man of the left would focus only on the vulnerable in the United States and ignore the massive increase in well-being that free trade has produced for the most vulnerable people in the rest of the world. The billions of Chinese and Indians who have risen out of abject poverty in the last decade or so are a major accomplishment of free trade, and that increase in wealth has benefited American citizens as well. The living standards of poor Americans today, measured by what they are capable of consuming, exceeds that of the average American 35 years ago. If free trade is so awful for the poor, Dionne and Frank need to explain how an era of expanding free trade has also produced these increases in the well-being of poor Americans and billions of others across the world whom they seem to think do not matter.

Once again, the pundits grab onto any bit of bad news to declare the death of capitalism, all the while ignoring the ways in which our larger-than-ever government has intervened in the market, producing the very problems they try to blame on the free market. Their misguided analysis is matched only by their continued promulgation of the idea that American living standards are declining, despite abundant data to the contrary. Even with all the government intervention, the (hampered) market continues to improve the lives of everyone, especially the poor. Imagine if the politicians and pundits stopped trying to prevent it from doing so.

Related posts:

1. Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse
2. Enron and Argentina Are Examples of Market Failure? It Just Aint So!
3. Uneven Information Causes Market Failure? It Just Aint So!

But how economists use those words is vulnerable to misunderstanding. For example, some environmentalists think that certain economists deny that scarcity even exists when they argue that we are not really running out of resources or that technology can solve any problem in this regard. The sorts of arguments criticized by the environmentalists are most closely connected with the work of the late Julian Simon, especially in his book The Ultimate Resource 2. However, the criticism reveals a misunderstanding of Simon’s and other market-friendly economists’ views.

It is certainly true that nonrenewable resources are limited in physical terms. From the perspective of the geologist, there is only “so much” oil to be extracted.

However, from the economist’s perspective, what matters is not physical quantity, but how efficiently a resource meets a human need. We care about oil because we want energy. If through new technology we can create the same or more energy with less oil, then in an important sense we have more oil than we had before. The existing quantity of oil can now serve more human needs. Moreover, falling costs of extraction can also lead us to find previously undiscovered oil or to tap into known supplies that had been too costly to reach.

So advances in technology do indeed matter, not because they abolish scarcity but because they enable us to stretch the resources we have so that they are functionally less scarce than they were before.

When we speak of improvements in technology, we really mean new and more efficient ways to achieve the ends to which the old resources were a means. New technology might enable us to use an existing resource, such as oil, more efficiently, but it can also provide a new solution to the same problem. For decades, the human voice and data were transmitted by copper wires. Eventually, copper’s price rose to where entrepreneurs had a strong incentive to find another way to provide the service. Eventually they developed sand-based fiber-optic cable, which can carry thousands of times the data for a fraction of the cost of copper. The development of the soft-sided beverage containers—juice boxes—is a similar story, and it is worth noting that their lighter weight reduces gasoline use per unit.

When economists say, “We will never run out of resources,” what they often mean is that faced with increasing scarcity of one resource, we will always find new solutions to the problem that that resource originally solved. In an important sense, the actual economic resource was not copper but “the ability to convey voice and data.” And that resource has become “less scarce” by the substitution of sand. This illustrates Simon’s point that the “ultimate resource” is the human ingenuity that finds new and better ways of using physical resources.

Although technology can fix things, it does not exist in a vacuum. Technological solutions emerge because the right economic institutions are in place. The market provides signals which inform people that a resource is growing more scarce and provide incentives to address the problem. Even some critics of environmentalist arguments forget this point. The role of institutions is clear where technology has not stopped resource depletion, such as overfishing, because the absence of private property and meaningful prices has created a “tragedy of the commons.” The tragedy is that no one has an incentive to husband the resource. This is not a failure of technology but a lack of proper institutions. If the commons are privatized, incentives will exist to develop resource-conserving technologies.

The Central Concern of Economics

What’s so absurd about the criticism of economists for not caring about resource scarcity is that the problem of scarcity—and how to handle it—are at the center of the discipline. The whole case for free markets is about allocating resources most efficiently to push back scarcity and communicating when a resource has become so scarce that we need to cut our use and find substitutes. That’s what market prices determined through the exchange of private property do. This is also why many economists have concerns about the institutional changes advocated by many environmentalists. Limits on property ownership undermine the very processes that would solve many of the problems they identify.

Can it be proven that technology will always provide an alternative when a resource becomes too scarce? Not in any rationalistic sense. We can offer lots of arguments from theory and history, but we cannot guarantee it 100 percent. However, the evidence and theory overwhelmingly indicate that we do not run out of resources when market institutions are in place and people are more or less free. Certainly markets do not solve problems perfectly, but imperfections do not make alternative institutions better. They may well be worse.

Scarcity is like gravity: it is omnipresent, and much of our lives is a struggle to find ways to overcome it. The existence of elevators and airplanes is not evidence that gravity is a myth. They are attempts to defy its very reality. Elevators improve our lives by giving us a way to push back at gravity and reduce the ways it frustrates our efforts.

Market institutions enable us to push back at scarcity as much as possible, much as elevators push back at gravity, and in so doing, make it considerably easier for individuals to achieve their myriad goals.

Some critics of the economic arguments for markets also suggest that economists dismiss scarcity whenever they claim that markets are positive-sum “games.” It is true that economists understand that exchange creates wealth for all parties, while the critics seem to believe that any gains are offset by losses, even that the wealth of the few causes the poverty of the rest. At first glance, one can see why this criticism might be valid: how does exchange create wealth out of nowhere? Does that not seem to suggest we are not acknowledging scarcity?

Not at all. In the short run, exchange—whether a trade between two people or an act of production that trades inputs for outputs—makes people better off. This results not by creating more physical stuff but by rearranging what exists to make it more valuable to human beings. While we each think we’re better off when we make an exchange, mutual benefit does not require a denial of scarcity; rather, exchange is one more way we push back against it.

This mutual benefit reinforces the point that value is a product of human minds, not of the objective physical world. In fact, we cannot even understand the concept “resource” without recognizing this point. For most of human history oil was a nuisance. People didn’t want land with oil on it because it polluted the soil. However, once human minds realized that it could be converted to energy, it became a resource, and as we begin to create substitutes for it, as with copper wire, it will become less of a resource. From an economic perspective, what makes something a resource and what determines its scarcity is the interplay between its physical quantity and the human mind’s perception that it can satisfy human wants.

In the longer run, the benefits of exchange, when combined with the institutions of the market, create the wealth that people can save in order to finance the investments that will lead to better and cheaper products for exchange. Real, tangible economic growth happens—not just for the wealthy, but for all. Again, we stretch the resources we do have even farther.

Theory aside, it would also be hard to deny that several centuries of more or less free markets have produced a tremendous rise in the living standards of the poorest people in the West. The same is beginning to happen elsewhere. To argue that the wealth of the wealthy is the cause of the poverty of the poor (the “some win at the expense of others” argument) flies in the face of historical facts.

Poverty and early death have been the norm throughout history. The power of private property, free exchange, and markets to change that norm has been the single most progressive force in human history. Scarcity is all too real and causes all too much human suffering, which is why we need genuine market institutions to continue to reduce its effects, especially on those who suffer most.

Related posts:

1. Book Review: Scarcity or Abundance? A Debate on the Environment by Norman Myers and Julian Simon
2. Scarcity, Parking, and the Price System
3. Scarcity

Instead, Brooks calls for a variety of government interventions to address the problems he sees, even as he recognizes that government contributed to those problems. Consistently throughout the column he fails to be as skeptical about regulators as he is about market participants, although the regulators are the cause of the problem and the key to his proposed solution. It simply “just ain’t so” that additional regulations are necessary to deal with these problems; in fact, they are likely to exacerbate them.

Brooks begins with a typical litany of potential problems arising from the fall in housing prices. Millions of people are expected to default on mortgages in the next few years, with millions of others owing more than their houses are worth. Furthermore, he worries that uncertainties about mortgage-backed securities will create ongoing problems for the banking system for the foreseeable future. And as for who’s to blame for the situation, Brooks points to “out of control” mortgage brokers, regulators who were “asleep,” and homebuyers who thought themselves entitled to huge houses as well as ever-rising property values.

Brooks then asks, rhetorically, “Shouldn’t people be held responsible for their stupidity and greed?” His answer, unfortunately, is “not really.”

One point worth noting in the hand-wringing over the housing crisis is that it is not a universal phenomenon. Yes, it’s very much true that housing prices have taken a big tumble in a number of major metropolitan areas, but more so in hot markets like Las Vegas and south Florida, as well as the affluent suburbs of other cities. The fact that many of these places are in “blue” states, where opinion-makers tend to live, might explain why it has received so much media attention. However, in the rest of the United States the effects are not so great. And where I live, near the Canadian border in New York state, the local newspaper indicated that housing prices in the tri-county area are up over one year ago. Moreover, reports from areas with high foreclosure rates suggest that some number of the houses falling in value in hot areas were bought to be “flipped,” that is, sold quickly for a profit, rather than lived in as primary residences. The number of people losing their primary residences is much lower than the total in mortgage default.

However, let’s grant Brooks the fact that there is a crisis at hand. Why then not have individuals take responsibility for their own bad choices? He argues that such responsibility, while important, has its limits. Specifically, he cites research in behavioral economics that shows how we “are powerfully and unconsciously influenced by the ideas and assumptions that float around in the social ether.” In his view “financial elites” offered “delicious loans to consumers” that they apparently were powerless to resist because they were unable to see the real risks involved. Therefore, they are to be rescued from their own short-sightedness.

This argument is dangerous in two ways. First, am I then to be saved from myself every time I walk into a restaurant that dangles a delicious serving of Buffalo wings before me at a price I am apparently powerless to resist, only to discover later that I’ve gained weight and caused my cholesterol to rise? What about that ultra-soft toilet paper I buy that turns out to be not as soft as I expected? As F. A. Hayek argued decades ago when similar arguments were made by people like John Kenneth Galbraith, the fact that our opinions and beliefs are very much shaped by the cultural environment and not consciously or rationally chosen does not mean that specific sellers can somehow “deliberately determine the wants of particular consumers.” The results of behavioral economics do not suggest we are victims of malevolent sellers, whether of food or mortgages.

But suppose Brooks is right that we are being overwhelmingly influenced by the ideas in the social ether. Why is this not equally true of those whom he would empower to save us from ourselves, if not Brooks himself? Do we suddenly become all-knowledgeable and able to resist that social ether when we move from consumer to regulator? Perhaps Brooks himself interprets the housing crisis the way he does because of similar unconscious, and erroneous, influences. Whatever the truth of the results of behavioral economics, they do not by themselves provide a case for government regulation of human behavior because, like the fact that people are generally self-regarding, the claim that people are unconsciously influenced applies to regulators as well. How can we be sure they will do any better than the same people will in the marketplace?

Perhaps most disturbingly, Brooks dismisses the most trenchant criticism of some sort of bailout by invoking the language of crisis. The danger of a bailout of homeowners or mortgage holders is that it creates “moral hazard” for the future. Moral hazard refers to the propensity to engage in more of a risky behavior when you know you are insured against a bad outcome. A bailout today suggests that all parties can count on such bailouts in the future, reducing the costs of engaging in the same sort of risky behavior down the road. In fact, it was former Federal Reserve chairman Alan Greenspan’s promise several years ago that the Fed would cushion against bursting asset bubbles that some commentators blame for encouraging the risky loans in the housing market. Brooks recognizes that this is a concern, but then says that’s a worry for “normal times” In a crisis, concerns like this go “on the back burner.”

Dangerous Precedents

What is so disturbing about this argument is that it is precisely during crises that precedents get set and powers are given to government that never are given back. As the work of Robert Higgs has documented, very rarely do the temporary powers given to the state to address a specific crisis ever get completely removed when the crisis passes. It is all too easy for the politics of a crisis to slowly transform into the politics of “normal times.” In the current situation, regulators are not even bothering to pretend that their “need” for new powers is a “temporary necessity.” The current proposal to give the Fed broad new regulatory oversight will be a permanent increase in the power of the state. To the extent the causes and consequences of the problems in the housing market have been misinterpreted and power-hungry politicians and regulators see an opportunity to swoop in, more “solutions” such as this one are sure to follow.

Those who propose intervention to bail out homeowners and mortgage providers not only fail to see that it was prior intervention (among other things, the promised bailout) that helped to create the current crisis, but they also fail to recognize that the precedent created by a bailout makes it more likely that one will occur in the future.

Related posts:

1. Government Schools and the Housing Mess
2. The Subprime Crisis Shows that Government Intervenes Too Little in Financial Markets? It Just Aint So!
3. How to Solve the Debt Crisis

Leaving aside for a moment whether the health-care industry is really dominated by the profit motive (given that almost half of U.S. health-care expenditures are paid for by the federal government, it is not clear which motives dominate) and whether Moore knows better than millions of individuals what their health-care needs are, the claim that a “motive” is a root cause of social pathologies is worthy of some critical reflection. The critics seem to suggest that if people and firms were motivated by something besides profit, they would be better able to provide the things that patients really need.

The overarching problem with blaming a “motive” is that it ignores the distinction between intentions and results. That is, it ignores the possibility of unintended consequences, both beneficial and harmful. Since Adam Smith, economists have understood that the self-interest of producers (of which the profit motive is just one example) can lead to social benefits. As Smith famously put it, it is not the “benevolence” of the baker, butcher, and brewer that leads them to provide us with our dinner but their “self-love.” Smith’s insight, which was a core idea of the broader Scottish Enlightenment of which he was a part, puts the focus on the consequences of human action, not their motivation.

What we care about is whether the goods get delivered, not the motives of those who provide them. Smith led economists to think about why it is that, or under what circumstances, self-interest leads to beneficial unintended consequences. It is perhaps human nature to assume that intentions equal results, or that self-interest means an absence of social benefit, as was often the case in the small, simple societies in which humanity evolved. However, in the more complex, anonymous world of what Hayek called “the Great Society,” the simple equation of intentions and results does not hold.

As Smith recognized, what determines whether the profit motive leads to good results are the institutions through which human action is mediated. Institutions, laws, and policies affect which activities are profitable and which are not. A good economic system is one in which those institutions, laws, and policies are such that the self-interested behavior of producers leads to socially beneficial outcomes. In mixed economies like that of the United States, the institutional framework often rewards profit-seeking behavior that does not produce social benefit or, conversely, prevents profit-seeking behavior that could produce such benefits. For example, if agricultural policy pays farmers not to grow, then the profit motive will lead to lower food supplies. If environmental policy confiscates land with endangered species on it, owners of such land who are driven by the profit motive will “shoot, shovel, and shut up” (that is, kill off and bury any endangered species they find on their land).

The same issues can be raised in the health-care industry. Before blaming the profit motive for the problems in the industry, critics might want to look at the ways in which existing government programs like Medicare and Medicaid, the interpretation of tort laws, and regulations such as those that limit who can practice what sorts of medicine might lead firms and professionals to engage in behavior that is profitable but unbeneficial to consumers. Labeling the profit motive as the source of the problem enables the critics to ignore the really difficult questions about how institutions, policies, and laws affect the profit-seeking incentives of producers and how that profit-seeking behavior translates into outcomes. Placing the blame on the profit motive without qualification simply overlooks the Smithian question of whether better institutions would enable the profit motive to generate better results and whether current policies or regulations are the source of the problem because they guide the profit motive in ways that produce the very problems the critics identify.

For example, high medical costs may well be a result of profit-seeking providers’ recognizing that government programs are notoriously bad at pricing services accurately and keeping good track of their expenditures. Ignoring the way institutions might affect what is profitable is often due to a more general blind spot about the possibility of self-interested behavior generating unintended beneficial consequences. Before we attempt to banish the profit motive, shouldn’t we see whether we can make it work better?

Placing blame for social problems on the profit motive is also easy if critics offer no alternative. What should be the basis for determining how resources are allocated if not in terms of profit-seeking behavior under the right set of institutions? How should people be motivated if not by profit? Often this question is just ignored, as critics are merely interested in casting blame. When it is not ignored, the answers can vary, but they mostly invoke a significant role for government. The interesting aspect of such answers is that critics do not suggest that we somehow convince producers to act on the basis of something other than profit, but that instead we replace them with presumably other-motivated bureaucrats or have those bureaucrats severely limit the choices open to producers. The implicit assumption, of course, is that the government personnel will not be motivated by profits or self-interest in the same way as the private-sector producers are.

How realistic this assumption is remains highly questionable. Why should we assume that government officials are any less self-interested than private individuals, especially when the door between the two sectors is constantly revolving? And if government officials do act in their self-interest and are motivated by the political analogs of profits (for example, votes, power, budgets), will they produce results that are any better than the private sector’s? If blaming the profit motive entails giving government a bigger role in solving problems, what assurance can critics of the profit motive provide that political officials will be any less self-interested and that their self-interest will produce any better results?

One will look in vain in Sicko, for example, for any analysis of the failures of state-sponsored health care in Cuba, Canada, Great Britain, or anywhere else. To blame the profit motive without asking whether an alternative will better solve the problems supposedly caused by the profit motive is to bias the case against the private sector.

How Will They Know?

Even this argument, however, does not go far enough. We are still, after all, focused on intentions and motivation. What critics of the profit motive almost never ask is how, in the absence of prices, profits, and other market institutions, producers will be able to know what to produce and how to produce it. The profit motive is a crucial part of a broader system that enables producers and consumers to share knowledge in ways that other systems do not.

Suppose for a moment that we try to take the profit motive out of health care by going to a system in which government pays for and/or directly provides the services. Suppose further that we could, somehow, ensure that the political officials would not be self-interested. For many critics of the profit motive, the problem is solved because public-spirited politicians and bureaucrats have replaced profit-seeking firms.

Well, not so fast. By what method exactly will the officials know how to allocate resources? By what method will they know how much of what kind of health care people want? And more important, by what method will they know how to produce that health care without wasting resources? It’s one thing to say that every adult should, for example, have a checkup every year, but should it be provided by an MD, an LPN, or an RN? What kind of equipment should be used? How thorough should it be? And most crucially, how will political decision-makers know if they’ve answered these questions correctly?

In markets with good institutions, profit-seeking producers can get answers to these questions by observing prices and their own profits and losses in order to determine which uses of resources are more or less valuable to consumers. Rather than having one solution imposed on all producers, based on the best guesses of political officials, an industry populated by profit seekers can try out alternative solutions and learn which ones work most effectively. Competition for profit is a process of learning and discovery. For all the profit-critics’ concern—especially but not only in health care—that allocating resources by profits leads to waste, few if any understand how profits and prices signal the efficiency (or lack thereof) of resource use and allow producers to learn from those signals. The most profound waste of resources in the U.S. health-care industry stems from the incentives and market distortions created by government programs such as Medicare and Medicaid.

Thus the real problem with focusing on the profit motive is that it assumes that the primary role of profits is to motivate (or in contemporary language “incentivize”) producers. If one takes that view, it might seem relatively easy to find other ways to motivate them or to design a new system where production is taken over by the state. However, if the more important role of profits is to communicate knowledge about the efficiency of resource use and enable producers to learn what they are doing well or poorly, the argument becomes much more complicated. Now the critics must explain what in the absence of profits will tell producers what they should and should not do. Eliminating profit-seeking from an industry doesn’t just require that a new incentive be found but that a new way of learning be developed as well. Profit is not just a motive; it is also integral to the irreplaceable social learning process of the market. Critics may consider eliminating the profit motive the equivalent of giving the Tin Man from Oz a heart; in fact it’s much more like Oedipus’ gouging out his own eyes.

Related posts:

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 The answer I am looking for, however, is, “times of increased federal government involvement in the monetary system.” That both answers are correct is no coincidence. For hundreds of years governments have intervened in monetary institutions in order to use them to raise revenue through the manipulation of money and credit, and most often that revenue has been used to make war.

War finance has long been the overt and covert rationale for an expansion of government’s role in the banking system. For classical liberals, exploring this historical relationship sheds light on the sources of both government control over money and the duplicity with which the state often heads to war. The connection illustrates that government intervention in money has no justification in the failures of free-market monetary systems, but rather grew out of the need for revenue. However, it also illustrates the ways in which government can mislead with respect to war by subverting the democratic process and using less-than-transparent means to finance wars, especially unpopular ones.

That classical liberals believe both that government should get out of the money-regulation business and stick to defending the territory of the United States from attack, rather than intervening in the domestic affairs of other nations, often strikes proponents of the “conventional wisdom” as odd. This sort of reaction has greeted Ron Paul’s presidential candidacy, which has argued for an immediate withdrawal from Iraq and for the gold standard. Most conservatives, of course, deride the former position, while the left (and some on the right) do the same to the latter. What few if any seem to realize is that these two positions have a deep and important historical connection: If you want to make it harder for the U.S. government to act like an imperial power, you need to find ways to reduce the resources available for it to do so. Preventing the state from creating money would eliminate its ability to manipulate the monetary system to raise funds surreptitiously for foreign adventurism.

Fighting wars requires resources. Governments have only four ways to raise revenue: sell off assets, borrow, tax, or inflate/manipulate the currency. If we assume that states interested in making war are also ones interested in accruing power, selling off assets is unlikely, at least as anything but a last resort.

Both borrowing and taxing have their limits. The most common strategy for financing wars is to sell war bonds. If governments go in this direction, they better have buyers, which assumes that the populace is in general agreement with the conduct of that war. War bonds are a hard sell for unpopular wars. For example, World War II bonds sold well as the public was convinced it was proper to respond to the direct attack by the Japanese and to attempt to stop the Nazis. However, you will look in vain for any Vietnam War bonds, nor have any Iraq War bonds been available since the 2003 invasion. When governments wish to conduct unpopular and often unjustifiable wars, engaging in borrowing tied directly to that purpose is unlikely to succeed.

Raising taxes to fight a war also requires at least some public agreement with the policy because tax-raising politicians may well be voted out if the war is unpopular. For politicians the downside of raising taxes (like the downside of using conscription to obtain soldiers rather than paying them market wages) is that it is an obvious and painful grab for resources by the state. Taxes make the costs of war very visible and spread them across the whole population. (Conscription is very visible, but more concentrated on the draftees.) From the standpoint of political actors, it would be preferable to raise the necessary resources in a way that is much less obvious and therefore has less potential for political conflict. Whenever politicians can disguise and/or delay the true costs of their programs, they will do so. This is where the monetary system enters the picture.

Governments that can either create money directly or use regulation to force banks to provide the resources will be able to conduct war more often and with less political resistance than those that cannot.

From 1791 to 1811, the federal government had partial ownership of the First Bank of the United States, which did not charter or regulate banks, but instead produced a limited amount of currency and served as the government’s bank. With the completion of the War of 1812, it became convenient for the federal government to have such a bank in operation again, and so the Second Bank of the United States was created in 1816 (lasting until 1836).

In 1863 the federal (Union) government for the first time offered charters for individual banks. With charters came regulations, one of which was the requirement that bank-issued currency be backed with U.S. government bonds. Whenever a federally chartered bank wanted to give its customers paper currency, it had to purchase such bonds, whose face value slightly exceeded the value of the currency, and then present them to the Comptroller of the Currency in Washington, who then printed the bank’s notes. Aside from the effect on war finance discussed below, this cumbersome process was the root of the periodic currency panics that struck the post-Civil War banking system and ultimately led to the Federal Reserve System as the “solution” in 1913.

Guaranteed Bond Market

The stated rationale for the bond-collateral requirement was that it provided safety in case the bank failed and could not redeem its notes in gold. However, Congress also knew that the requirement would, in theory, create a guaranteed market for U.S. government bonds, which in turn would enable the Union government to have revenue to pay for the Civil War. Interestingly, when the federal government first offered the charters, almost no banks signed up; they kept their state charters because the federal charters offered no advantages and some minor disadvantages. Not content to lose that way of financing the war, Congress quickly passed a 10 percent tax on the banknotes of state-chartered banks. This now made federal charters notably more advantageous, leading a significant number of banks to apply. By the end of the 1860s federally chartered banks were proliferating and the large market for the bonds had come to pass. Between the original bond-collateral requirements and punitive tax on the state-chartered banks, the federal government used its power over the monetary system to ensure a market for bonds to pay for the Civil War.

Although the Great Depression was itself not a war, it certainly took on many of the characteristics of one, as the Roosevelt administration attempted to pass legislation and programs that were of questionable constitutionality and popularity. Like many wartime activities, it is plausible to argue that the New Deal programs benefited business constituencies more than the public at large. (Halliburton’s role in the Iraq War provides a contemporary example of this sort of damaging corporate capitalism.) The administration’s outlawing of private gold holdings in 1934 and the Banking Act of 1935, which created a variety of new federal interventions—the most notable giving the Federal Reserve new powers to create money through bond purchases—were both examples of using the monetary system to provide resources for a growing state. These powers were certainly useful when the government took the country into World War II a few years later.

Vietnam Inflation

The Vietnam era provides an example of a direct connection between inflation of the money supply and war finance. The Johnson administration made a conscious decision to finance the Vietnam War through inflation rather than higher taxes. The increase in money was accomplished by buying up government bonds from financial institutions; as payment, the government simply credited the institutions’ accounts. This saved interest payments on those bonds and therefore also allowed the government to issue additional Treasury securities at the same total interest cost they had before the new money was created. The bottom line was that the Fed created additional money and allowed Congress to run more debt at no greater cost in the process.

At the time Federal Reserve Notes held by foreign central banks were still redeemable in gold at the Fed. As a result of the inflation (depreciating dollar) of the late 1960s, the Fed saw a massive flow back of Federal Reserve Notes from foreign governments, which began to reduce U.S. gold holdings. This drain of gold reserves led President Nixon to close the “gold window” in 1971, breaking the last remaining link between the dollar and gold. With excess supplies of money no longer generating any direct negative economic consequences for the Fed, the even-greater inflation and macroeconomic disorder that characterized the rest of the 1970s and ’80s were no surprise.

Thus the need to finance the Vietnam War led to increased government control over money, which led to macroeconomic disorder (much as we saw in the late nineteenth-century banking panics), which in turn led to calls for more government intervention. Aside from the direct problems of financing the warfare state, increased control of money by the state often sets off what Ludwig von Mises called the “interventionist dynamic,” in which one state intervention has negative unintended consequences that create the perceived need for more intervention. The business cycle is one example of this process.

One can tell similar histories about the creation of central banks and other forms of government monetary intervention in other countries across the globe. The need to fund war and empire has been behind the creation of many a central bank. It’s easier to pay for bombs and bullets if you have the equivalent of a printing press at your fingertips.

Because inflation’s costs are normally dispersed, subtle, and longer term, politicians find it a politically more palatable way to raise revenues, especially for unpopular causes. This point is even more important because politicians play up the very short-term benefits of inflation as if they were a panacea for a stalled economy. Persuading the public to accept those ephemeral and small short-term gains without an understanding of the long-term costs is part of the general deception often used to promote empire-building wars.

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2. Free Money Is Sound Money
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