From the Archives: Will 2011 state election voters feel enough pain to solve state budget crises?

Will 2011 state election voters feel enough pain to solve state budget crises?
December 4, 2010 1:22 PM MST

At the annual holiday dinner hosted by the Mercatus Center on December 1, economist Eileen Norcross spoke to the Charlottesville Libertarian Examiner about the impending crisis in state budgets. Norcross is a senior research fellow at Mercatus and co-founder of the web site StimulusWatch.org.

Norcross answered questions about state budget shortfalls and the “fiscal evasion” tricks that state governments play to create the appearance of balanced budgets. Most states, she explained, are facing serious consequences as a result of distended pension obligations and growing expenditures.

Some better than others
Still, she said, “there are a few states that are not in terrible shape,” such as South Dakota and Wyoming.

Some states are doing better because they “are simply smaller” and “don’t have as big of a public sector workforce. They don’t have the same pension obligations that some of the mismanaged states like Illinois and California do.”

Even so, Norcross warned, “all states are facing one crisis, and that is in Medicaid and rising health care costs. That is a feature of all state budgets.” Another universal feature, she added, is education spending, which “has been baked into the cake.”


Stimulus problems
Referring to research that shows that the federal stimulus money of the past couple of years may lead to budget problems for state governments in the future, Norcross cited research conducted for the Mercatus Center by Russell Sobel and George Crowley on the effects of intergovernmental transfers.

Sobel and Crowley “found that for every dollar of federal money that’s transferred to the state government, that raises future taxes by 40 cents,” Norcross reported.

Why is that?

“Once you undertake a public works project and the stimulus money goes away, you still have to finish that project. You have to pay for those workers [and] you might have to issue bonds to complete the project. In other words, they may have expanded commitments that they now have to fund themselves.”

2011 state elections

Eileen Norcross

In 2011, Kentucky, Louisiana, New Jersey, and Virginia will be holding state legislative elections, and these budgetary issues may have an effect on their outcomes but, Norcross cautioned, “that’s going to depend on the pain that the electorate feels.”

She said the case of New Jersey is “interesting,” because recently “when property taxes got so onerous on the average homeowner, [voters] actually turned out in force during the school budget election and they voted down a lot of school budgets in New Jersey.”

The number of school budgets rejected was “the greatest number since 1976,” she said, “because they were really voting against a tax hike.”

The results of next year’s elections, Norcross concluded, is “really going to depend on the extent to which the electorate is feeling the pain today or whether legislators are engaging in that kind of fiscal evasion, trying to buy more time, [and] pushing that debt onto future taxpayers.”


Publisher's note: This article was originally published on Examiner.com on December 4, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

From the Archives: Balanced-budget gimmickry hides states' fiscal crises, says Eileen Norcross

Balanced-budget gimmickry hides states' fiscal crises, says Eileen Norcross
December 4, 2010 12:58 PM MST

Economist Eileen Norcross, who specializes in state and local budgetary policy at the Mercatus Center at George Mason University in Northern Virginia, spoke to the Charlottesville Libertarian Examiner on December 1 about the impending crisis in state budgets.

She explained that states are experiencing persistent budget deficits, often as the result of ballooning pension obligations.

She noted that these budgetary shortfalls are taking place even though most states have a constitutional requirement to balance their budgets.

Balanced-budget 'gimmickry'
This happens, Norcross explained, because “it’s possible to have a balanced budget yet to grow spending every year.” There are different answers to the question, “What does budgetary balance mean?”

Norcross pointed out that “while on the books they can claim budgetary balance, they also engage in a lot of gimmickry, what I call ‘fiscal evasion.’”

Eileen Norcross

She explained:

“For years, states have been finding ways to balance their books without having to raise taxes directly, so they take on more debt, they dump trust funds into the general fund, they defer their pension obligations: That’s how some of these states have been balancing their books. It gives them the temporary illusion that they’ve met their commitments yet they really haven’t. That’s revealing a structural instability in these revenue streams.”

Noting that “Virginia is doing relatively well compared to the other states,” Norcross added that “there are a few things that concern me.”

For one thing, the Virginia state government “deferred [its] pension payment this year. It’s not a good practice.”

This is not unique, she said.

Pension obligations
“All the states have undervalued the size of the obligation that they owe to their public sector employees by an order of magnitude. What they claim on their books looks bad, but what they actually owe is far greater.”

In Virginia and other states, Norcross continued, “what concerns me is when [they] defer their pension obligations, they’re basically passing the buck [or] kicking the can down the road, but that’s not going anywhere. They’re going to owe those public sector workers” eventually.

In the third part of this interview, Norcross looks at which states are doing a better job, and whether fiscal matters will affect the behavior of voters in 2011 state legislative elections.

Publisher's note: This article was originally published on Examiner.com on December 4, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

From the Archives: Mercatus Center economist Eileen Norcross notes state budget ‘fiscal evasion’

Mercatus Center economist Eileen Norcross notes state budget ‘fiscal evasion’
December 4, 2010 12:43 PM MST

On December 1, the Mercatus Center at George Mason University hosted its annual holiday dinner, this year featuring novelist Christopher Buckley as after-dinner speaker. About 300 people attended, also hearing pre-dinner remarks from GMU economics professor Russell Roberts, co-creator of the viral video, “Fear the Boom and Bust” with rapping versions of F.A. Hayek and J.M. Keynes.

Economist Eileen Norcross is a senior research fellow at the Mercatus Center who closely follows state and local budgetary policy. Two of her recently published working papers are “Fiscal Evasion in State Budgeting” and “The Crisis in Public Sector Pension Plans.”

At the cocktail reception preceding the dinner, Norcross spoke to the Charlottesville Libertarian Examiner about the crisis in state budgets across the country.

‘Persistent budget deficits’

State and local budgets are an important research topic, she said, “because so many state and municipal governments are experiencing persistent budget deficits. They’re finding it difficult to balance their books and it’s projected that states are not likely to find fiscal balance until 2013.”

There are common reasons for this situation that cross state lines, Norcross explained.

“States have growing pension obligations that they have not funded. These bills are coming due. They’re going to have to contribute more to their pension systems to pay public sector workers. This is going to crowd out their ability to meet their growing Medicaid obligations.”

Workforce cutbacks

Eileen Norcross

Moreover, with state revenues falling, their spending grew “in the decade leading up to the recession,” she said. “They’ve built commitments into their budgets that they’re now finding it very difficult to cut. That means cutting back on the public sector workforce and other things have become very challenging for states.”

Even with money from the federal government, the situation is still serious.

“With the stimulus drying up they don’t have much to go on here,” Norcross said. “They’ve either got to raise taxes or find other places to cut.”

In the second part of this interview, Norcross answers questions about constitutional requirements for balanced budgets, deferred pension obligations, and the negative effect of stimulus money on state budgets.


Publisher's note: This article was originally published on Examiner.com on December 4, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

Guest Post: Natural Disasters Are Not Good for the Economy

by Nicolás Cachanosky

Every time there is a natural disaster old economic fallacies make their appearance. And they are usually always the same. In particular, the argument that a natural disaster is good for the economy. This should make little sense.

Wealth is not created by destroying things. A natural disaster destroys wealth, doesn’t create it. I doubt anyone affected by a hurricane would argue that he is better off after the natural disaster than before.

The argument that an event such as a natural disaster is good for the economy rests in the positive impact seen in GDP (as is argued) after the natural event. If GDP increases, then the economy is doing better. But this is a misreading of GDP. This variable is a flow of wealth, it is not a stock of accumulated wealth. It is possible that wealth creation (flow) increases at the same time the stock of wealth is decreasing. And this is what happens during a natural disaster.

Imagine that someone’s house caught fire and burnt down. Because of this situation, this person decides to start working extra hours to increase his income and be able to buy a new one. The extra hours makes his income (GDP) increase. But his situation is considerably worse because he lost his stock of wealth (remember Bastiat’s broken window fallacy…?). Arguing that a natural disaster (or a war, etc…) is good for the economy is like arguing that this person is better of because he has to work extra hours to recover his loss.

This is just another case of a too common fallacy in economics. We know that if the economy is doing better the result will be better GDP and unemployment indicators. But from observing a better GDP and unemployment indicators we cannot, and should not, conclude that the economy is doing better. More important than observing what is happening to GDP is understanding why is changing its behavior.

It could be argued that one of the problems of the Keynesian view of the world is the focus on what happens to output and unemployment rather than why these variables are moving. Not surprisingly, we get to the conclusion that going to war (or having a natural disaster) would be a good way to achieve full employment.

Reprinted from Notes on Liberty.

Nicolás Cachanosky is an Assistant Professor of Economics at Metropolitan State University of Denver, a co-editor of the journal Libertas: Segunda Época, and the manager of El Hub Económico, an index of Argentine economic series. He is a macroeconomist with interests in business cycles, monetary theory and policy, and comparative institutions.

This article was originally published on FEE.org. Read the original article.

Guest Post: Don Quijote, Man of Free Markets

by Eric Clifford Graf

Economists from the Austrian School have long argued that the free-market mindset, which reached its pinnacle during the classical liberal period of the 18th and 19th centuries, traces its own origins back to the early modern period, especially the ideas of the neo-scholastic thinkers of 16th and 17th century Spain known as the School of Salamanca.

Just to name a few, men like Domingo de Soto (1494-1560), Martín de Azpilcueta (1491-1586), Diego de Covarrubias (1512-77), Luis Saravia de la Calle (1500s), Tomás de Mercado (1525-75), Luis de Molina (1535-1600), Juan de Mariana (1536-1624), and Felipe de la Cruz Vasconcillos (1500s) were keen to define, analyze, debate, and explain things like interest rates, the pricing of goods and services, the causes and effects of inflation, the advisability of different monetary policies, and the relation between supply and demand.

Miguel de Cervantes (1547-1616), author of the first modern novel, Don Quijote de la Mancha (part one, 1605; part two, 1615), was familiar with the School of Salamanca. As evidence, here are five major ideas at the core of free-market thinking which are also at the core of Don Quijote:

Subjective Value
Salamancan and Austrian economists embrace the notion that free and voluntary exchange implies that even two wrongs can make a right. If both of us leave happy, the “true” value of things we exchange matters less than the fact that we exchange them. Tastes, wants, and needs are subjective. Indeed, such differences are precisely why we produce stuff and trade it. Without them we would all be poor, starving brutes.

Examples of subjective value theory abound in Cervantes. For example, in Don Quijote Part 1 Chapter 21, Don Quijote, the eccentric hidalgo (gentleman) asks Sancho, “Do you not see that knight coming toward us, mounted on a dappled gray and wearing on his head a helmet of gold?” The squire is unconvinced: “What I see and can make out ... is just a man riding on a donkey that’s gray like mine, and wearing something shiny on his head.”


The Time Value of Money
In the Protestant world, men like John Calvin and Henry VIII began eroding usury laws around 1550. In Spain, the Salamancans debated. Saravia’s Instrución de mercaderes (1544) marked a transition between different ways of thinking about business; Mercado’s Suma de tratos y contratos (1569) advanced a liberal view of charging interest; Vasconcillos’s Tratado único de intereses (1637) indicated the basic injustice of borrowing money for free.

Cervantes’s critique of usury laws appears in Don Quijote Part 1 Chapter 4’s dialogue between the hero and Juan Haldudo regarding the back pay the peasant owes a shepherd. Don Quijote calculates that “nine months, at seven reales a month” comes to “73 reales,” which includes an interest of 10 reales. It’s a game of perspectives. If we laugh at Don Quijote, we endorse the official policy against interest; if we accept his calculation, we think like rational market participants.

By the way, a surcharge of 10 reales for the use of 63 reales for nine months, or 21% annually, was a reasonable rate around 1600.


Free-Labor Markets
Karl Marx and Friedrich Engels credited Thomas Hobbes as an originator of their materialist assessment of how the world works. They liked Hobbes’s critique of metaphysical thinking but also his understanding of labor as a commodity subject to the law of supply and demand. A fundamental aspect of the transition from feudalism to bourgeois capitalism involved an awareness that we should compensate people for their property or services.

Hobbes was a serious reader of Don Quijote. Throughout the book, squire and hidalgo negotiate Sancho’s salary. In Part 1 Chapter 20, Sancho presses his master: “I would like to know ... just how much a squire made from a knight-errant in those days, and if they were paid on a monthly basis or daily, like bricklayers.” When Sancho threatens to go on strike in Part 2 Chapter 7, Sansón Carrasco, also known as “perpetual diversion and delight of the courtyards of the schools of Salamanca,” offers his services. Don Quijote perceives a market: “Did I not tell you, Sancho, that I would have plenty of squires from whom to choose?”

Stable Currency 
John Maynard Keynes observed that only one man in a million perceives the destructive effects of inflation. Hoping likewise, the Habsburg kings of early 17th-century Spain undertook the first modern industrialized production of fiat money to finance their wars, corruption, and extravagance. The results correlate well with the fall of the Spanish Empire marked by the Treaty of Westphalia in 1648 (see figure below). Artificially induced inflation was criticized by members of the School of Salamanca, especially Mariana. Philip III burned Mariana’s books and the Inquisition charged him with lèse-majesté – insulting the monarch, which was treason.

Purchasing power of the billon cuarto coin reverting to the market value of copper, 1597-1659. The maravedí was one of the era’s units of account. Source: Federal Reserve Bank of Chicago.

In Don Quijote Part 1 Chapter 1, the first metaphor in this greatest work of fiction involves a comparison between Rocinante’s hooves and the decayed purchasing power of the era’s quarter coins. Later, in Part 2 Chapter 17, Cervantes has his hero attack what is first described as the king’s money cart. It’s really a cart carrying the King’s lions, which refuse to fight with Don Quijote. But when he uses gold coins to tip the driver and the lion tamer, bribing them to say he vanquished the beasts, it’s symbolic: gold is a store of value against Philip III’s money. The narrator reports that the lion tamer “promised to relate that valiant deed to the King himself when he arrived at court.”

Sweet Commerce
Montesquieu’s notion of “doux-commerce,” a vision of the positive effects of trade, anticipated Adam Smith, James Madison, David Ricardo, Norbert Elias, Steven Pinker, and Niall Ferguson. Anticipating Montesquieu was Mariana, who said, “There’s nothing more excellent in human life than that good faith by which commercial relations are established and society among men is constituted.”

Don Quijote also concerns this lesson. The protagonist’s madness dissipates as he comes to terms with bourgeois virtues. In Part 1 Chapter 1, he is mismanaging his domestic economy such that not even Aristotle could help him. Just one chapter later, he learns that, unlike chivalric novels, the real world requires payment for goods and services. Fittingly, the innkeeper knights him by pretending to read Latin from an accounting ledger. By Part 1 Chapter 7, our hero grasps that he must finance his adventures: “Hawking one thing and pawning another, all for less than he should have, he came up with a reasonable amount.” Don Quijote is perhaps most bourgeois in Part 1 Chapter 44, where he quietly resolves, without his usual recourse to violence, a payment dispute between the innkeeper and two guests.

The greatest irony involving commerce in Don Quijote is that the marketplace rescues the novel from its own violence against itself. In Part 1 Chapter 9, the narrator explains how he acquired the continuation of the text that ended in the middle of the knight’s battle with the Basque in Part 1 Chapter 8. Asymmetrical information about bundles of paper the narrator finds in Toledo’s marketplace results in their purchase and then the employment of a local Morisco to translate them. Think about this: we couldn’t read the novel past Part 1 Chapter 8 were it not for the miracle of a multiethnic marketplace for goods and services.

Cervantes was a capitalist? An Austrian? A free-market Randian? A libertarian? An English liberal? I hedge by saying he was a precursor.

Nevertheless, when it comes to thinking about economics, there’s a tangible intellectual feedback mechanism amplifying the influence of the first modern novel: Salamancan thoughts on political economy influenced Cervantes; later, proto and classical liberals who also read Salamancans often validated their ideas while reading Don Quijote. John Locke, Thomas Jefferson, and Frédéric Bastiat were also intense fans. But that is another story.

Republished from PanAm Post.

Eric Clifford Graf (PhD, Virginia) is director, writer, and host of Universidad Francisco Marroquín’s Discover Don Quijote de la Mancha, a MOOC (“massive open online course”) available in both English and Spanish.

This article was originally published on FEE.org. Read the original article.

From the Archives: Is 'income inequality' a serious problem?

Publisher's note: This article was originally published on Examiner.com on April 7, 2010. The Examiner.com publishing platform was discontinued July 1, 2016, and its web site went dark on or about July 10, 2016.  I am republishing this piece in an effort to preserve it and all my other contributions to Examiner.com since April 6, 2010. It is reposted here without most of the internal links that were in the original.

This was my third article published on Examiner.com. Eventually I wrote about 500 articles that appeared on the now defunct news site over the six years between April 2010 and June 2016.

Is 'income inequality' a serious problem?
April 7, 2010 6:02 PM MST

One doesn’t expect The Sabre, a web site devoted to sports at the University of Virginia, to be a place to find long discussion threads about political and economic issues. Yet on March 30, a lively exchange of ideas ensued when one of its contributors posted a quotation from former Federal Reserve Board Chairman Alan Greenspan: “Income inequality is where the capitalistic system is most vulnerable."

In his 1996 book, Hidden Order: The Economics of Everyday Life, legal scholar and economist David Friedman wrote:

“When a psychiatrist wants to get his audience’s attention, he talks about sex. Economists talk about the income distribution. In both cases the audience’s interest is prurient (what are other people doing?), puritanical (that they shouldn’t be?), and personal (how am I doing?). In both, there is the thrill of violating taboo; although sex is gradually becoming an accepted topic of conversation, asking how much money someone makes is still beyond the pale.”

Though asking about someone’s income is still not permitted in polite conversation, it is not forbidden in political discourse. Members of Congress and political candidates talk about it all the time, sparking the question: Is “income inequality” something that should worry us?

George Mason University economist Tyler Cowen put the question in perspective in the New York Times. “What matters most is how well people are doing in absolute terms,” he wrote. “We should continue to improve opportunities for lower-income people, but inequality as a major and chronic American problem has been overstated.”

Fears about income inequality stem from a pre-modern understanding of economics, in which because some people “have,” others “have not.” In the pre-industrial, pre-capitalist world, this was largely true. If Midas had a lot of gold, it meant he was taking it from his subjects, who had no gold.

But the fabled Midas hoarded his gold; he neither spent it nor invested it. Today’s affluent people both spend and invest their earned incomes. They don’t hide it under their mattresses. As a consequence, they create products that fulfill our needs and wants, hire workers, and make other people wealthy in the process – or at least more wealthy than they would have been in the absence of spending and investment.

In his magnum opus, Human Action: A Treatise on Economics, Austrian economist Ludwig von Mises wrote:

“The inequality of incomes and wealth is an inherent feature of the market economy. Its elimination would entirely destroy the market economy.

“What those people who ask for equality have in mind is always an increase in their own power to consume. In endorsing the principle of equality as a political postulate nobody wants to share his own income with those who have less. When the American wage earner refers to equality, he means that the dividends of the stockholders should be given to him. He does not suggest a curtailment of his own income for the benefit of those 95 per cent of the earth’s population whose income is lower than his.”

In other words, “more wealth for me, but not for thee” is the principle at play.

Redistributing unequally distributed wealth would require one of two things:

One option is passing laws that forbid businesses from paying their employees – including high-level management, rock stars, and Oscar-winning actors and actresses – what they (the businesses) and the market think they are worth. That is, set ceilings on earnings.

The other option is to establish a system of confiscatory taxation that would take earnings from the person who earned it, in order to bring their income beneath an arbitrary ceiling, and give it to the government, which in turn will spend it on goods and services provided by other rich individuals and the companies they own. That is, rob Peter to pay Paul.

Commenting on the “economic consequences of confiscatory policies,” Mises wrote that “in the long run such policies must result not only in slowing down or totally checking the further accumulation of capital, but also in the consumption of capital accumulated in previous days. They would not only arrest further progress toward more material prosperity, but even reverse the trend and bring about a tendency toward progressing poverty.”

Put more simply, by constricting the capacity of the rich to create jobs and buy things, one ends up creating more unemployment and ultimately punishing the poor and middle classes.

In a PBS documentary film about his life, The Power of Choice, the late Milton Friedman said, “The society that puts equality before freedom will end up with neither. The society that puts freedom before equality will end up with a great measure of both.”

That is a lesson well-learned by policymakers in Washington and in Richmond.

'Bootleggers and Baptists': An Interview with Adam Smith

Over on Book Reviews by Rick Sincere is a recent interview with economist Adam Smith of Johnson & Wales University.

Smith is the coauthor, with his grandfather Bruce Yandle, of Bootleggers & Baptists: How Economic Forces and Moral Persuasion Interact to Shape Regulatory Politics, which was published by the Cato Institute in September.

The two authors gave a presentation about their book at Cato in October. Afterward, I spoke to Smith about the book and its title. Here is an excerpt:

Smith explained that the term “bootleggers and Baptists” originated during alcohol Prohibition in the 1920s, when “you had bootleggers and Baptists with aligned interests” even if they did not realize it.

Baptists, he explained, proclaimed “Down with legalized distribution of alcohol!” because they saw drinking as morally detrimental. Bootleggers, too, proclaimed “Down with legalized distribution of alcohol!” because Prohibition raised the price of illegal liquor and fed more profits to the bootleggers.

“It was a boon to the bootleggers,” Smith explained, “and the Baptists were kind of oblivious to that situation.”

Broadening the concept to include other kinds of regulations, Smith said, “what we see today in our modern political economy [are] many, many manifestations of the same kinds of strange bedfellows.”

More and more, he said, “we're seeing that those bedfellows are recognizing one another and coming together to form even more powerful would-be bootlegger/Baptist coalitions.”

There is also a relationship between “bootleggers and Baptists” and “crony capitalism,” when government grants preferential treatment to certain, well-connected businesses.

Smith said that, in the book “we call it 'bootlegger/Baptist' capitalism instead of crony capitalism.”

Read the whole thing here.

Does Robert Sarvis Disdain Austrian Economics?

Robert Sarvis

Various individuals who have been trying to cast doubt on Virginia gubernatorial candidate Robert Sarvis' libertarian credentials have pointed to a comment he made in an interview with Ron Paul biographer Brian Doherty in Reason magazine, which has been interpreted to mean he is not entirely dedicated to Austrian economics, a staple of libertarian thinking.

Sarvis is the Libertarian Party's nominee for governor. He faces two rivals on Election Day, November 5: Republican nominee Ken Cuccinelli and Democratic nominee Terry McAuliffe.

Current public opinion polls show Sarvis might expect 8 to 10 percent of the vote, an unusually high number for a Libertarian (or any third-party or independent candidate for statewide office) so close to an election.

Charles C.W. Cooke cited the Reason interview on National Review Online on October 31, for example. 

Another instance of the questioning of Robert Sarvis' libertarian bona fides can be found on Examiner.com, where International Politics Examiner Andrew Moran wrote:

George Mason University is known for its free-market economics program (see Walt Williams). This is where Sarvis attained his economics degree. However, he doesn’t adhere to the principles of Austrian Economics, which is usually what libertarians promote.

Here is what Sarvis said in his interview with Reason: “I’m not into the whole Austrian type, strongly libertarian economics, I like more mainstream economics and would have been happy to go elsewhere.”

Wait does he mean “mainstream economics” that has gotten us into this current mess and continues to cause more problems?

An answer to that question may be found in an interview I did with Sarvis two years ago, when he was running for the Virginia state Senate.

That interview was also published on Examiner.com (just a coincidence). I had asked Sarvis about his favorite economist, and he offered up names of three people he admired: Friedrich Hayek, Adam Smith, and Scott Sumner.

It seems that, to Sarvis, "mainstream economics" means that derived from the work of Adam Smith, author of An Inquiry into the Nature and Causes of the Wealth of Nations.

Here's the relevant excerpt:

His libertarian philosophy is reflected in his answer when asked about his favorite economist. Without pausing, he named Friedrich von Hayek, the Austrian Nobel laureate who taught at the London School of Economics and the University of Chicago.

“Hayek is someone who really influenced my thinking,” Sarvis explained: “How to think about problems that face national economies and how public policy can influence it in many unintended ways.”


While a lot of people, such as talk-show host Glenn Beck, focus on Hayek’s 1944 book, The Road to Serfdom, Sarvis said he “was more influenced by his 'The Use of Knowledge in Society,' which was probably the seminal paper that won him the Nobel Prize, and also [volume] one of Law, Legislation, and Liberty, where he talks about rules and order.”

In addition to Hayek, Sarvis cites Adam Smith as an influence in his economic thinking.

“In philosophy, they say, there’s Plato and all else are footnotes,” he quipped. “I think that can be said more truly of Adam Smith than of Plato.”

Among contemporary economists, Sarvis pointed to Bentley University professor Scott Sumner, who blogs at TheMoneyIllusion.com. As Americans have focused on the financial crisis and the recession, he said, “Sumner has been the most persuasive in what exactly is going on [with regard to the] monetary policy mistakes of the Fed. We really are in many ways repeating some of the mistakes of the depression.”

Then there is Sarvis' biographical sketch on the web site of the Mercatus Center at George Mason University. (Both the Mercatus Center and the GMU economics department are hotbeds of Austrian economists.)

Emphasis added below:

Robert is a native of Northern Virginia and a lifelong believer in freedom, free markets, and the rule of law. He holds degrees in mathematics from Harvard University and the University of Cambridge and a JD from NYU School of Law. During law school, he co-founded a libertarian and classical liberal law journal, the NYU Journal of Law & Liberty, dedicating the first issue to Friedrich Hayek, and he has been outspoken in arguing against government regulation of the tech industry. Robert has worked as a software developer, a lawyer, and a tech entrepreneur, and his research interests span a wide range of topics relating to law, economics, and public policy.

Can the off-hand comment Sarvis made to Reason about his choice of a graduate school overwhelm the other evidence of his admiration for, and influence by, Austrian economists?

Recent Articles on Examiner.com: Politics 2012

Recent articles I've written as the Charlottesville Libertarian Examiner include Labor Day interviews with Constitution Party presidential candidate Virgil Goode; U.S. Senate candidates from Virginia Tim Kaine and George Allen; U.S. Senator Mark Warner; Sixth District Congressman Bob Goodlatte; and Goodlatte's Democratic opponent, Andy Schmookler.

Two-part interviews were necessary for Libertarian vice presidential candidate Jim Gray ("Libertarian VP candidate Jim Gray warns of ‘obese federal government’" and "Libertarian VP nominee Jim Gray reflects on electing judges, Gary Johnson") and for George Mason University economist Peter Boettke ("GMU economist Peter Boettke asserts the ‘dismal science’ can be 'entertaining'" and "Economist Peter Boettke deflates candidates’ concept of ‘energy independence’").

Charlottesville-based historian and prolific author Arthur Herman merited an interview divided into three parts: "Historian Arthur Herman explores America’s World War II industrial effort," "On D-Day anniversary, historian Arthur Herman recalls WWII industrial effort," and "World War II industry effort led by Ayn Rand-type characters, says historian." The Herman interview is also available as a Bearing Drift podcast and in consolidated form on Book Reviews by Rick Sincere.

Intermixed with all this are interviews with Virginia Lieutenant Governor Bill Bolling,Governor Bob McDonnell, Northern Virginia businessman Tim Donner (on his remarkable recollections of the events of September 11, 2001), and Delegate David Toscano.

Other authors who have spoken into my microphone include Jonah Goldberg (who talked about his fascination with witch hunts). political commentator Michael Barone, pollster Scott Rasmussen, and David Lampo (on his book, A Fundamental Freedom: Why Republicans, Conservatives, and Libertarians Should Support Gay Rights).

 There were several articles on reactions to the Supreme Court's Obamacare ruling ("Conservatives decry Supreme Court’s health-care ruling," "Attorney General Ken Cuccinelli says Obamacare decision is 'a win for liberty,'" "More Virginia politicians react to Supreme Court’s Obamacare ruling," and "Gay and libertarian GOP groups critique SCOTUS Obamacare ruling").

Congressman Robert Hurt (R-VA5) reflected on the meaning of the Fourth of July and reacted negatively to calls to impeach Chief Justice of the United States John Roberts.  And Florida Congresswoman Ileana Ros-Lehtinen, who chairs the House Foreign Affairs Committee, reacted positively to the idea of marriage equality for gay men and lesbians.

Be sure to visit my CafePress store for gifts and novelty items!
Read my blog on Kindle!
Follow my tweets on Twitter! 
See my articles on Examiner.com!

Friedrich Hayek: 19th-Century-Born Video Star of the 21st Century

Sunday's New York Times featured a book review by Francis Fukuyama of a new edition of Austrian economist Friedrich Hayek's The Constitution of Liberty, originally published in 1960 by the University of Chicago Press (the same publisher of the new edition, which is edited by historian Ronald Hamowy).

As Fukuyama notes in his first paragraph, Hayek -- who was born in 1899 and who died two decades ago -- is enjoying something of a renaissance of interest:

The publication of the definitive edition of Friedrich A. Hayek’s “Constitution of Liberty” coincides with the unexpected best-seller status of his earlier book “The Road to Serfdom” as a result of its promotion by the conservative talk-show host Glenn Beck. In an age when many on the right are worried that the Obama administration’s reform of health care is leading us toward socialism, Hayek’s warnings from the mid-20th century about society’s slide toward despotism, and his principled defense of a minimal state, have found strong political resonance.

That Glenn Beck is a fan of Friedrich Hayek should not be held against Hayek, because the Austrian-born Nobel laureate -- who also wrote about politics, society, philosophy, and culture -- is admired by far more intellectually solid individuals, not just Lonesome Rhodes types but also university teachers, think-tank scholars, journalists, business executives, and rap-music video producers.

Rap-music video producers?

Indeed, a surprising YouTube hit of recent months has been "'Fear the Boom and Bust' a Hayek vs. Keynes Rap Anthem," produced by George Mason University economist Russell Roberts and video artist John Papola. Since its Internet debut in January 2010, "Fear the Boom and Bust" has racked up 2,212,104 hits (and counting), leading to a sequel that was released on April 27, "Fight of the Century: Keynes vs. Hayek Round Two," which has had 589,253 views in less than two weeks.

That's a lot of fans for two economists who ended up in the long run just as Keynes predicted they would.  Still, their ideas are still alive.

Here are the two videos.  You can judge their intellectual (and entertainment) quality for yourself.

"Fear the Boom and Bust":

"Round Two":

For those interested in diving deeper into the continuing controversy among public intellectuals about Hayek, his ideas, and his legacy, take a look at the Mercatus Center's Peter Boettke's brief response at Coordination Problem to Fukuyama (who has his own new book on store shelves now, part one of The Origins of Political Order).  I'm sure it is just the start of a stimulating conversation.

 

Be sure to visit my CafePress store for gifts and novelty items!
Read my blog on Kindle!
Follow my tweets on Twitter! 

See my articles on Examiner.com!

RLC Videos: Peter Schiff and Gary Johnson

The Republican Liberty Caucus (www.rlc.org) held its biennial national convention in Arlington, Virginia, on February 12, coincident with the annual Conservative Political Action Conference (CPAC), which was being held across the Potomac in Washington, D.C., that same weekend.

The day was full of policy discussions and speeches, punctuated by a business session at which new officers were elected to lead the RLC for the next two years.  Dave Nalle of Texas was re-elected as chairman, Aaron Biterman of Virginia was re-elected as vice chairman, Jason Jeff Hellenberg of Florida was re-elected as secretary, and Matt Nye (also of Florida) was elected treasurer, defeating longtime RLC activist Bill Westmiller, who in turn was elected an at-large member of the board of directors.

The evening banquet featured two prominent speakers:  investment analyst and 2010 candidate for the GOP Senate nomination in Connecticut, Peter Schiff, and former New Mexico Governor Gary Johnson, who is a potential candidate for President in 2012.

Schiff is the co-author of How an Economy Grows and Why It Crashes (with Andrew J. Schiff) and of Crash Proof 2.0: How to Profit From the Economic Collapse (with John Downes), as well as author of The Little Book of Bull Moves in Bear Markets: How to Keep Your Portfolio Up When the Market is Down. He is widely credited with predicting the dramatic economic downturn of 2008 when other economists were caught with their pants around their ankles.

Schiff spoke briefly and was well-received by the RLC members, many of whom subscribe to the theories of the Austrian school of economics that are consonant with much of Schiff's analysis.

With apologies for the dim lighting (something customary in hotel banquet rooms at dinnertime), here is the video of Peter Schiff's remarks:

Schiff was followed by Governor Johnson, who the day before had spoken at CPAC and, we learned earlier on Saturday afternoon, had placed third in the CPAC presidential straw poll (with Ron Paul and Mitt Romney placing one and two and virtually tied with Governor Chris Christie of New Jersey, who says he lacks the arrogance to run for President after only one year in office).

The Republican Liberty Caucus also sponsored a straw poll that day, and Johnson took first place in that instance, with more than double the votes received by Texas Congressman Ron Paul (who is still a favorite among libertarian Republicans) and six times the number of votes received by the third-place finisher, former House Speaker Newt Gingrich.

Johnson has been traveling across the country -- including numerous visits to New Hampshire and Iowa -- delivering his message, which is largely autobiographical. He talks about his experience as governor of New Mexico, where the registered voters have a 2 to 1 ratio of Democrats to Republicans, and how he was able to reduce the size and scope of government while vetoing 750 bills, some of which were passed unanimously in the state legislature. Yet only two of his vetoes were overturned. During his eight years in office, he vetoed more bills than all of the other 49 governors put together.

In his remarks, Johnson also pointed out how he had come to believe, during his term as governor, that the criminalization of marijuana is wrong-headed, that it is a waste of money and other resources, and that we need to rethink the drug war. Johnson was one of the few incumbent politicians to come out in favor of legalizing marijuana and he has not backed down from his position despite criticism.

Here is part one of Governor Johnson's dinner speech, which begins after a short introduction by RLC national chairman Dave Nalle:

Here is part two of Gary Johnson's RLC speech:

Early in this segment, Johnson salutes Peter Schiff for his on-target analysis of our economic situation -- more than a polite gesture, the former New Mexico governor shows a great deal of passion about how the federal government needs to cut spending, including in entitlements like Social Security, Medicare, and Medicaid, as well as defense and so-called "discretionary" spending.

Johnson also talks about his opposition to the Iraq War from the outset, and how he thinks the United States should get out of Afghanistan "tomorrow."

More RLC videos will be posted here later.

Be sure to visit my CafePress store for gifts and novelty items!
Read my blog on Kindle!
Follow my tweets on Twitter! 

See my articles on Examiner.com!