I’ll periodically remind you guys that if you’re interested in Nelson Nash’s “Infinite Banking Concept,” you should subscribe to our YouTube channel. I recently conducted a long interview with Nelson, and over the coming weeks we’ll be posting the best excerpts of it. We’ve already posted a bunch, but many more are coming. Here’s the first one:
My latest at Mises CA, sparked by Scott responding to Tyler Cowen on “causality.” The punchline:
…I want to point out an odd feature of Sumner’s worldview, which partly explains why it is (arguably) vacuous as an “explanation” of recessions. For the sake of argument, suppose Janet Yellen announces next Monday: “I have been reading the work of the Austrian economists, particularly this bald guy Murphy. I have realized that my predecessor, Mr. Bernanke, did a horrible thing by expanding the monetary base so much. Henceforth, to protect the value of the dollar and remove the Fed’s role in fueling asset bubbles, we will lock-in the current dollar-price of gold along the lines that Ludwig von Mises recommended for governments wishing to go back on a gold standard.”
But wait, the scenario gets more implausible. As soon as Yellen’s press conference ends, Barack Obama addresses the nation in this way: “My fellow Americans, well, some folks in my party lost their seats in the recent election. I realize government is the problem, not the solution, and in conjunction with the Republican leadership, we’re going to cut federal spending by 20% over the next quarter, and give a dollar-for-dollar reduction in personal income taxes across the board. Furthermore, effective immediately, all provisions of the Affordable Care Act will not be enforced, and we will repeal it as soon as Congress sends me a bill doing so–just so long as it abolishes the FDA and EPA too.”
Okay, now what would happen in this ridiculous story? There might be a technical recession upfront according to the NBER, but I think it’s safe to say that for 2015 as a whole, there would be strong economic growth, coupled with a decline in most consumer goods prices. Just grabbing numbers, let’s say when the dust settles, the BEA announces that in 2015, the U.S. economy experienced real GDP growth of 15% with a drop in consumer prices of 7%, yielding a growth in NGDP of 8%.
Thus, as the Fed announced it was going back on the gold standard, Scott Sumner would be forced to tell his readers, “Uh oh, Yellen has overshot. Thank goodness she eased the monetary tightness of the mad Bernanke, but now she’s erring on the other side, allowing NGDP to grow too rapidly. This type of easy-money regime will lead to the problems of too much Aggregate Demand that we suffered in the 1970s.”
I submit that this is a crazy way of discussing monetary policy.
My talk at the Acton Institute:
Sometimes you can read something that you’ve heard a thousand times before, but for whatever reason it hits you in a new way that changes your whole perspective. That recently happened to me when I was reading Albert Jay Nock’s Our Enemy, the State. To understand the context, you should know that I am a huge fan of the writings of Murray Rothbard, Thomas Paine, Thomas Jefferson, and Paul the Apostle. Yet there were some apparently enormous tensions (if not outright contradictions) between their works, which I had grappled with over the years but never fully resolved to my satisfaction. After reading a section from Nock, the tensions fell away; I feel intellectually liberated. In this post I’ll summarize my revelation, though this will be a theme I expect to elaborate for the rest of my career.
Nock: Government versus the State
Let me quote a lengthy passage from Nock, constituting the first section from Chapter 2 of his book, after which I will explain why it relieved so much of my cognitive dissonance:
AS FAR back as one can follow the run of civilization, it presents two fundamentally different types of political organization. This difference is not one of degree, but of kind. It does not do to take the one type as merely marking a lower order of civilization and the other a higher; they are commonly so taken, but erroneously. Still less does it do to classify both as species of the same genus – to classify both under the generic name of “government,” though this also, until very lately, has always been done, and has always led to confusion and misunderstanding.
A good example of this error and its effects is supplied by Thomas Paine. At the outset of his pamphlet called Common Sense, Paine draws a distinction between society and government. While society in any state is a blessing, he says, “government, even in its best state, is but a necessary evil; in its worst state, an intolerable one.” In another place, he speaks of government as “a mode rendered necessary by the inability of moral virtue to govern the world.” He proceeds then to show how and why government comes into being. Its origin is in the common understanding and common agreement of society; and “the design and end of government,” he says, is “freedom and security.” Teleologically, government implements the common desire of society, first, for freedom, and second, for security. Beyond this it does not go; it contemplates no positive intervention upon the individual, but only a negative intervention. It would seem that in Paine’s view the code of government should be that of the legendary king Pausole, who prescribed but two laws for his subjects, the first being, Hurt no man, and the second, Then do as you please; and that the whole business of government should be the purely negative one of seeing that this code is carried out.
So far, Paine is sound as he is simple. He goes on, however, to attack the British political organization in terms that are logically inconclusive. There should be no complaint of this, for he was writing as a
pamphleteer, a special pleader with an ad captandum argument to make, and as everyone knows, he did it most successfully. Nevertheless, the point remains that when he talks about the British system he is talking about a type of political organization essentially different from the type that he has just been describing; different in origin, in intention, in primary function, in the order of interest that it reflects. It did not originate in the common understanding and agreement of society; it originated in conquest and confiscation.
Its intention, far from contemplating “freedom and security,” contemplated nothing of the kind. It contemplated primarily the continuous economic exploitation of one class by another, and it concerned itself with only so much freedom and security as was consistent with this primary intention; and this was, in fact, very little. Its primary function or exercise was not by way of Paine’s purely negative interventions upon the individual, but by way of innumerable and most onerous positive interventions, all of which were for the purpose of maintaining the stratification of society into an owning and exploiting class, and a propertyless dependent class. The order of interest that it reflected was not social, but purely antisocial; and those who administered it, judged by the common standard of ethics, or even the common standard of law as applied to private persons, were indistinguishable from a professional-criminal class.
Clearly, then, we have two distinct types of political organization to take into account; and clearly, too, when their origins are considered, it is impossible to make out that the one is a mere perversion of the other. Therefore, when we include both types under a general term like government, we get into logical difficulties; difficulties of which most writers on the subject have been more or less vaguely aware, but which, until within the last half-century, none of them has tried to resolve. Mr. Jefferson, for example, remarked that the hunting tribes of Indians, with which he had a good deal to do in his early days, had a highly organized and admirable social order, but were “without government.” Commenting on this, he wrote Madison that “it is a problem not clear in my mind that [this] condition is not the best,” but he suspected that it was “inconsistent with any great degree of population.” Schoolcraft observes that the Chippewas, though living in a highly-organized social order, had no “regular” government. Herbert Spencer, speaking of the Bechuanas, Araucanians and Koranna Hottentots, says they have no “definite” government; while Parkman, in his introduction to The Conspiracy of Pontiac, reports the same phenomenon, and is frankly puzzled by its apparent anomalies.
Paine’s theory of government agrees exactly with the theory set forth by Mr. Jefferson in the Declaration of Independence. The doctrine of natural rights, which is explicit in the Declaration, is implicit in Common Sense;  and Paine’s view of the “design and end of government” is precisely the Declaration’s view, that “to secure these rights, governments are instituted among men”; and further, Paine’s view of the origin of government is that it “derives its just powers from the consent of the governed.” Now, if we apply Paine’s formulas or the Declaration’s formulas, it is abundantly clear that the Virginian Indians had government; Mr. Jefferson’s own observations show that they had it. Their political organization, simple as it was, answered its purpose. Their code-apparatus sufficed for assuring freedom and security to the individual, and for dealing with such trespasses as in that state of society the individual might encounter – fraud, theft, assault, adultery, murder. The same is as clearly true of the various peoples cited by Parkman, Schoolcraft and Spencer. Assuredly, if the language of the Declaration amounts to anything, all these peoples had government; and all these reporters make it appear as a government quite competent to its purpose.
Therefore when Mr. Jefferson says his Indians were “without government,” he must be taken to mean that they did not have a type of government like the one he knew; and when Schoolcraft and Spencer speak of “regular” and “definite” government, their qualifying words must be taken in the same way. This type of government, nevertheless, has always existed and still exists, answering perfectly to Paine’s formulas and the Declaration’s formulas; though it is a type which we also, most of us, have seldom had the chance to observe. It may not be put down as the mark of an inferior race, for institutional simplicity is in itself by no means a mark of backwardness or inferiority; and it has been sufficiently shown that in certain essential respects the peoples who have this type of government are, by comparison, in a position to say a good deal for themselves on the score of a civilized character. Mr. Jefferson’s own testimony on this point is worth notice, and so is Parkman’s. This type, however, even though documented by the Declaration, is fundamentally so different from the type that has always prevailed in history, and is still prevailing in the world at the moment, that for the sake of clearness the two types should be set apart by name, as they are by nature. They are so different in theory that drawing a sharp distinction between them is now probably the most important duty that civilization owes to its own safety. Hence it is by no means either an arbitrary or academic proceeding to give the one type the name of government, and to call the second type simply the State. [Bold added.]
The Importance of Consent
I had known for a long time that some people stressed the distinction between “government” and “the State,” but for whatever reason that had never seemed very important to me. I knew that in terms of political theory, I was a Rothbardian; I favored voluntary, contractual relationships for the provision of legal, police, and military services. The free market could provide these important services just as well as it could provide roads and schools. Since Rothbard himself used the term, I thought that made me an “anarchist” and I thought I was against “the government.” Sure, we could reflect on the rhetorical brilliance and moral courage of people like Thomas Paine, but oh they were just so naive, weren’t they?
But now I see that there’s no reason for me to jettison the classical liberal tradition; I can just take it at face value. Look again at how Thomas Jefferson explained the origin of “government” in the Declaration (I put it in bold above): People come together to secure their rights (which of course he earlier said were given to men by their Creator, and could be discerned as part of the Laws of Nature) and the resulting government is only just if it enjoys their consent.
Well great, that’s what it means to be a Rothbardian: A company offering judicial rulings or armed defense against robbers can’t shake its “customers” down for protection money against their will. That’s what the mafia does, and that’s what modern agents of the State do–which is why they are a professional criminal class, just as Nock diagnosed.
Amidst the drive to “raise consciousness” about the importance of consent when it comes to women’s bodies, let’s apply the same standard to all human interactions. When it comes to taking my money to fund wars in the Middle East, no means no.
Anarchism vs. Authority
Perhaps the reader doesn’t understand why the above was such an epiphany for me, but if it adds more detail, I should add that I was in a hotel room and had just read the Bible passage generated by Biblegateway.com, which drew from the opening of Romans 13:
Submission to Governing Authorities
13 Let everyone be subject to the governing authorities, for there is no authority except that which God has established. The authorities that exist have been established by God.
So I had the above in my mind–which caused the obvious and familiar trouble for me, since I am a Christian but also a Rothbardian–and then I literally started the second chapter of Nock’s book, which I’ve reproduced above; that’s precisely where my bookmark had been from the reading I’d done on the plane.
Notice that Romans 13 talks about the governing authorities, not the agents of the State. I am not at all opposed to authorities; in fact they are indispensable to civilization and the division of labor. Here’s an anarchist with serious street cred, Bakunin, making this point:
Does it follow that I reject all authority? Far from me such a thought. In the matter of boots, I refer to the authority of the bootmaker; concerning houses, canals, or railroads, I consult that of the architect or the engineer. For such or such special knowledge I apply to such or such a savant. But I allow neither the bootmaker nor the architect nor the savant to impose his authority upon me. I listen to them freely and with all the respect merited by their intelligence, their character, their knowledge, reserving always my incontestable right of criticism and censure.
So by the same token, if we imagine a truly free society in the vision of a Rothbard, there would be private judges rendering legal opinions that would be enforced (perhaps at gunpoint, depending on the situation) by employees of another agency. Yet as I stressed in my pamphlet, there is an important sense in which people would (normally) have submitted beforehand to these professionals and their “authority.”
The classical liberal tradition is imbued with the idea that one can only have freedom with the rule of law. I submit to my atheist friends that this seemingly paradoxical symbiosis is best captured in the doctrines of Christianity, with their perfect law of liberty, merging God’s Law and freedom under Christ. (I realize there will be a flurry of objections, but just remember that if the Christian God exists, then He created the entire physical universe de novo–atheist libertarians love homesteading except when it comes to the universe itself.)
I am not claiming that the above musings resolve all conflicts among the writers I’ve cited. Obviously, Thomas Jefferson didn’t think he was endorsing privatized military forces, and Murray Rothbard didn’t consider himself a Protestant.
However, what I am saying is that Nock’s distinction between government and the State is a crucial one, which I will respect from now on. The essential difference is consent: that makes all the difference between a legitimate agency of government providing protection services, versus a criminal department of a State running a protection racket.
Just a reminder, tomorrow (Tuesday) I’ll be giving a 12pm lecture on “sound money” at the Acton Institute. It’s my first time and the place is really impressive (I toured it today). If you’re in the Grand Rapids area, come check it out. Much better use of your time than voting.
In church today we covered this neat passage regarding Ezra’s leading people back to Jerusalem:
21 There, by the Ahava Canal, I proclaimed a fast, so that we might humble ourselves before our God and ask him for a safe journey for us and our children, with all our possessions. 22 I was ashamed to ask the king for soldiers and horsemen to protect us from enemies on the road, because we had told the king, “The gracious hand of our God is on everyone who looks to him, but his great anger is against all who forsake him.” 23 So we fasted and petitioned our God about this, and he answered our prayer.
I recognize that historically the State has often used religion to prop itself up, but that’s not an accurate interpretation of the Bible. A major theme of the book, running from start to finish, is that the faithful will look to God for their security, not earthly riches or rulers.
I realized that a lot of my recent YouTube postings have been karaoke videos. I decided to throw some red meat to the true fans.
==> An oldie (1936!) but goodie: Albert Jay Nock on ignoring the masses and catering to the Remnant.
==> Some of you may be interested in this podcast put out by one of the pastors at my church.
==> Before the 2008 election, I asked Obama supporters to list things that would make them regret it. This guy responded, and so did Andrew Sullivan (though I can’t dig up the link now–he mentioned me by name if any of you want to look). Interesting stuff.
==> A Freakonomics podcast on the vampire econ book co-edited by Glen Whitman, my micro TA at NYU.
==> Alex Tabarrok says that I will not be going to the Moon anytime soon.