Consumption and Production – A Brief Summery and Analysis of Capital and Consumption Goods

Economic Piece by Josh L. Ascough

Consumer Goods and Capital Goods; these are terms the average individual has heard before. But how much is understood about these terms?

What qualifies as Capital? Are there different kinds of Capital? What counts as Consumer goods? Throughout this article I hope to give the reader an in depth analysis of these terms, their technical and theoretical purposes, how they relate to one another, and what their qualities are.

We will treat this as a process throughout the article; from capital to consumer; with a few interchanges to give context and further, detailed analysis.

Before delving into such areas, a mundane but important question must be posed and answered; What is Economics?

Economics is the social science, formulated around the study of human action towards ends with scarce means. Economics holds the epistemological (theory of knowledge) view of a priori knowledge (knowledge that is acquired independently of experience, and proceeds from theoretical deduction); that all human action is purposeful to the individual subject; whether his own deductions be rational or not, all of his actions are purposeful towards his goal or goals. This is where the subjectivism of Economics comes into play; particularly with the regards to the Austrian School.

The subjectivism of economics has gone through a process of clarification. During its early period, it was believed that the subjectivism of economics depended on the assumption of perfect knowledge; that all men at all times must be omniscient, in order to engage in economic activity. This position however, takes the view (intentional or not) that the market is in perfect equilibrium, and adjusts to perfect equilibrium relative to the circumstances, and regards all human decisions and values are fully determined; leaving no scope for the autonomy of the human mind. This leads to no room for the entrepreneur. Another view to which economics took about subjectivism, was that all economic activity and human decisions are spontaneous with no purpose and totally unexplainable; this view of the subjectivism of economics leaves us with no hope or ability for understanding market regularities, or human action as in terms of the subjects purpose.

This view of the subjectivism of economics was revolutionised by the late, Ludwig Von Mises. Mises recognised the autonomy of the human mind; the subjectivist freedom for human choice, which bear the imprint of the external circumstances. The external circumstances do not themselves constrain or determine action, but the actions of the autonomous man do take his circumstances into account, with regards to the knowledge he holds of the external. The Mises understanding of subjectivism in economics dismisses the notion of perfect knowledge, and the omniscience of man with regards to his value and action; instead, taking the view that at any moment, markets are pervaded by widespread ignorance on the part of the market participants; there is no such concept of perfect knowledge, nor perfect equilibrium. An additional and important feature of the subjectivism of economics, recognises that error on the part of market participants, and disequilibrium, creates opportunities for the existence of the entrepreneur, and entrepreneurial activity.

Before moving on to the main area of our subject, it is additionally important to explain what an economic good consists of.

Economic Goods require a few qualities to qualify as Economic Goods:

  1. Scarcity.
  2. Human Need.
  3. Belief of the Goods Ability to Satisfy Wants or Needs; Directly or Indirectly.
  4. Command or Claim of Ownership Over the Good.

Economic goods are split into two distinct groups:

  1. Good of Lower Order.
  2. Goods of Higher Order.

The value or price of all economic goods are subject to marginal utility.

What is Marginal Utility?

People’s wants are ranked in terms of the importance of their satisfaction. Let us use an example of a farmer. The farmer has 5 sacks of wheat, and his wants/needs are as follows:

  1. Bread For Living.
  2. Bread For Health.
  3. Seeds For Planting For Next Harvest.
  4. Feed Farm Animals. Cattle
  5. Produce Vodka.
  6. Feed Pets.

Our farmer in question would use the wheat to satisfy these wants. But how does he allocate them? What value does each sack of wheat hold? To answer this, we must ask: Which want or satisfaction would I do without if one of these sacks were lost?

For example let us assume a pack of foxes were to break into the barn where the sacks are located, and ate all of the wheat inside the 2nd sack. The want to do without is the 5th. The value of each sack is equal to the sack which satisfies the lowest-ranked want, to which the supply is capable of serving.

The level of satisfaction is utility. The lowest want is the Marginal. Hence value is equal to Marginal Utility.

Capital: What Is Capital?

Capital refers to economic goods of Higher Order. Higher Order goods are economic goods to which the satisfaction of human wants or needs is done so indirectly. These economic goods are not used for consumption or the direct satisfaction, but utilised to indirectly service wants or needs, and for further production. As a brief example for the moment, the car you drive to go to the supermarket is an economic good of higher order; or capital good. You do not consume the car itself, the car is utilised to indirectly satisfy a human want or need, with acquiring economic goods of lower order for consumption, or for acquiring other economic goods of higher order or capital, for further and better indirect satisfaction.

These are very broad brush terms though, as can be seen in the brief example of the car, a much more in depth explanation is required, as there are different kinds of capital; including different types of capital in terms of purpose.

There are two fundamental facts with regards to capital goods, which exhibits the complexity with regards to capital goods (economic goods of higher order).

Capital is Heterogeneous: All forms of capital are different and diverse; they’re not all the same. For example a beer barrel is not a boiler or a blast furnace.

However, stating this, each piece of capital is also Multi-Specific: Each piece of capital can be used in multiple lines of production.

Because each piece is different, they can’t substitute for each other perfectly, however, because they can go into different lines of production, they can substitute at different ratios for different things; the economic calculation for capital comes down to calculating the relative scarcity and alternatives; for this, you need a pricing system to signal the various marginal production costs and marginal values of consumers, in order to configure what lines of production to go into, and at what quantities.

In regards to the Capital and Interest, a standard terminology for capital is used.

The standard term is: Capital GoodsProduced Means of Production.

However, this conflates Capital with Capital Goods. The distinction between the two can be summarised as follows:

Capital Good: Reproducible Means of Production.

The reason such a distinction is important is due to the different functions between Capital and Capital Goods. The late Bohm-Bawark coined the term evenly rotating economy (ERE) when referring to this issue. In the ERE, Capital Goods earn gross rent, but do not earn net rent; as only the original factors of production (labour and natural resources) – earn a net rent within the ERE. The reason for Capital Goods not earning net rent is due to the fact that they are reproducible.

For simplicity sake:

Capital Goods = Physical Goods.

Capital = Financial Goods.

To sum up when not referring to Capital Goods, Capital is within reference to the total sum of money prices for assets related to an enterprise, minus any financial obligations.

To give a further explanation to this, let us imagine a laundry shop owner. If you were to ask the owner how much Capital Goods he has in his business, this would be referring to his physical goods; washing machines = Capital Goods, the till = Capital Goods, laundry detergent = Capital Goods etc.

If you were to turn to this same laundry shop owner (don’t ask him too many times otherwise he might get bored with all the questions), and ask him how much Capital is in his business, this would be referring to if the business was sold; all debts and loans paid off, how much money he, as the owner would hold.

“In the market economy capital accumulation is required for an increase in living standards, and to ensure a society is made wealthier”

In the market economy capital accumulation is required for an increase in living standards, and to ensure a society is made wealthier.

Capital accumulation requires the setting aside of money; in relation to their time preference, for future consumption by forgoing current consumption. This allows for further accumulation of tools, machinery, and reproducible means of production. The accumulation of capital plus saving for a preferred time frame of future consumption, allows for higher degrees of efficiency. This may seem bizarre since if there is an immediate need for consumption, and there is no time preference for future consumption, how can there be efficiency in waiting; it may be more easily conceived if we refer to it as relative time preference.

To give an example of this in action, let us imagine a man living on an island, and he has a need for water to have a bath. If this is an immediate need (maybe he has a hot date with the girl on the next island tomorrow), he will likely cup his hands to bring water to his home. If however this is not an immediate need and he holds time spare, he could climb up a tree, grab a coconut and break it to use the shell to more efficiently gather water.

I made a quick reference to interest and I will quickly go over two important questions:

  1. What are Interest Rates?
  2. How is Interest possible?
  • Interest Rates are prices related to time preference for capital funds.
  • Interest Rates signal to investors and entrepreneurs people’s willingness to postpone consumption; or their need to have consumption sooner, rather than later.
  • Sooner Consumption = High Interest Rate. Future Consumption = Low Rates.
  • Interest Rates regulate and allocate how much production is geared towards present consumption verses future consumption.
  • Interest Rates coordinate the capital process. When consumers wish to save for the future (for college for example), they will cut back on current consumption; such as eating out at restaurants, visits to the cinema etc. It should not be misunderstood as being “current production is down = recession”; resources have been reallocated for a future time preference, towards savings for future consumption. This coordinates signals to investors and entrepreneurs that taking out loans is now more affordable

With regards to how interest is possible, we need to delve into another question:

What is the interest problem?

The interest problem, according to Bohm-Bawark is as follows:

“Suppose a Capitalist can spend £100,000 on land, labour and capital goods. One year later, the finished product can be sold for £110,000. How can this undervaluation of the factors persist?”

Anyone with financial capital in the present, who can put it to work and earn back not only the principle sum but money on top is referred to as an interest return. Why is it possible?

Before answering, it is important to mention what is known as, The Naive Productivity Theory. This is a term which was first mentioned in Bohm-Bawerk’s piece, Capital and Interest when critically referring to the Productivity Theory.

The Naive Productivity Theory notes that the return to capital goods (originary interest) is due to capital being productive.*

*Originary Interest is the ratio of the value assigned to want-satisfaction in the immediate future (current consumption) and the value assigned to want-satisfaction in periods of future consumption. It is present in market activity in the discount of future goods against present goods.

The Naive Productivity Theory however is incorrect. While it is true that capital goods are productive, and they would not be utilised were they not, this does not answer why interest is possible. If interest was possible because of The Naive Productivity Theory, then why wouldn’t entrepreneurs bid up the price of these capital goods; so instead of being able to buy capital goods for £100,000 and sell later for £110,000, they would be buying at £110,000 and selling for £110,000?

The way this is possible, is through Time Preference.

Present goods are preferred and hold a higher marginal value than future goods of comparable qualities, and need-want satisfactions.

Subjective Price Theory states that a pre-built house has a higher price than a contract for a house to be built in the future, because; ceteris paribus, consumers have more immediate wants to be satisfied.

Even if the person buying the contract at £100,000 for a house to be built and delivered in the future has no want for it, they recognise they can sell the house with a return to those on the market with more immediate wants.

I shall very briefly go over the subject of Consumption Goods.

Consumption: What Are Consumer Goods?

Consumer Goods refers to economic goods of lower order. Economic goods of lower order; or consumer goods, are goods to which the individual holds command over, that produce the satisfaction of human wants/needs directly and without further allocation of capital goods (economic goods of higher order).

Consumption goods; or goods of lower order, are the final products of the line of production which directly satisfy the want-needs and marginal values of the person who holds command over them.

Stating this however, not all consumer goods are for direct consumption. As a simple example; because I don’t want to spend too much time on consumption goods after so much time dedicated to capital/capital goods, let us take a handful of examples of what I mean by this:

  • Houses.
  • Printers.
  • Refrigerators.
  • Chicken.

Houses and chicken are an easy economic good to classify as consumer goods. Human beings need shelter and food, and so these consumer goods fulfil the purposes of direct consumption.

Printers on the other hand, can fall into two categories if they are not for the purposes of profit. On the one hand these are the final product after the coordination of capital goods (goods of higher order) and are purchased by consumers. However, saying this, they may also be used as capital goods from the perspective of the consumer. What I mean by this is that, nobody buys a printer for it to be the final product to which he will directly consume; people buy printers, in order to utilise them as personal capital goods, for the purposes of producing direct consumer goods; i.e. printing pictures, important documents, or receipts for consumer goods they’ve in addition purchased which are to either be directly consumed, or like the printer, be capital goods owned by said consumer to coordinate other goods he will directly consume.

“Now refrigerators are not only an extremely beneficial invention, but they’re also a great example of economics at work in the home; apart from financial capital, they can be used to represent consumption goods, capital goods, and interest/time preference, all at once within the home of the consumer”

The final example are refrigerators. Now refrigerators are not only an extremely beneficial invention, but they’re also a great example of economics at work in the home; apart from financial capital, they can be used to represent consumption goods, capital goods, and interest/time preference, all at once within the home of the consumer.

Refrigerators are consumer goods due to them being economic goods of lower order; the final outcome from the line of production and the allocation and coordination of capital goods. In addition they are capital goods for the consumer who owns the economic good in question, due to the fact they are not consumed themselves, but are utilised and can reproduce the activities they have been allocated to (keeping food fresh), to allow better satisfaction of direct needs-wants of the consumer. Finally, refrigerators represent interest/time preference in the home. Most of the time, people don’t buy 2 weeks’ worth of food for current consumption (unless they have a very big appetite). Refrigerators allow the consumer to save food for an allocated time period preferred for future consumption, for when they’re marginal utility will be higher.

There are many other areas to be talked about, particularly with regards to the division of labour, which links heavily to capital investment, allocation and coordination of capital goods and time preference, but I have taken much time over the subject we were focussed on; this may be an area to return to another time. For now I shall leave the reader with a passage from Ludwig Von Mises’s book, Planning For Freedom page 17-18, on the subject of economic organisation, economic coordination, and entrepreneurship.

“The truth is that the choice is not between a dead mechanism and a rigid automatism on the one hand and conscious planning on the other hand. The alternative is not plan or no plan. The question is: whose planning? Should each member of society plan for himself or should the paternal government alone plan for all? […] it is spontaneous action of each individual verses the exclusive action of the government.

Laissez faire does not mean: let soulless mechanical forces operate. It means: let individuals choose how they want to cooperate in the social division of labor and let them determine what the entrepreneurs should produce. […]”



Tax Reform – The Philosophical and Economic argument against Direct Taxation and for Indirect Taxation

Economic Piece by Josh L. Ascough

Portions of this article are parts of a larger collection of my upcoming work titled: “The Long Road Against Statism”

“Taxes are the price we pay for a civilised society” is what we are told; by politicians, progressives, watermelon environmentalists, and other self-declared benevolent busy bodies. Yet this very notion is predicated on the premise of “assumed consent”; nay, the very concept of “societal good” or “public good” via government coercion is crystallised in the notion of assumed consent.

“The nature of this premise is rooted in the desire to control how our fellow man operates; how he uses his property and values, and how much of his values and property are permitted for him to assess and access”

All of these concepts and notions are rooted in the belief that the individual is under obligation to accept the assumed consent of his neighbour to sacrifice the individual’s values on the individual’s behalf; that no man may truly own his existence, nor be master of his own destiny. The nature of this premise is rooted in the desire to control how our fellow man operates; how he uses his property and values, and how much of his values and property are permitted for him to assess and access.

These parasitic piranhas show their true colours when questioned; they demand their fellow man have his resources, values and property extracted by the external, yet refuse to voluntarily relieve themselves from their own property further. These “Men of State” bestow upon themselves entitlement to the values and properties of others, but do not view themselves in the same light.

This is the mind-set of the “Statist Entitlement Complex”: You must accept the assumed consent from the external to extract your property and values, because it has been deemed that your values and property are not permitted in your possession on the basis of the assumed consent via the societal good, which has been made the mandatory good on your behalf through assumed consent.

This apparent “societal good” via government coercion based within the premise of assumed consent, cannot operate on acknowledging the existence of the individual or his self-ownership; it must view the individual as expendable to the State and the tribe.

With this said, we conclude at the beginning of this article, that taxation is not the price we pay for a civilised society; taxation is the price we pay for assuming consent to Tribalism, Collectivism, Statism, and the externally defined sacrifice on the behalf of the sovereign individual.

With the introduction to this article, we require starting from the position of a priori knowledge; an axiom that man, the individual is sovereign.

This axiomatic truth, by recognising the sovereignty of the individual, as well as the sentience of the individual, acknowledges that value is subjective; as one man seeing higher value in his self-interested pursuit of service to others, may not be recognised or adopted by another fellow to the same degree, and that all sovereign individuals strive for the maximisation of their values; even he who chooses the maximisation of his value to pursue service to others over himself is his own sovereign self, and is operating in rational self-interest and the expansion of his own moral value, so long as he views this to be of higher value to himself over other values he may hold or strive for. Furthermore, this axiom acknowledges that all values face trade-offs; the sovereign individual can trade long term values and his future existence for short term values and current existence and vice versa, yet in addition, we acknowledge the objective reality of what is needed for the full pursuit of these values: Action.

Action requires ideas to be processed and progressed into action.

Ideas require thought to be interpreted and crystallised into ideas.

Thought requires values in order for the manifestation of thoughts.

Values require needs in order to assess which are of higher value.

Needs require life in order for a potential need to exist.

It is not “I think therefore I am.” It is, “I am therefore I think.” Hence the process which is the heir to this notion is: “I think therefore I act.

All human action is purposeful to the sovereign individual towards the goals he sees as of value; these goals can be ends in and of themselves, or ends that once achieved, are developed into means for the purposeful action towards other goals and values.

Through this understanding of our a priori of human beings, our axiom of the sovereign individual and that all individuals strive for the maximisation of their subjective value; trading those which hold lesser value to them for those which hold higher value, we come to the other notion.

No individual can perform a sacrifice to which he consents to. A sacrifice requires the termination of a higher value in exchange for that which is of lower value to the individual: if the action has truly been consented to by the individual, it must be of higher value to him, hence he made no sacrifice; he gained a value. A sacrifice can only occur therefore, via external forces assuming consent over the individual to act on his behalf.

If we continue down this path of assuming consent over the individual to sacrifice his values on his behalf, for the abstract higher plane known as “societal good”; to him both economically and socially, we risk reverting ourselves to poverty, not just in economic terms, but poverty in moral terms.

In his 1954 book, The Income Tax: Root of All Evil, Frank Chodorov gave several political, philosophical and economic arguments against the Income Tax.

From pages 12 – 13, Chodorov gives a description as to how Income Taxation is, an essence of Socialism:

…when this amendment became part of the Constitution, in 1913, the absolute right of property in the United States was violated. That, of course, is the essence of Socialism. Whatever else Socialism is, or is claimed to be, its first tenet is the denial of private property. All brands of Socialism, and there are many, are agreed that property rights must be vested in the political establishment. None of the schemes that are identified with this ideology, such as the nationalization of industry, or socialized medicine, or the abolition of free choice, or the planned economy, can become operative if the individual’s claim to his property is recognized by the government. It is for that reason that all Socialists, beginning with Karl Marx, have advocated income taxation, the heavier the better.

What Chodorov says is in relation to the distinction between Direct Taxation, and Indirect Taxation. While Indirect Taxation still extorts a portion of resources from the individual, and operates as all taxation, on the basis of assumed consent, Indirect Taxation recognises the original claim of ownership to be within the hands of the individual wielding command over the resource. The Indirect Taxation requires the individual to first consent to a particular act; buying a product for example with the Sales Tax. Direct Taxation on the other hand, such as the Income Tax, does not require the individual to consent to a particular act, and does not treat the resource to be the property of the owner, who holds the official claim. Direct Taxation, such as Income Tax, sees the income as a loan by The State; the individual labourer holds no claim of ownership for his fruits, his fruits are loans by The State holding a claim as original, official owner of the property.

This type of taxation holds consequences for the productivity of the economy and the living standards of all individuals. There are two core consequences:

  1. Lack of Saving.
  2. Reduction in Incentive.

Through income taxation, individuals hold a reduced amount of expendable income, which means the marginal utility of goods affordable to them decreases and the opportunity cost between consumption for more urgent needs and current value, and saving for future consumption and future living standards increases; the man who is taxed up to 40% has a much smaller surplus bracket for saving consumption for the future, and finds himself prioritising current, short term consumption of goods whose marginal utility are high; in other words, living for the day, by the day.

“the only way to ensure economic progress and the increase in the standard of living, is to increase the per head capita investment, which is only possible if people are saving and investing to allow the expansion of capital investment, and the furthering of the division of labour”

When individuals have large portions of the fruits of their labour extorted, they are less inclined to save; which places a major problem into economic progress and productivity, as the only way to ensure economic progress and the increase in the standard of living, is to increase the per head capita investment, which is only possible if people are saving and investing to allow the expansion of capital investment, and the furthering of the division of labour.*

*(One could make the argument that the Income Tax and top-down imposed disincentive for saving creates the incentive for central banks to artificially lower interest rates and expand credit beyond the money supply, creating inflationary booms and beginning the process of the boom/bust cycle. Though this is not a piece on monetary policy and I don’t intend to make it one.)

Finally on the first note, the forced disincentive for saving reduces the judgement the individual is capable (or maybe allowed is the right word) of making towards his property, and how to best allocate his resources to maximise his quality of life.

In other words, your ownership entitles you to use your judgement as to what you will do with the product of your labour-consume it, give it away, sell it, save it. Freedom of disposition is the substance of property rights.

~ Frank Chodorov – The Income Tax: Root of All Evil page 18.

On the second note as to the dangers of Direct Taxation, it creates a disincentive for individual productivity and production. If an individual has his resources extorted heavily and continuously, he will become disinterested with furthering his productivity and with continuing his production; as he sees his fruits, and the productivity he could place with them, restricted by the State, and since no one can consume more than they have produced (unless you’re the government and have the magic power of ignoring economic realty at the expense of everyone else), the living standards of the individual reduce. This is why the greatest enemy to the individual, especially the poor man, is not “income inequality”, but income extortion and inflation of the money supply, and devaluation of his resources; leading him straight into the welfare trap.

Interference with this freedom of disposition is, in the final analysis, interference with your right to life. At least, that is your reaction to such interference, for you describe such interference with a word that expresses a deep emotion: you call it “robbery”…if you find that this robbery persists, if you are regularly deprived of the fruits of your labor, you lose interest in laboring. the only reason you work is to satisfy your desires, and if experience shows that despite your efforts your desires go unsatisfied, you become stingy about laboring. You become a “poor” producer.

Frank Chodorov – The Income Tax: Root of All Evil page 18.

As stated above with the philosophical argument for the sovereign individual on the subject of a priori knowledge in accordance with human action being purposeful, if faced with a direct tax, the sovereign individual’s unseen consequences are enacted. He has not been permitted the maximum capabilities of his ability to proceed with the objective, purposeful process for attaining his ends via the means he holds command over; he has been denied his full ability to act.

This indicates that he has in addition, been denied his full ability to process his ideas, manifest his thoughts, asses his values, nor recognise his needs; he ultimately has been denied the maximisation of his a priori knowledge of purposeful human action; he has been denied the maximisation to life.

There would be many who would say that a direct tax is a fair tax, based on either one of two principles:

  1. Ability To Pay.
  2. Relation To Benefits Received.

Both of these reasons given for the justification of a direct tax are in the negative however.

With regards to the ability to pay principle, there is no clear standard about what is meant by someone’s “ability” to pay. For example, let’s say two people; person A and person B. Person A earns £50,000 per year, Person B earns £28,000. A has no savings, person B has loans from undergrad and graduate tuitions to pay off. B has no children, A has 4 children. Who in the example has the greater ability to pay? There’s no unit to measure who has the greater ability to pay.

One way people try to argue around this, is by stating that when people give charity to their church, or to an animal rights organisation let’s say, they are encouraged to give within their means by the priest or animal rights organisation representative; the argument pertaining that it is the same with taxes. However, the priest doesn’t come to your house if you refuse to give 20-40% of your income; nor does PETA take you to court for charity evasion (though knowing PETA I can see them threatening to do so). The State however does. There is no means to resign from the government. In addition do people truly only give to charity based on their means? Of course not. People give to charity because they subjectively believe there is a value in doing so. Carl Menger once addressed these values as the satisfaction of imaginary needs; because these were values that did not directly or indirectly benefit the individual’s human needs, though he recognised said individuals’ were achieving the value of needs they believed required satisfying.

As a final note on this current principle, the market and in turn market prices obey the law of one price. Everyone expects to spend the same money on bread, cars, iPhone’s, iPad’s etc. People with a greater ability to pay don’t pay more for these goods. If people were expected or required to pay more for these goods based on their ability to pay; for example if someone earning £50,000 had to pay £3,000 for an iPhone, yet the individual earning £18,000 only had to pay £500, there would be no incentive for people to work harder, to acquire a higher income, or to save for the future. This would in effect cause equal income, as no one would hold any incentive for greater productivity, and the economy would collapse.

The other principle as mentioned is that the direct tax is in relation to the benefits a person receives from society. There are a few things wrong with this.

“People engage in market activity based on mutual, consensual exchange; government on the other hand is coercion. When people engage in market exchange, they do so because they perceive there to be a benefit, this benefit is subjective. However, because tax is non voluntary, they do not indicate any sort of benefit”

The individual earning £50,000 is able to do so because he is providing higher productivity that is valued more, and is of greater service to consumers; whether directly or indirectly; so by this terminology, said individual is giving back to society based on his productive efforts, and is being paid in proportion to how productive he is. In addition the market is not government. People engage in market activity based on mutual, consensual exchange; government on the other hand is coercion. When people engage in market exchange, they do so because they perceive there to be a benefit, this benefit is subjective. However, because tax is non voluntary, they do not indicate any sort of benefit. While there is no form of a just tax or a fair tax, if the aim is to add a layer of consent to a tax and to ensure the maximisation of an individual’s ability to command the resources he holds a claim to, the better methodology is to pursue an indirect tax system; such a system would not only ensure that people pay a tax only when engaging in a consensual action, and provide ability and incentive for savings; such a tax system would also ensure governments inability to directly extort resources simply based on ownership, and force governments to adopt a more fiscally responsible position, based within their means, and to limit government to focusing on their primary focus; which is the protection of life, liberty and property.


Assistance For Self-Education – Top 10 Books On Economics For The Layman

Opinion Piece by Josh L. Ascough

It is no crime for anyone to be ignorant over the subject of Economics; it is a specialised social science after all. However, it always seems to be the loudest voices with ill-conceived “good intentions” who vocalise their opinions on the subject without ever having read a book on the subject (cough cough; The Guardian).

I have spent the last few months, since April 2020, working with the Croydon Constitutionalists in publishing articles dedicated to economic areas; delving into Central Banks, Cronyism, Economic Fallacies, The Gold Standard, Education, Unemployment, Cryptocurrency and hopefully more in the future. It should be noted however, by myself mostly, that the work of attempting to educate the layman cannot just come from myself via the knowledge I have gathered over the time I have been engaged in the subject of Economics, so this article will be a short and sweet one, giving a list of the top 10 books anyone and everyone can acquire to grasp an understanding of Economics. The books in this list have been chosen based on a number of factors; such as affordability and how friendly the books are to first time readers of the subject. You don’t need to acquire all of these books (unless you’re an Economics junkie like myself), as not all of them cover similar areas, however, I’m certain any number of these books will be valuable to the reader.

No: 10 – Free Market Environmentalism by Terry Anderson.

This book is in last place for the simple fact that it is the least affordable on the list, though if you are willing to pay £50+ for a book (that is pennies compared to what I’ve happily paid for other books), then this is a highly worthwhile read. Terry Lee Anderson is a former Executive Director of the Property and Environmental Research Centre and has a number of books relating to Environmentalism. Free Market Environmentalism however gives the reader an introductory, yet highly detailed take on the environmental and economic policies, as well as theory of free market environmentalism. From pollution, land use, to fossil fuels and green energy, Free Market Environmentalism is a worthwhile book for those concerned about environmental issues, and would like to hear the theory from a Environmental Researcher before delving into the purely economic argument.

No: 9 – Chaos Theory by Robert P. Murphy.

Less of a technical economics book, and more based on social and economic theory, Chaos Theory delves into the theoretical concept of Anarcho-Capitalism as a social and economic system, and how such a system would work in practise. Robert P. Murphy is an American Economist based in the tradition of the Austrian School of Economics, and is an Assistant Professor at the Free Market Institute, Texas Tech University. While I am a little biased, subscribing to the Austrian School and this being the book that fully converted me to Anarcho-Capitalism, I must say that the book doesn’t pull any punches; Murphy eloquently explains the theoretical basis of a society absent from the state, with detailed discussions on subjects such as market-based military defence, property protection, courts and prisons, as well as answering common questions, such as the always classic…who will build the roads?

No: 8 – The Economic Point Of View by Israel Kirzner.

The Economic Point of View, like Chaos Theory, focuses less on the technical side of Economics, and focuses more on the history of the epistemology of Economics. Israel Kirzner is a British-born American Economist who holds close theoretical ties to the Austrian School, and is a retired professor of Economics at New York University. The book looks at the history of economic thought in regards to what perspective economics and economists are meant to take; it delves into the different points of view economists have held since the classical economists of the time of David Hume and Adam Smith, to the Austrian understanding of Praxeology; the study and theory of human action based within Apriori knowledge, that all human action is purposeful to the subject. While this can be a difficult book to grasp if you have no experience reading philosophical writings, for those who have studied or are interested in philosophy, this is a great book for gaining an insight into the history and epistemology of Economics.

No: 7 – Liberalism by Ludwig Von Mises.

It took a lot to not put Mises in the number 1 spot or even close, however I need to think critically about what is approachable for those unfamiliar with the social science of Economics, and Mises has always been, and will always be one of the titans of Economics. Liberalism, as the title suggests, takes a look at the history of the Liberal tradition as a political, social, and economic philosophy. Mises delves into the connections and relationship between Capitalism and Liberalism, the problems with Interventionism, Socialism, and other command/planned economic systems, as well as the struggles Liberalism faced during the early 20th century from Socialism and Fascism. Ludwig Von Mises was many things during his life; he was an Austrian Economist, Historian, Logician and Sociologist; he was a champion of Liberalism, and a staunch intellectual fighter for freedom. If you are less interested in technical economics, but more interested in learning about the social science, social values and political arguments for the market economy, this will surely be a strong start.

No: 6 – Fascism vs Capitalism by Llewellyn H. Rockwell Jr.

If there is one thing more irritating than someone calling a Social Democracy “Socialism”, it’s someone calling Capitalism “Fascism”, and Rockwell Jr’s book Fascism vs Capitalism is the perfect book for ending that blending of terms for rhetorical arguments sake, once and for all. Llewellyn Rockwell Jr. is an American author, a Libertarian and a self-classified Anarcho-Capitalist. In addition he is also the founder of the Mises Institute; a non-profit institute dedicated to promoting the Austrian School of Economics. In Fascism vs Capitalism, Rockwell Jr. takes no particular stance for or against Capitalism or Fascism, but lays out the political, social, and economic differences between a Fascist system and a Capitalist system. Rockwell Jr. examines the strongly contrasting systems, while taking note of pro-fascist trends in recent decades, as well as the larger history of the two systems. If you’re not particularly interested in learning about economics, but want to understand what different systems means, this is the perfect book for clarification.

No: 5 – The Income Tax: The Root Of All Evil by Frank Chodorov.

No one likes taxes; Libertarians especially, and most if not all liberty-minded individuals at some point in their lives will say “Taxation is Theft”. However if there’s one tax most liberty-minded individuals oppose the most, it’s the Income Tax, and in his book (the title speaking for itself), Chodorov embarks on explaining to the reader the history of the Income Tax, as well as the general difference morally and economically between indirect taxes such as the Sales Tax; which require a consenting act before the tax can occur, and direct taxes such as the Income Tax; which treat property and the fruits of a man’s labour as loans by the government, and that under direct taxes no man owns his property or his labour. Frank Chodorov was a member of what was referred to as the Old Right, a group of Libertarian thinkers who were against Interventionism and opposed the New Deal brought about by FDR; he was a staunch advocate of free markets, individualism, and peace. The Income Tax: The Root Of All Evil gives the reader both economic and moral arguments against direct taxation as well as social implications of such forms of taxation.

No: 4 – That Which Is Seen And That Which Is Unseen by Frederic Bastiat.

If there was a competition for the most overlooked Economist in history, Frederic Bastiat would be in the top. In his essay, Bastiat explores the unseen outcomes of economic choices and actions; such as the unseen productivity of savings vs the seen productivity of consumption. Frederic Bastiat was a French economist, writer and a member of the French Liberal School, who developed the concept in economics known as Opportunity Cost, and introduced the parable of The Broken Window fallacy. While Bastiat’s essay contains little technical economics, it is a highly important piece of writing which assists the reader in understanding the unseen outcomes of economic choices and actions, as well as give the reader the understanding that all economic activity is subject to trade-offs.

No: 3 – The Origins Of Money by Carl Menger.

Getting into the top 3, Carl Menger’s book, The Origins Of Money, offers exactly what it states. The Origin Of Money gives a detailed economical and historical examinations as to how a form of money is created; dispelling the myth that money is a creation of government, Menger explains the qualities a good requires in order to qualify first as a medium of exchange, and then later as a money, while also delving into the different forms money has taken over the years; from animal skins, copper, tobacco leaves to gold. Carl Menger was an Austrian Economist born in 1840 and was the founder of the Austrian School of Economics, and would late go on to influence the work of Economists such as Ludwig Von Mises and Eugen Von Bohm-Bawerk.

No: 2 – Economics In One Lesson by Henry Hazlitt.

The choice for 2nd and 1st for this list was a difficult one, however, I believe Hazlitt’s book Economics In One Lesson should be placed here for the semantic reason that Hazlitt was not a trained economist; though this lends a strength to the book as there are few technical terms you would find in most economics books, and places more emphasis on explaining concepts and activities within the economic sphere. Economics In One Lesson does an amazing job of explaining fallacies, debunking faulty solutions to problems with assessments on productive solutions, and examining alongside explaining misunderstood concepts. While brining things back to basics with areas such as supply and demand, Hazlitt doesn’t treat the reader as stupid, and treats the reader with respect by explaining why it is understandable that some falsehoods appear more attractive than the truth, while not watering down why these more attractive ideas are incorrect. Henry Hazlitt, born in 1894, was an American Journalist who primarily wrote on the topics of business and economics for The Wall Street Journal and The New York Times, and is a highly regarded figure among Libertarian and Conservative circles.

No: 1 – Principles Of Economics by Carl Menger.

While Economics In One Lesson is friendlier for first time readers of economics, Carl Menger’s book; Principles of Economics, presents the revolutionary theory of where value comes from, which hugely assists any reader whether they be well versed or new with unravelling many areas of economics. Principles Of Economics takes a look at where and how economic goods receive value, the qualities a good requires in order to qualify as an economic good, and the differentiations between consumption goods; referred to as goods of lower order, and capital goods; referred to as goods of higher order. It was in this piece that Carl Menger came up with the economic theory known as Marginal Utility and subjective value for economic goods, leading to what has been called “the Marginal Revolution”. Menger, with his theory of Marginal Utility and the subjectivity of value, rejects the Cost-of-Production Theory of Value as advocated by Adam Smith and David Richardo, as well as rejecting the Labour Theory of Value as promoted by Karl Marx.

While there are many additional books on Economics, I have found these to be the best in terms of affordability and friendliness to first time readers, who are looking to understand Economics from different angles. It is my hope that the reader will take up one or all of these books to begin a journey into understanding not just the science of Economics, but to comprehend just how vast the subject is.

Man himself is the beginning and the end of every economy.” ~ Carl Menger

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Private Unemployment Coverage – How The Free Market Can Give Security For Unemployment

Opinion Piece by Josh L. Ascough

With the UK only now beginning to realise the problem with putting an entire economy on lockdown; forcing millions out of work for being classified as “non-essential”, is it time we rethink how we cover the struggles of unemployment?

Having unemployment coverage run by government has its issues. Due to the fact that no one can consume more than what they produce, if people are unemployed then the government through taxation redistributes money; yet if not enough people are producing, then the resulting answer (in the eyes of the government), is to print more money, resulting in the purchasing power of the money becoming less valuable. This ultimately does further harm to the very people that were in need of help to begin with, as through inflating the money supply, the money operating within the economy becomes less valuable because money is subject to the same laws of supply and demand as any other market good; so the poor, unemployed person with £20 in his pocket from unemployment payments, will find he is less capable of purchasing goods and services than he was before.

It is, quite literally, stealing value and economic growth from our “what was to be” future.

There is also the problem of people who are capable of working, the work exists, yet refuse to work, because there is no incentive to work. If an individual is handed “free” money at the expense of another man’s productive efforts, and he faces no risk or opportunity cost to himself; where is the incentive to work?

In addition there is the problem of individuals who hold a repetition of becoming unemployed through a lack of responsibility resulting in being fired; whether it be through stealing from the workplace, abusing staff and/or customers, lying about being sick or a whole host of other actions which justify the termination of employment, the fact is this:

If you create poor or no incentives for people, you will come up with poor or negative results.

This is not to say there are not people who are unemployed through no direct fault of their own. There are many people who become unemployed due to a whole host of reasons; the company going out of business, costs for employees rising, economic disasters, natural disasters, or simply not meeting the expectations of an employer.

So if the problem is unemployment, why not just create more jobs?

If the goal is purely to have full employment then there is a simple answer; bring back conscription. If every worker is staffed in the army then we will have full employment, but we will also have nothing to eat. Jobs are not the ends, they are a means for people to live better; to put food on the table by the production of what people demand. That is how you achieve economic growth; creating jobs for the production of things which have no demand and simply exist as a policy to “get people to work” creates and holds no value.

“I am very much on the same side as the great Professor Walter Block; if it moves privatise it, if it doesn’t move privatise it. Since everything either moves or doesn’t move we should privatise everything.”

So if employment for the sake of employment and government unemployment coverage aren’t the answer, then what is?

As the title suggests, I believe the answer to be the privatisation of unemployment coverage. I am very much on the same side as the great Professor Walter Block; if it moves privatise it, if it doesn’t move privatise it. Since everything either moves or doesn’t move we should privatise everything.

“Now private doesn’t mean you pay for it or that it is for profit, private simply means it is not owned, run, or managed by the government; to be a private aspect of the economy is to be separate from government involvement or management, and to be commanded and operated by private citizens”

Now private doesn’t mean you pay for it or that it is for profit, private simply means it is not owned, run, or managed by the government; to be a private aspect of the economy is to be separate from government involvement or management, and to be commanded and operated by private citizens. There are a few ways unemployment could be covered in a free market economy which I will go over. However, it should be noted that these are not policies of a top-down approach. Not every means mentioned will be of value to all individuals just like any aspect of the market; this is an approach from a bottom-up position based within human action and incentives.

Community Coverage – We have many locations around the UK which hold on to community values: look out for your neighbours and help to keep your community safe. One form of private unemployment coverage could come in the form of community coverage based within a HA (Homeowners Association). Now in the UK we don’t really have Homeowners Associations apart from a few “gated” communities. A Homeowners Association is a private association, usually formed by estate developers in order to manage homes in residential areas. However in a free market there is relatively no reason these associations could not be run and managed by the community members themselves via the formation of what could be called “Community Contracts”; these contracts would operate on a membership benefit basis.

For example, let’s say John Smith wishes to buy a home in a community which has a Community Contract. He is not required to sign the Contract in order to live in the community; if he chooses to sign, he will be legally obliged to have a certain percentage of his income deposited into the communities fund, which is to be used to cover damages to any of the properties, donations to churches if it is a religious community, maintaining roads, and, on the subject we are focused on, assisting in coverage for unemployment. Now as stated, Mr Smith is free to not sign the contract and live in this community, however if he chooses not to, any damages to his property, any religious building he wishes to attend, any roads within the community he wishes to drive on and covering his unemployment will have to come out of his own pocket, rather than the fund set up by the contractual obligations of the community.

Now the reader may think this is a disadvantage for Mr Smith; however the community is incentivised to have Mr Smith sign the contract, not simply because it means more funds by the community for the community, but because if they can insure Mr Smith is a contracted community member, then they can further insure there will not be a ripple effect on to the value of their own property through damages which have been done to his property, through not being able to afford a toll on the road which goes towards maintenance, or through him becoming unemployed and being unable to pay his bills. His incentive if he chooses to sign the contract is the same as the communities incentive to encourage his signing; shared community values, maintenance of the community resources, ensuring protection against damages and unemployment, and securing the property value at high rates.

“Some may say this is just a local version of government with choice added in to the mix; to which I would say localism and choice by our current standards are the complete opposite of government”

Some may say this is just a local version of government with choice added in to the mix; to which I would say localism and choice by our current standards are the complete opposite of government.

But what if like myself, you don’t really get along with your neighbours and you don’t hold any shared values (I’m a Libertarian ever moving towards Anarcho-Capitalism living in a Labour stronghold; I’m as out of place as Karl Marx in an Economics class) and you don’t value such a setting; or if the location you reside in doesn’t hold community values, what is the option for a purely individual basis?

Unemployment Insurance – An Unemployment Insurance Program (We’ll address it as simply UIP from this point), would operate on a similar basis to most insurance program do now; the higher financial risk you pose the higher rates you’ll have to pay. However just as insurance for health or cars in a free market would be more open to innovations and competition, insurance for unemployment would operate in a much broader sense.

These rates would be based on a number of factors; taking into account a person’s income but in addition taking into consideration living costs, if the person has ever been fired and what for, and the level of experience and/or qualifications which increase or decrease a person’s ability to obtain and retain a job.

This would mean that, for example:

Let’s say we have two individuals; persons A and B.

Person A has a job which pays £20,000 annually, has never been fired, holds 5 years’ experience, holds a degree where there is high demand for that line of work and their consumption and living cost are low.

Person B has a job which pays £23,000 annually, has been fired multiple times for abusing customers, holds 12 years of short-lived experience based on being fired from multiple establishments, holds a diploma where there is high demand for that line of work and has high consumption and living costs.

A’s living costs are low because he doesn’t smoke or drink, has paid off his mortgage and economises on what he consumes.

B’s living costs are high due to holding a high drug and drinking habit, and due to holding debt from excessive credit card use.

If an unemployment insurance company based its rates off of the factors which were mentioned above, then we can assume that B would have higher rates to pay.

B would have higher rates to pay because he has been fired a variety of times due to abusing individuals and because of a high drug/drinking habit. He has a higher risk of becoming unemployed due to his own actions, and so would have to pay more as he is a bigger financial risk to the insurance company.

A would have to pay lower rates due to the fact he has never been fired, holds low living costs due to economising on his resource consumption and holds a degree in an area with high sought after work. He has a low unemployment risk and in the low risk event of losing his job either due to his own actions or an exterior causation, it is speculated he would not be unemployed for a long period of time, due to his experience, and his sought after qualifications.

“We can see from this scenario that the unemployment coverage would favour those who are responsible individuals and financially punish those who were not responsible”

We can see from this scenario that the unemployment coverage would favour those who are responsible individuals and financially punish those who were not responsible and were the cause of their own terminations.

This would incentivise what otherwise would be harmful, reckless individuals who become unemployed due to their own negative actions to take on responsibility, while ensuring those who are responsible and who may lose their jobs due to exterior reasons receive higher coverage for lower costs, because due to their responsible actions are less of a financial risk to themselves or the insurers.

This is all good for those who already have employment, but what about individuals in communities where there is no employment; how do we address this problem?

Unemployment Charities and Work Foundations – Now addressing an entire community which is unemployed and in poverty is a difficult subject in the hypothetical because (A – poverty is the natural state of man and (B – lack of economic activity is not a black and white scenario and can occur for a variety of reasons; for the purposes of this example however, we will assume that poverty within an entire community has occurred due to governments regulating economic activity out of business, and has become a generational problem.

Within a market economy, charities could be set up much easier than current (we can also make the assumption that in this hypothetical scenario, the monetary sphere and government are separate, and sound money is active; which would remove the risk of private charities being decimated by inflation), to provide financial aid to those who need it. In addition to this work foundations could be set up, which would receive their funding via donations from private citizens and businesses, in order to provide training to individuals to give them the skills for work; as well as provide funding to individuals looking to set up a business to boost the GDP of their community, but lack the funds due to no economic activity and/or not being able to acquire a loan due to low or no credit score.

The ultimate theme here is one of choice; choice for how we cover ourselves and help our neighbours and whether we choose to do either or not.

“Nobody likes to see others suffer, but forcing resources from others in order to give to another does not make the giving moral. What makes it moral is the recognition of choice and the analysis of values each person holds”

Nobody likes to see others suffer, but forcing resources from others in order to give to another does not make the giving moral. What makes it moral is the recognition of choice and the analysis of values each person holds; can any act actually be deemed “moral” if it is forced without any understanding as to why this act is right or wrong? If I put a gun to my neighbours head in order to redistribute his wealth to someone else who I deem to need it more, am I moral or would I have been moral if I took the time to persuade him of the moral value of charity, and he gave based on his own understanding and agreement of value?

It is very easy to force things from and upon others; it is difficult to persuade, but it is a lot more rewarding and long term, as if you can achieve such a feat, you will have created a moral framework, rather than a violently forced act of charity; which is no charity at all.

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Podcast Episode 39 – Josh L Ascough: Covid News, War on Obesity, LibDems, Japan Trade Deal & New Peerages

We are joined by Josh L Ascough from the Libertarian Party, as we discuss the latest Covid news, the War on Obesity, the withdrawal of the Liberal Democrats’ London Mayoral Candidate, the potential for a post Brexit UK-Japan Trade Deal and some interesting new Peerages. We then chat with Josh about why he became a libertarian, his upcoming book on The Social Science of The Market, the free market and environmentalism, price gouging, a free market in education and the benefits of cryptocurrencies.

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We ask Josh:

  1. Firstly Josh what led you to become a Libertarian?
  2. You’re writing a book on ‘The Social Science Of The Market’.  Can you tell us a little about what this will cover and what’s made you write a book?
  3. We spoke recently about the free market and environmentalism?  How do you think we can use the market to improve the environment?
  4. You wrote for us about price gouging.  So why do you think Tesco’s, Sainsburys etc. should have been able to, and maybe should have charged us £10 for a roll of toilet paper?
  5. Schools have been closed most of this year so far, but hopefully will be back in September.  You wrote for us about a private market in Education. Briefly how would that work, and what do you see as the main benefits?
  6. Lastly all good libertarians have a problem with Central Banks, and you’re no exception.  So will Crypto save us all from fiat currency quantitative easing?

Bitcoin, Cryptocurrency and the Blockchain – The Potential Future of Money

Economic Piece by Josh L. Ascough

When writing about the subject of money, I think it’s worth having a bit of fun by quoting the Monty Python Money song:

“There is nothing quite as wonderful as money. There is nothing quite as beautiful as cash. Some people say it’s folly, but I’d rather have the lolly. With money you can make a splash.

You can keep your Marxist ways, for it’s only just a phase… Money makes the world go round!” ~ Monty Python The Money Song

“Money is quite literally the life blood of any economy, and a people’s ability to communicate value to one another”

Money has played one of the most important roles in our ability to communicate throughout the world of commerce. Thanks to money, we are better equipped to calculate the marginal utility of goods and services, which ensures we can evaluate the cost of production and the value of capital. Money is quite literally the life blood of any economy, and a people’s ability to communicate value to one another.

But thanks (or rather, no thanks) to government involvement and its monopolistic grip over the monetary sphere, money has not advanced in 100 years; in fact, it has gotten worse.

“money never used to be a symbol of ‘national sovereignty’, in fact during the period of the classical gold standard, money was not nationalised; it was an international means of calculating value via the means of value to weight ratio and arithmetic”

Not many people realise, but money never used to be a symbol of “national sovereignty”, in fact during the period of the classical gold standard, money was not nationalised; it was an international means of calculating value via the means of value to weight ratio and arithmetic. Gold was gold. It did not matter what brand was on the coin as it was all in the form of precious metals.

Sadly, we went down a very damning path by nationalising money, and giving full control over the monetary sphere to governments and the central banks. We took what was a once a bottom-up process based on market democracy, and turned it into a top-down process based on institutional, cartel-like tyranny.

However, though governments will fight hard to not resurrect the gold standard, we have an alternative to the monopolistic, monolithic hold over our money. Allow me to introduce you to the wonderful world of Cryptocurrency.

Before we delve into the subject of Cryptocurrency I think it is important to debunk an idea that has circulated for a while:

Where does money come from?

There has been this strange consensus for a while that could be the root of the idea for assumed consent of taxes; which is that money is created by government.

This is in fact not true in any sense. In fact it is actually the complete opposite.

Money has always been a creation of the private, organic markets. When I say the private market, I don’t mean a CEO of a company creates a money and says “this is money, and this is how much it is worth.” Rather, I’m referring to the organic process of human interaction. I’ll try not to turn this into an article on the creation of money, but I will attempt to explain this through a chronological ordering:

Let’s say there is a community with no money and it is operating in a system of barter. Barter is a system with no commodity for the means of exchange and so those wishing to acquire goods and services will trade economic goods for economic goods, via the means of Direct Exchange; for example let’s say I grow wheat and you raise cows. I have 50 crates of wheat, enough to serve my immediate needs via 2 crates and enough to keep aside for future use via 10, yet I can further satisfy my needs by acquiring a cow.

You are raising 20 cows, you hold 1 for an immediate food source, 5 for future food sources, 2 for milk which you use to drink and create butter, and 4 for breeding, yet you can also further satisfy your needs by acquiring wheat.

Your uses for the wheat equate to you requiring 20, and you hold the use value you hold over the 8 cows as being below that of 20 crates. My use for the cow equates to requiring 4, and I hold the use value I hold over the 38 crates as being lower than the 4 cows.

In all economic activity we are seeking to increase our value by trading goods we deem to have lower value for ourselves, and so if I value 4 cows to be equal in value to my 38 crates of wheat and was to trade the exact amount, I would not be gaining value. The same is true for the other side; If you value your 8 cows to be equal to 20 crates and you were to trade the exact amount, you would not be gaining value – therefore the ratio for me to gain would mean I’m willing to trade no more than 37 crates, and in order for you to gain you are willing to trade no more than 7 cows.

We agree to a trade by you acquiring 30 crates of wheat in exchange for me gaining 6 cows.

30 crates = 6 cows.

This system of barter is all well and good until a few issues arise.

Within a system of barter, we rely on a coincidence of wants; we are focused on the necessity of our neighbours coincidently having a need that can be satisfied through the use of what his fellows have, and vice versa.

Additionally, the perishability of goods is another problem. If you are growing wheat, and your neighbour says he doesn’t want wheat now, but he probably will in the future. The problem here is that wheat doesn’t last forever, after a period of time it will shrivel up and be incompatible for the uses it could’ve served. Continuing down this, perishable goods cannot be traded over great distances as again, they will shrivel, grow mould and become unable to satisfy the needs they once held use value for, so under this system direct trade based on the coincidence of wants can only be maintained within a local community; not city to city or nation to nation.

Finally the other problem with a system of barter, is the indivisibility of goods. If you are raising horses for example, you are looking to acquire wood and straw to build yourself a basic hut, and people have a need which can be satisfied through the use of said horse and hold command over the goods you are seeking, you cannot divide the horse into a multitude of pieces to satisfy both “buyers” and yourself, as the horse will then lose its use value, and if both the wood and the straw hold no value to you on their own, then even trading the horse to one person regardless of who will not form a gain in value to yourself, as you would be no worse off with or without.

Now the way in which a money is brought to the market occurs when an economic good, which holds use value, acquires the quality of being a means of exchange, by confirming a few important qualities:

Scarcity – scarcity is the primary requirement for a good to be deemed an economic good, and it is no different for money. If a money is not scarce, then it loses its value and ceases to be an economic good. A historical example of what happens when a money is made non-scarce, is the period of hyperinflation in Germany.

Divisibility – this could also be referred to dramatically as the indestructability of a sound or “good” money. An indestructible or divisible economic good, is one in which it can be divided into fractions without losing it value. A perfect example of this is the gold standard; if you had a 1kg bar of gold and broke the bar up into a thousand pieces each equalling 1g, the value of gold has not diminished it has simply been divided into more flexible quantities.

Durability – a sound money will be able to be transported across cities, towns and nations without fear of the money shrivelling up, and losing its value; this is very similar to the divisibility of money.

These are the qualities of an economic good that are required for a money to occur over the course of time within the market. So if, let’s say, steel was seen to satisfy a need which people had and therefore held use value, then an innovative, entrepreneurial individual would come to the conclusion that, steel is scarce so it quantifies as an economic good and the more people demand it the more valuable it will become, it is divisible/indestructible because it can be broken up and melted down into different quantities of different sizes and weights, and it is durable because it retains itself over long periods of time making it possible to transfer as far as other nations; this individual would decide to begin accepting steel in exchange for his goods and services. The steel now has gained a new quality, it has acquired an exchange value by obtaining the ability to be a means of exchange; it is now of intrinsic value.

If you would like to see further details about how money comes into the world, I highly recommend Carl Mengers book – The Origins of Money.

So, what is Cryptocurrency?

Crypto is a digital commodity which is created through the means of what is called Crypto mining; using specialized hardware to code at a variety of hash rates and adding blocks to the chain (Blockchain). This process takes a lot of processing power just like mining for gold. The Hash rate is the speed at which a software is able to complete the operation of accessing crypto code; the greater your hash rate the more crypto you’ll be able to mine.

There are a wide variety of Cryptocurrencies; Bitcoin being the most famous and most valuable; at the time of writing this (24/07/20), 1 BTC is valued at £7,498. Other forms of Crypto are Ethereum, Ripple, Bitcoin Cash, and Litecoin.

At the time of writing this, they are valued at:

1 ETH = £221.

1 XRP = £0.16.

1 BCH = £184.

1 LTC = £34.97.

Cryptocurrency has all the qualities that require a money to come on to the market.

“These mechanisms ensure that only a fixed quantity of each Cryptocurrency can be created through coding regardless of the hash rate. So once a maximum quantity has been created, no more for that particular Cryptocurrency can be brought into existence”

It is a scarce resource. Many may say, how can something with no physical qualities be scarce? Well that is thanks to the mechanisms operating within the Blockchain itself. These mechanisms ensure that only a fixed quantity of each Cryptocurrency can be created through coding regardless of the hash rate. So once a maximum quantity has been created, no more for that particular Cryptocurrency can be brought into existence. This also ensures that it cannot be manipulated through artificial creation or inflation, and so as the production operating in an economy is lower than the money supply we will see what is known as Growth Deflation, resulting in prices falling; not necessarily due to overall supply of goods being higher than consumer demand, but because the money has become more valuable than the capital and consumer goods themselves.

It is divisible. Cryptocurrency can be divided between different coders, hashers, consumers, suppliers and investors without it causing the currency to lose its overall value.

It is durable/indestructible. Cryptocurrency probably has the most unique form of this than any other form of money, because all money, even the gold standard over very long periods of time will wither. Under the gold standard even though there were huge benefits to this monetary system, over prolonged periods of time the coins would lose weight and so a coin which originally weighed 1 pound, could be reduced by continuous use to say 3/4 of 1 pound or lower, and so that particular coin would be less valuable. Crypto though, thanks to its non-physical quality and being completely based in code, can go on, and on, and on; forever. Cryptocurrency is the purest form of indestructible money.

There has been criticism and questions over Cryptocurrency in general and I’d like to address some of them.

“So Crypto is just a money. What about a payment system?”

Cryptocurrency has a unique quality about it where it is both a money and a payment system. The payment system is built into the money itself, for example imagine if PayPal was its own form of money as well as a payment system; rather like how most modern gaming controllers have battery packs built into them rather than the battery being a separate aspect; except the batteries in the Crypto payment system down run out of power.

“The Blockchain not only acts as a massive database for all the Crypto in existence, but has built into it a ledger that keeps track of transactions occurring as well as keeping a log of what belongs to who”

“If it is all digital how do you know what belongs to who?”

The Blockchain not only acts as a massive database for all the Crypto in existence, but has built into it a ledger that keeps track of transactions occurring as well as keeping a log of what belongs to who. Note that when I say track I don’t mean the ledger is keeping track of what you buy or who where the money is going; to keep with the privacy of Cryptocurrency, the ledger tracks when transactions occur, and how much; that’s it.

“How secure is Crypto; could I get hacked?”

Just as any piece of technology, there is always a possibility that your wallet could get hacked, but at the current period of time, unless someone has access to your private key; which is built into each individual wallet that only the owner has access to, it would be impossible to hack into someone’s account and steal your money without requesting money first, which is done by sharing your public key to customers or businesses, which is used to enact transactions.

I would like to rewind my statement earlier about it being a money and a payment system, as with the information on the private key it can be noted as being three; a money, a payment system and a personal private bank.

“What about the crash that happened to Bitcoin in 2017?”

This has often been thrown around in an attempt to discredit Crypto in general, however the reason the crash happened is very straight forward and, while it is something skilled techno-minded people are looking to solve, from an economic position its reasoning comes down to artificial barriers in the way.

Crypto has all the qualities of a money. It is scarce, divisible, durable, it holds exchange value and is a means of exchange. However, at the time, it did not hold use value because it could not be used in large numbers of transactions; so as large numbers of people were increasing the demand and overall value of Bitcoin, when it was realised it couldn’t be used speculation went against its favour and caused the value to drop. Now as stated, there are very skilled technically minded people working on ensuring it has usability, however I would argue it comes more down to governments holding a monopoly on what money is “meant” to be, and so blocking any and all competition for better, more efficient means of exchange. There is also the aspect that not all businesses wish to commit to transactions in Crypto, but no money ever created through the spontaneous, unplanned order of the market comes about instantly; these things take time and the user interface has hugely improved since Crypto’s inception in 2009.

If Cryptocurrency continues to advance, and achieve better, faster and more user friendly means, we could see the death of big government faster than we could have hoped only a decade ago; we could see an end to central banking by adopting completely private wallets, storing private money.

Without full control over money, nation states cannot maintain their power.

Main image: Image by Pete Linforth from Pixabay

Price Gouging, Price Controls & Monopolies – An Analysis of Economic Fallacies

Economic Piece by Josh L. Ascough

– This article is part of a larger collection of my work I hope to have available soon, titled; ‘The Social Science Of The Market’. –

It would be very easy to simply “fallacy shame” those who are inclined to believe fallacies with regard to economic science; to turn to the layman and say “you are a science denier!” without explaining why these falsehoods are not just wrong, but dangerous, as they are counter to the science of Economics.

However, an economist, and those well minded in the science without the official title, should do well to explain where these fallacies are, why they are dangerous, and what the reality is.

Throughout this article, I shall attempt to explain two important subjects that hold dangerous consequences; these are price gouging, and price controls.

Price Gouging: – Price Gouging is a non-scientific term used to define when the price of a certain, or many economic goods, sees an increase in the cost to consumers. This fallacy is often used in times of crises, such as a natural disaster, and is predominantly used to attack apparent “greedy business owners” for “taking advantage”. But the reality is the price has seen an increase because market conditions have changed; people’s use for the economic good in question has seen an increase in the quantity demanded, which is above the supply levels, and through consumer actions has seen its value increase. This is no different to when the supply of a good sees an increase, the consumer demand of specific quantity levels has stayed inelastic, and so the equilibrium of value reflected in the price decreases.

“Thanks to the pricing system being allowed to reflect value through supply and demand, Amazon was able to adjust to better bring supply to meet the consumer demand”

Price increases of this degree do not simply occur because a business became greedy overnight; an economising business does not simply look at current levels of supply and the quantities demanded, but will look at predicted future levels and value; if a disaster has occurred, causing people’s demand for a certain economic good to increase and it is predicted that consumers quantity levels demanded are likely to increase over time or stay at the current high levels, then the business will increase the cost to a higher level because (A) the value of the good has seen an increase and (B) this ensures the business can refrain from having its supply depleted causing it to be unable to meet future demand quantities, and through its predicted models will be in a position to better afford materials to meet the supply levels demanded. An example of this occurring can be seen with Amazon during the early outbreak of COVID-19: During the early period there was a spike in demand for hand sanitizer gel. This caused the dreaded “price gouging” to occur with most notably Amazon at the time selling 50ml bottles for upwards of £12; the consumer use for the economic good had seen an increase, shown through large numbers of consumers buying larger quantities than previously, causing the value to increase and the pricing system to take effect. After this period of the equilibrium of value meeting consumers quantities demanded and producer quantities suppliable, Amazon later found itself in a position to sell hand sanitizer gels of 50ml for an average price of £4.50 (subject to brand). Thanks to the pricing system being allowed to reflect value through supply and demand, Amazon was able to adjust to better bring supply to meet the consumer demand.

The scientific term used for both increases and decreases in a price, is Price Fluctuation; it is not producers who cause prices to increase or decrease, it is consumers through their choices, values and actions. Price Fluctuations (I will use the scientific term hence forth), not only play an important role in a market economy, as they help to coordinate courses, allocate resources and incentivise choices through identifying what uses and needs people are prioritising and placing higher value on, but they play a significantly high role in times of crises, as higher fluctuations in prices help to disincentivise panic buyers and hoarders taking supply quantities which go beyond their use value to them.

For an example, let us say during the early stages of a crisis, person A has £250 to spend on resources to satisfy his needs; he requires food for himself, his wife and baby, paracetamol, hand sanitizer, toilet roll and diesel. Let us also say that the pricing system has been allowed to take effect, and has not been tampered with to pass inaccurate signals through price controls; baby formula has seen an increase from £8.99 for 900g to £20, canned food has seen an increase from £0.79 per can to £3 per can, frozen microwave meals have seen an increase from £2.50 to £5, fresh meat has seen an increase from £3.50 to £10, paracetamol £0.50 to £3, hand sanitizer £0.99 to £12, toilet roll £3 per x4 pack to £8 per x4 pack, and diesel with an increase from £5.90 per litre to £10.60 per litre. If he is an economizing individual, he will utilize his resources the way which best allows him to satisfy the needs he deems to be a priority in relation to the use period of time they are required to serve. We can better imagine this organization through a 1 to 10 chart; 1 being the least valuable or that which serves a lesser need, and 10 being the most valuable or that which serves higher needs.

If person A is an economizing man, he will look at the price alongside his means to enact an exchange, and look to satisfy his and his family’s needs through goods which serve to satisfy said needs based on their use value, and time scale of necessity to him. Let us say he has a high use value for food for himself and his family, and wishes it to serve a long time period; the economizing man will look to primarily satisfy these needs over what he considers his second and third most important needs, say paracetamol at second and toilet roll at third. This places food at the position of 10 on the scale, paracetamol at 9 and toilet paper at 8. While he sees a need for hand sanitizer it does not serve a regular use such as food and he only finds use for it when in contact with unclean items or items he has no control over; he recognises his use will be satisfied with one drop, and so he looks to maximise its time period of use through only taking command of the good when needed; this will place the hand sanitizer at a position of 4 on the scale. Placing the sanitizer in a position of 4 allows him to have command of more of his resources, that of money, should he find an unexpected need for further food or one of the other goods of higher value than 4, but below 10. If person A continues to act in an economizing manner, and has little use for travel during the crisis, then he will look to only utilize his means of transport in order to better satisfy his needs, or future needs which may arise; placing diesel at a position of 3 on the scale.

This would mean person A would roughly spend £100 on food, £12 on paracetamol, £16 on toilet roll, £12 on sanitizer, and £42.40 on diesel, leaving the economizing individual with £67.60 for a reserve should needs of higher value require further satisfaction or a good of lower value in order to serve his needs of higher value at a higher quantity at a later period.

“This in turn disincentivises person A from hoarding and leaves resources available for other economizing individuals looking to serve their needs and, in the long term, allows businesses to adjust their supply levels”

A further, shorter example of this would be the following: if person A needs £3 worth of toilet roll per x4 pack but he wishes to purchase £16 worth which exceeds their use value to him; should the price increase to £16, he will economise by making a purchase which allows them to serve their use value in relation to the exchange value of his good without excess to ensure he can better serve and maximise the satisfaction of needs he deems to be of higher value. This in turn disincentivises person A from hoarding and leaves resources available for other economizing individuals looking to serve their needs and, in the long term, allows businesses to adjust their supply levels with the additional income so as to better meet quantities demanded in the future.

Price Controls – Continuing down the road from “Price Gouging”, as briefly mentioned in the fallacy above, one method which is often attempted during high price fluctuations is price control. This is when a high price fluctuation for an economic good is deemed “immoral” and so policy makers look to enact price controls to halt prices from rising, and decrease them to “acceptable” levels. This however, as will be explained, is a dangerous measure to take.

Price controls have been a tried and tested measure of failure, most notably within the housing market. When a price fluctuation occurs, it is not through reckless desire by the business in question, it is a reflection of consumer demands, quantities demanded, and a higher degree of value being placed on the economic good; these act as signals to producers, investors, and entrepreneurs that a high equilibrium of subjective value is being placed on an economic good; either of higher or lower order (lower order being direct consumption, higher order being economic goods such as material, labour, land, or capital; goods not designed for consumption, but for further production). Goods of both higher and lower order fall under the pricing system, which sends signals to which goods of economic qualities are in demand; if a large shift is seen in the number of those engaging in the consumption of vegan food for example, this sends signals to the sellers of the final good that consumers value the vegan products they are selling over the non-vegan products. This in turn sends signals to the industries which produce the ingredients (goods of higher order) that sellers are expected to increase their demand for stock, which engages these industries to be more competitive for resources as they have increased in value, as each party is sending signals that they place a higher value on the economic goods; from consumer to investor.

In addition, these signals of high demand assist the entrepreneur in calculating the risks of bringing new, innovative goods to the market and allows him to assess his opportunity costs*; without these signals of supply and demand representing an equilibrium of value, the entrepreneur risks his resources on outputs which hold little to no value.*

*An Opportunity Cost is the assessment of resources available to the economizing individual and what could be, or could’ve been created, consumed, invested in, or sold. As an example if I hold command over leather, I could sell this to a sofa maker, a jacket maker, or sell it on an open market directly to consumers as a material they hold use value for; if I hold command over 1000 pieces of leather, and I choose to sell 600 to sofa makers, I cannot sell 600 to jacket makers and can only sell 400 thereafter. The opportunity costs are the economic option I chose not to engage in, and is an important aspect of determining where resources go and where they are best allocated.

*This does not mean if an entrepreneur sees a high demand for a specific vegan food (such as vegan bacon) he will only look to create more vegan bacon, but that he will see an increase in value for vegan products, and look to innovate the vegan market; this could be in the form of creating new ways to produce vegan products, finding economic goods which have yet to have vegan alternatives, or find ways of enhancing the vegan goods through extracting animal DNA to grow meat products without the killing of an animal.

With all that said, let us get back to the topic of price controls.

When legislators put into action price controls, this causes the signals used to display supply and demand to be artificially altered, and send false signals to buyers and sellers that the value of the economic good in question has not changed. Price controls cease the pricing system to signal to consumers as to the change in economic value, and so the consumer is not faced with changing their consumption patterns.

This act also disincentivises investors, entrepreneurs, sellers and producers from bringing more of the economic good to the market, as the pricing system has not been allowed to reflect any equilibrium of value, and so those in these categories will not be able to meet new levels of quantities demanded, causing long term shortages; this in turn, hurts the consumer base of the economic good in the long run too, not just the suppliers, as it is not seen as a wise investment to place resources into a good which has not been permitted to reflect its overall value.

Price controls do not just occur in the form of artificially lowering the price to a “justified” level, they can also occur in the form of minimum pricing; this type of policy tends to arise if a company is suspected of “dumping” goods on to consumers, in an attempt to dismantle competition and become a monopoly; this type of price control can often be found in most Anti-Trust laws.

The minimum price form of price controls is dangerous for very similar reasons to the price controls mentioned above; in this instance though, the disincentive is with the consumer rather than the supplier.

As before, the artificial increase in a price, misinforms those engaged in the market as to the value of the economic good in question, and sends false signals to suppliers as to what consumers are in high demand of. The value of an economic good is based within the subjective values and needs the good as a subject serves; it is subject to the use value of the individual wishing to consume the economic good being higher than the individuals exchange value of the good he is to trade for the good, and the exchange value of the good to be higher to the supplier than its use value; this in turn creates an equilibrium of value, which is displayed in the pricing system and determines an economic goods overall market value.

If this system of value is not permitted to function (in this instance subject to the form of minimum pricing), then the actual value of an economic good is not being allocated; if this is above the use value the consumer places on the good, it will create disincentive for the consumption of said good; causing losses to be made on the sides of both parties, as if the consumer is forced to pay a price above the equilibrium level of value, he has less access to resources at his disposal for the consumption of economic goods he is in need of service from which can satisfy his additional needs, if the supplier is forced to charge a price above what he initially was willing to sell the good for and above what the consumer values, he will be wasting resources, and losing profits which would’ve gone to the further production of goods in demand.

Prices need to be allowed to work, not through the artificial lowering or heightening of the value, or both parties wishing to engage in mutual benefit will be faced with non-consensual losses; disincentivising further engagement. Price controls ultimately hurt the poorest by being forced out of market engagement, and hinders new, small businesses from entering engagement of the market, damages the competitive process and, in the end, slows innovation.

Monopoly And Competition – I have chosen to combine both the fallacies of monopolies and competition together, as there is a prominent, black and white view of the two as to how they correlate; there is nuance with both and not all monopolies are damaging and not all competition is beneficial.

We must first go over the subject of a monopoly. There are three forms of monopoly, which are:

  1. Legal Monopoly.
  2. Market Monopoly.
  3. Community Monopoly.

“the UK’s NHS holding a legal, centralised monopoly over the health industry to forcefully extract resources from citizens, irrespective of whether they value the particular good”

The legal monopoly is best described, as an institution, company or industry, which has been granted a special, legal status to protect it from competition. This can appear in the form of a copyright over a product (not a brand), power to restrict competition via methods of selective entry and through licencing laws (a case example is the American Medical Association, which up until the 1970s, lobbied to Congress to grant it special licencing powers and to restrict how many graduates could enter the market at any given time, in order to keep wages high), but is most notably found within government institutions, as these institutions do not operate under a market system through pricing based on supply and demand, but demand payment from “potential” consumers through means of assumed consent, regardless of quantities demanded (or lack thereof) from consumers; many government institutions also operate as “safeguards” of deciding who can enter the area of a market the government institution has a legal monopoly over; examples of this can be seen with the UK’s TFL (Transport For London) holding the monopoly power to issue or take away licences from private competitors, as well as with the UK’s NHS holding a legal, centralised monopoly over the health industry to forcefully extract resources from citizens, irrespective of whether they value the particular good.

This form of monopoly, the reader would be right in assuming, is damaging to not just competition, but the quality and quantity of economic goods available to the consumer. Through the means of a legal monopoly, competition becomes either too expensive to warrant investment, or illegal. Competition and the pricing system go hand in hand, and are vital to determining how to allocate resources to where they will best serve the maximum demand which serves a need individuals wish to see satisfied.

This note of competition brings us to our second form of monopoly, the market monopoly.

The market monopoly is exactly as is named; it is a monopoly which has arisen through market activity.

This form of monopoly has a tendency to attract the most suspicion; however, a market monopoly is merely created through consumers placing a higher value on the particular goods to which the company in question is selling.

Market monopolies are not created through legal means such as selective entry*, licencing laws or forcefully extracting income from consumers regardless of demand, but are created through consumer choices. If the majority of consumers choose to purchase iPhones’ over Androids’ because their use value for the economic good is higher than the exchange value of their money, the quality meets or exceeds their subjective standards or a combination of both, Apple will naturally acquire a market monopoly, because it is more efficient at serving its consumer base and the consumers use value of the item, than its competitors.

The market monopoly has often been accused of stifling competition in an attempt to restrict consumer choice, there is a major flaw with this hypothesis though; the monopoly can only occur through consumer choices within a competitive market; you cannot save all or any competitors if they are not able to perform as well at providing a service consumers value than their competition that can.

Market monopolies do not occur due to a lack of competition, they occur because the competition lacked efficiency at providing the particular economic good consumers demanded, and this lack of efficiency is reflected through the actions and choices of consumers.

“Market monopolies do not hinder consumer choice, as has been stated; it is through consumer choice this form of monopoly occurs; through consumer choice, market monopolies actually encourage innovation in being able to compete for the top position of serving consumer demand the most”

Market monopolies do not hinder consumer choice, as has been stated; it is through consumer choice this form of monopoly occurs; through consumer choice, market monopolies actually encourage innovation in being able to compete for the top position of serving consumer demand the most. Is this monopoly expected to last a long time? Yes. Is it expected to last forever? Unless the company in question is exceptionally good at predictions of future quantities and qualities demanded by consumers and adapts accordingly to change, and prices its goods to reflect demand and use value; continually meeting an equilibrium of value, no; peoples’ evaluation, values, tastes, needs and priorities change and adapt over time, an example of this change would the vegan food industry vs the meat industry; not that long ago farmers appeared to have an unending dominance over the food industry, but as peoples’ value over animal life changes and demand for alternatives arise, the meat industry’s market monopoly becomes crippled, and has to adapt to the change in value, though it is a shame the meat industry, particularly in the UK has resorted to demanding subsidies and bailouts, because it cannot grasp the change in consumer demand or competition, which isn’t a legal monopoly per say, yet it does fall into a much wider issue which we will go over later in this chapter.

All industries, under a market economy, can and will bend to creative destruction, through entrepreneurship and the private ownership of the means of production.

An example of a market monopoly would be Microsoft.

When Microsoft first began selling household computers, it provided its own internet browser for free. Before this, consumers would have to buy a browser for their home computers. This genius act of innovation for consumers gave Microsoft a market monopoly over household computers, with many of its competitors decreeing Microsoft to be “dumping” on consumers and called out for Anti-Trust to be enacted upon the company.

This brings us to our third form of monopoly, the community monopoly.

The community monopoly, could be considered a pointless subject to delve into, as it tends to be the most short lived, and very few take issue with this; however for the sake of consistency and to wrap up, I will go into this monopoly briefly.

A community monopoly occurs when there is a particular area of the market, which has yet to reach a community, regardless of size of the community or the industry itself.

If a community has no provider of pizza delivery services, yet there is ample demand for pizza delivery and I decide to open up shop, due to being the only provider for this community I have achieved a community monopoly.

This form of monopoly in previous years would never last long if there was demand for the service and demand continued or grew, as since my prices would reflect the equilibrium of value relating supply and demand, the use value and exchange value of both parties involved, other business owners would see there to be demand and money to be made in this industry within said community, and these competitors would cause me to exit the market if they were able to provide the service with more efficiency, and the consumer not only found greater value with the goods of my competitors, but could better satisfy their needs to greater quantities with an exchange more attractive to them and provided use value higher than the exchange value of their money.

The community monopoly is a rarity in the modern world, as we have become a much more global market, with a wider range of methods for individuals to acquire goods in order to satisfy their needs; this should not be seen as a good thing or a bad thing, but should be a grand example of how the organic market has created new, innovative ways of serving, satisfying, and providing to individual subjective needs and value; commerce is truly, a beautiful and exciting experience to watch expand.

I will leave the reader with a quote by the late Economist, Milton Friedman, to which I hope the reader considers when presented with future, “quick fix” and “moral” solutions:

“One of the great mistakes is to judge policies and programs by their intentions rather than their results.”

Josh L. Ascough is on Instagram at

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The Central Bank & Fiat Money – The Root of Cronyism

Economic Piece by Josh L. Ascough

This article is part of a larger collection of my work I hope to have available soon titled ‘The Social Science Of The Market’. – Josh L. Ascough

Many economagicians, central planners and establishment economists have an unnatural admiration for this leviathan juggernaut of pestilence; ignoring the fact that, many economic issues causing harm to individuals and societies are due to this abomination’s existence. The creation of this legally monopolistic, monolithic, malicious institution has been at the very heart of the decreasing value and standards of life.

In order to adequately talk about the central bank, we require delving into a few topics first, in order to fully understand the issue. These topics include:

  • Deflation
  • The Gold Standard
  • Sound Money to Fiat Money
  • Inflation
  • The Boom/Bust Cycle

We will begin the subject with The Gold Standard and the process of Sound Money to Fiat Money.

Let us first take a look at the spectrum of international monetary systems to gain a quick grasp of the subject.

The graph shown above displays a quick overview of The Gold Standards history, starting with its 100 percent Gold system, where there was no central bank or any format of paper money receipts.

“The Classical Gold Standard had the monetary unit set, to be legally defined as a weight of gold, and though it is a popular belief, the gold standard was not a creation of government, but a market supplied commodity with an intrinsic value predicated in use and exchangeability”

The Classical Gold Standard took place from 1821 to 1914. Under this system we had the creation of paper money receipts; these were not forms of money but were tickets or claims to the noted amount of weight in gold (a £20 note was not money, but a claim to 20 pounds of gold, which the bearer of the note could give to the bank to withdraw said amount of gold, or could use as a money substitute to purchase goods and services; the money substitute or ticket, could then be used by the new owner to claim 20 pounds of gold. The Classical Gold Standard had the monetary unit set, to be legally defined as a weight of gold, and though it is a popular belief, the gold standard was not a creation of government, but a market supplied commodity with an intrinsic value predicated in use and exchangeability, which developed over time as people found more reliability with the precious metal.

As a monetary unit, under the gold standard the currency name was not an indicator of national sovereignty, but was simply unit of gold measured in weight.

For example from 1834-1933, the US Dollar was legally defined as $1 = 1/20th of 1 oz of gold (23.22 grains), and the British Pound from 1821-1931 was defined as £1 = 1/4 of 1 oz of gold (113 grains).

With regards to the exchange rate of the gold standard, the gold standard was not a fixed exchange rate system, as all countries operated with the same form of currency; that being gold.

“the “exchange rate” of  Dollars to Pounds for 100 years was $4.86 ÷ £ = 113 grains of gold, as there was a smaller weight of gold in the Dollar coins as opposed to the weight of gold in Pound coins. The exchange rate of the gold standard was simply a law of arithmetic”

So the “exchange rate” of  Dollars to Pounds for 100 years was $4.86 ÷ £ = 113 grains of gold, as there was a smaller weight of gold in the Dollar coins as opposed to the weight of gold in Pound coins. The exchange rate of the gold standard was simply a law of arithmetic.

The operation of gold as the currency did not require or involve the fixing of the price. If an individual sought to redeem £4 for an ounce of gold, the bank or the government was not in fact selling gold to the bearer, but was simply fulfilling its contract to redeem the value of £4 to the title holder of the property. Another way of looking at this system and transaction, would be to think of placing a piece of property into a storage building and being given a receipt; the piece of paper is not the property object itself, but is a claim to the property and its rate of value is equal to the property.

Under the gold standard the MS (money supply) was strictly limited to the amount of gold in circulation and to that of gold mining; hence bank notes and deposits can only increase if and when new gold was to enter the banks. This is often referred to as “The Golden Handcuffs”, as the banks were restricted in how much money substitutes they could supply.

As a result of this, prices tended to fall over periods of time, as saving, investment and technological improvements increased the supply of goods and services available more rapidly than the increase of the money supply. Price deflations are natural outcomes of a gold standard. As an example in the US from the period of 1880-1896, price percentage decreased an equal amount of 30%, while GDP percentage saw an increase of 85%. A more broken down format would be a decrease of 1.7% per year, and an increase of 5% per year. This type of increase in production with a decrease in prices is what is known as “Growth Deflation”.

The destruction of the gold standard began during the period of WWI, when gold reserves in the US were centralised in to the Federal Reserve; prior to this, private banks held their own reserves of gold against the money receipts they issued. This was aided and achieved through the act of a heavy tax implemented on to all private issues of bank notes, alongside the exporting of gold being prohibited in 1917.

During the period of the 1920s, the private issuing of bank notes became outlawed. This was followed by the Federal Reserve cutting reserve requirements from 21.1% to 9.8%, which in turn caused the money supply to double from 1913 to 1919.

These first steps were achieved through mass propaganda by the government and the central bank, classifying the use of gold as “old fashioned”, in an attempt to have the dollar not associated with a weight in gold, but with a government owned paper money.

From 1922 to 1933, the Federal Reserve expanded bank reserves in an attempt to stabilise prices and assist Great Britain in returning to the gold standard, as a means of having foreign nations buy up the US gold supply.

In 1929 the Great Depression and the bank runs began, signalling the end of the classical gold standard, as Franklin D Roosevelt, on the 1st of May 1933 issued an Executive Order, prohibiting the ownership of gold by private citizens and businesses, with a criminal charge of $10,000 or 10 years in prison for non-compliance.

There was a temporary period where an apparent “gold standard” made a comeback, named the Bretton Woods System, from the period of 1946 to 1971.

However, the BW system was a faux gold system, and was an attempt to bring order to the chaos brought about by the newly adapted national fiat money systems, by covering it as a gold standard.

Under the Bretton Woods system, the US dollar was treated as the key currency; or the world reserve currency, and was made convertible into gold at a fixed rate of $35 per oz. This caused a devaluing of gold from the legitimate rate of $20 per oz.

All other forms of currency were convertible into dollars, but at fixed exchange rates, and currencies were only convertible into gold for central banks and governments; US citizens were not permitted to convert their dollars to gold or own gold, due to the FDR Executive Order of 1933.

The operations of the BW system were so that, currencies of foreign nations were expanded and placed into a pyramid on top of the US dollar, causing the Balance of Payments adjustment mechanism, which limited inflation under the gold standard to be null and void.

This lead to the Federal Reserve having the ability to create money, causing domestic inflation and BOP (Balance of Payment*) deficits without consequence, due to foreign governments and central banks buying up dollars with their own currencies instead of demanding gold.

Because of this, the Bretton Woods system caused a persistent BOP deficit due to a global surplus of the dollar. However, as long as foreign governments and central banks were willing to accept and hold excess dollars, the US did not require concern for the deficit; in essence, the US exported paper money and inflation to the world in exchange for economic goods.

On the 15th August 1971, President Nixon placed the final nail in the coffin of the gold standard, by renouncing the obligation of the US to convert dollars for gold, as decreed under the terms of the Bretton Woods system.

Under the current operation of fiat currency, gold would play no direct role under the fiat money system. The US dollar and other currencies continue as pure fiat money, which are unconvertable to gold. The monetary basis would be comprised of fiat paper money (government controlled central bank notes), which are held by the public and the banks within the vaults and cash machines. Thus, the central banks would continue to control the monetary system, by buying or selling bonds, and giving government’s political control over the supply and dealings of money.

*The Balance of Payments was an automatic mechanism, which would cease the increase in the money supply before it could cause too much damage to the economy. Under the BOP mechanism, if the domestic money supply increases, domestic prices would rise above world prices. This would lead to exports to the country in question decreasing and imports increasing; resulting in a balance of payments deficit. This mechanism maintained an equilibrium in BOP, and distributed gold throughout areas according to the demands for money (gold). In addition, the BOP operated inter-regionally, with the end result of a limited money supply increase and inflation by central banks. The mechanism operated as such: As the MS (money supply) increases, the domestic P (price) increases above world P. This causes exports to decrease and imports to increase, creating a BOP < 0. This leads to gold supply to decrease, creating a downturn in the MS, causing domestic P to drop below world P, and leading to exports to rise as imports drop, equaling a BOP > 0.

With the subject of the gold standard and the introduction of the fiat money system concluded, let us move on to the subject of Deflation.

Does the reader enjoy falling prices for consumers? Does the reader believe falling prices are good for the economy?

If the answer to both questions is yes, then there is not much purpose in continuing on with the subject of deflation; for the purposes of reaching the end result of the central bank subject however, I will continue.

Deflation is a natural occurrence of the market economy, and is generally subject to the same laws of supply and demand. Like any price for economic goods, the value of money is determined by the equilibrium level in relation to supply and demand.

An increase in the value of a money, or a reduction in prices is caused by a reduction of the money supply, or a rise in the demand for a money. We increase the demand for money when:

  • A) We produce and sell more goods.
  • B) When we aim to hold more of our money, leading to spending and investment to decrease.

It should be noted, that there are three kinds of deflation:

  1. Growth Deflation.
  2. Cash-Building Deflation.
  3. Confiscatory Deflation.

Growth Deflation is caused by the production and supply of economic goods seeing an increase; this is an economic growth.

A rapid increase in economic growth is caused by an increase in the investment of capital goods, which reduce the cost of production and increase profits. The newly increased supply of economic goods creates greater degrees of competition for money by sellers, and as a result increases the exchange value of money. If the money supply is allowed to increase very slowly alongside the fast increase in production, this will result in the value of money to increase, causing this to be reflected in falling prices.

Cash-Building Deflation is caused by economising individuals wishing to hold on to more of their incomes in relation to prices; prices can refer to consumer goods or rates for investment. The lack of spending causes the same result; demand for money to increase and prices to decrease.

Confiscatory Deflation is caused by the government confiscating money from individuals, demonetising notes or limiting the withdrawal amount of cash from banks. This form of deflation however is not a natural market occurrence, as it infringes on property rights and distorts the economy by sending false signals of economic activity.

“In 2001 Botox treatment was priced at $365; in 2013 the price was set between $99 -$149.

Liposuction in 1992 was at a cost of $1,600, and in 2013 the cost was roughly $999.”

Historical examples of Deflation can be examined with computers, HDTV’s, laser eye surgery and cosmetic surgery.

  • In the 1970s mainframe computers cost upwards of $4 million; today, thanks to growth deflation, home computers are 20x faster, and are able to hold more memory; selling for less than $500.
  • From 1980 to 1999, computer prices fell by 90% as the industry grew.
  • In 2004, roughly 32 million TVs sold in North America at an average cost of $400, sized at 27 inches.
  • In 2015, around 44 million TV’s sold in North America at a price of $460 sized at 38 inches.
  • This shows that price per inch fell to $12.10, from a rate of $14.81.
  • A broader breakdown of the overall price can be seen as such:
  • 1990 ~ $36,000.  2003 ~ $3,000 – $5,000. Today ~ <$500.
  • From the period of 1998, Lasik Eye Surgery was priced at roughly $4000 per eye. From 2013, the price was set around $300 per eye.
  • In 2001 Botox treatment was priced at $365; in 2013 the price was set between $99 -$149.
  • Liposuction in 1992 was at a cost of $1,600, and in 2013 the cost was roughly $999.

To add more detail to Cash-Building Deflation otherwise known as “Speculative Deflation”.

Cash-Building Deflation plays an important role, particularly during a recession, as businesses increase their cash holdings due to the production costs, such as wages and additional forms of input; capital, land, materials or machines, have seen a sharp increase during an inflationary period (or boom), which in turn have wiped out profit margins. This is a speculation of prices; the speculators have concluded that costs will fall and so seek to hold on to their resources until prices fall back to normal, or equilibrium levels.

This also accounts for entrepreneurs. The entrepreneur will hold on to his money supply and wait until wages and other input costs adjust to a reduced rate before they begin to proceed with investment.

Deflation plays a vital role in the speed of the readjustment period from a recession; we will go into the subject of recessions, booms and busts later in this section.

With all this said however; many commentators, financial writers and economists hold an irrational fear of deflation and the results of it, that being; falling prices. A handful of fear driven titles of blog posts and articles include:

  • “The Deflation Monster Still Lives”
  • “Why We Should Fear Deflation”
  • “Defeating Deflation”
  • “The Spector of Deflation”

In a congressional testimony, Alan Greenspan (2003) made the statement that a further drop in inflation would be “an unwelcome development.”

Further stating; “We see no credible possibility that we will at any point, run out of monetary ammunition to address problems of deflation.”

In 2002, Ben Bernanke gave a speech, in which he stated:

“The Chance of significant deflation in the US in the foreseeable future is extremely small. The Fed would take whatever means necessary to prevent significant deflation that might occur would be both mild and brief.”

This fearmongering should be seen for what it is; a desire to promote an irrational fear of deflation among the public, in order to justify further inflationary policies; the subject of inflation we will delve into in the following.

Inflation could be misleadingly seen as simply an increase in prices. This, however, is an errored concept. The price of an economic good can rise and fall for a variety of reasons: if the overall consumer demand for an economic good sees an increase, then the price mechanism will reflect the increase in value, or if the input materials or a particular economic good of higher order (capital) becomes more scarce, then the overall cost will be reflected in the equilibrium of value in relation to consumer demand and the supplies available to producers.

The monetary inflation occurs, when the central bank expands the rate of credit artificially through the expansion of the money supply, or beyond the money supply, causing interest rates to be set artificially low; this results in false signals being sent to investors, entrepreneurs and producers as to the degree of real, loanable funds available, and is the starting point of an economic “boom”; this could also be referred to as an “inhale” within the economy.

The economic boom or “inhale” cannot be maintained for long however, as the rates have been kept artificially low in relation to the expansion of credit and the money supply; this as stated, sends false signals to investors as to the funds available for production such as housing construction, the purchasing of capital such as labour, land, materials, machines etc. As those seeking further expansion continue to reach for resources, it is revealed that there are too few; leading to interest rates rising and the capital developed to become devalued; resulting in an economic bust, which can be referred to as an “exhale” in the economy.

The economic bust is a painful process, however it is highly necessary in order for rates of value to meet in a position of equilibrium, and stabilise the economy in relation to real loanable funds available reflected in the rates of interest, and allow the pricing mechanism to signal the actual value of economic goods in relation to consumer use value and producer exchange value.

We can think of the boom and bust cycle as breathing. We all breath (hopefully) inhaling and exhaling air, yet, if we were to take a deep breath in an attempt beyond what our lungs are capable of, and withhold from exhaling, we would slow the process of relief and do damage to our lungs. The boom and bust cycle can be seen in a similar way; the boom is the problem; the boom is an excessive intake of air, the bust is the readjustment back to a stable, natural rate. Yet many policy makers insist in bringing relief to the economy in the form of stimulus; this is folly, as the stimulus is just more of the same, perverse incentives and false signals, delaying the recovery period and prolonging the pain (this faulty activity in our breathing example can be seen as an attempt to hold the excessive air in the lungs, as a way of “strengthening” the lungs for a better recovery. There is only one method of recovery. Exhale!)

Inflation is not just a simple act of expanding the money supply however. A money, any money at the end of the day is an economic good, and is subject to the laws of supply and demand, as well as the first rule of economics: All goods are scarce.

What defines a good as an economic good, and to that extent, whether it holds any economic value at all, is whether it holds a demand which aims to satisfy a human need, want or desire, and whether or not the good in question is scarce. If the good in question falls into these two categories, then it is an economic good. What form of economic good it is and what its value is in relation to, is reflected in whether it serves a direct need (such as food), or an indirect (tools for cooking food); the good which serves direct consumption is an economic good of lower order, and the good which serves to better the ability to serve the need; tools for cooking, cars, materials and labour for making cutlery, are economic goods of higher order.

With Regards to a money, if it loses one or both of these characteristics, the money in question will cease to hold any value; if people no longer demand the commodity deemed as a money, its rate of value will decrees as people no longer hold it to a standard to which it serves a need, if the money ceases to be a scarce good, it will lose all economic value.

That which is stated above, is an extreme format known as hyperinflation. But, a monetary inflation of the magnitude we are used to in a fiat world is not therefore, less dangerous.

The process of inflation is not as simple as: more money is printed followed by lower value; there are many areas in between this process.

When government expands on the money supply, the new money is used to stimulate economic activity to which the economy cannot afford. The early receivers of the new money benefit from the influx, as they will be able to enact projects such as construction at unaltered prices. As the new (bad) money continues to pass through the economy, the prices of goods and services begin to reflect the decreased value of the money in question, causing the late receivers to be worse off, as their money has become less valuable with the artificial increase in supply.

This is why there is a tendency for prices to not increase straight away from inflation. However even the term “price increase from inflation” is a faulty one it must be admitted; the price of goods have not seen an increase, the money used for the means of exchange has seen an overall drop in its value, the prices have not increase but are merely reflecting a decrease in exchange value of the commodity used for trade.

One fallacy which I will briefly go over, is that wealth is simply a measure of the degree of money an individual holds possession over.

This however is completely false.

Wealth is not determined by the degree of money in a man’s pocket; nor is it necessarily a significant calculation of wealth. Wealth is based on the degree of economic goods; both of higher and lower order, to which an economizing individual holds command over.

It is the use value of the economic goods, their time frame, and their ability to serve a need to which the individual recognises, as a need he wishes to have satisfied.

If it were true, that wealth is simply determined and measured by the quantity of money in a man’s pocket, then we should be praising the outcomes of inflation, and ultimately striving for hyperinflation. Under this notion, Germany during its dark period of hyperinflation should have been considered the wealthiest nation of all time; everyone had barrels full of thousands of paper money notes.

Inflation is not just a monetary disaster; inflation is the theft of value.

It is the loss of opportunity for a higher standard of living for all economizing individuals. By increasing the money supply for the purposes of “short term gains”, the central bank and the government steals the possibilities of our means of exchange, by reducing the scarcity, and overall how valuable the good in question is in the long term. Central planners love the prospect of inflation because it provides them the ability to hold further control over the monetary system, and increase spending without increasing production and productivity.

Overall, with this fallacy at its end, I hope the reader will be left with the understanding that, with the creation of this monolithic institution known as the central bank, and the means of inflating the money supply; the creation of the fiat currency and its monopolistic hold, the central bank and the government have bestowed upon themselves control over the monetary system.

Whereas in the past money was a creation of the market, and as a market commodity for exchange aided in building upon the relationship between consumers and producers; now, under the fiat, government owned system, that relationship has shifted. With government solely in control of money, who may acquire it, how it may be used, who has theirs decreased or increased both in quantity and value, that relationship has turned to one between the establishment, and whoever it can gain the most from; whether that be consumers or producers and whichever is not chosen, is the one who suffers.

“the creation of the central bank and the enacting of the fiat currency, the power to print limitless quantities and act as a mafia towards the individual’s means and ability for exchange; forever weakening our lives and value”

The State has brought to itself the legal monopoly not just that of money production, but the power to define a money and through the elimination of the gold standard, the creation of the central bank and the enacting of the fiat currency, the power to print limitless quantities and act as a mafia towards the individual’s means and ability for exchange; forever weakening our lives and value.

If we truly want to end Cronyism and all it encapsulates; we need to restore the gold standard with a stable form of money substitute as a market commodity, not a symbol of “national sovereignty” to be centralised; we need to destroy the Central Bank.

Josh L. Ascough is on Instagram at

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Schools vs States – A Limitless Possibility For Education

Opinion Piece by Josh. L Ascough

The task of the educator, whether they be for primary or academia, is to bring quality and qualified information to those who seek to not only engage with truth, but build their ability to function with higher detail and to further the expansion of the knowledge they have gained.

But this function of education, has been stifled by government interference. It should come as no surprise, that the modern format of most school systems were formatted around the era of the workhouse, and were shaped and standardised to fit the model of the workhouse; you are taught in the same manner, the methods are regimented, the process is regulated, and the system is standardised.

The desire to have a publicly funded education system is a sorely faulty one. The government is a centralised legal monopoly of force, and due to its central, top down approach, it cannot comprehend a complex system of education; it has to standardise teaching methods, qualification methods, and ultimately treats students (in our current subject case, children) as projects to be socially engineered to whatever type of citizen the government wishes to govern over, and it is with great thanks to a regimented system of schooling that the children are in a perfect position for moulding, rather than educating, (who reading this remembers when they were in school the way they were “taught” to multiply and the “two 2s are 4, three 2’s are 6” regimented style of teaching?)

“The parent knows how to talk to their child in order for them to understand something, whether that subject be simple or complex, in a manner which the child can best grasp”

This is not to say this method does not help any in an absolutist sense, there will be individuals who benefit from a teaching method of this kind, but a one size fits all education system, does nothing to improve the capabilities of those who learn best via other methods. This is why we should not only hold respect for parents who choose to home school their children, but encourage parents who can see their child is not making any gains from their education to teach at home; the parent knows their child better than any bureaucrat, teachers union, or politician. The parent knows how to talk to their child in order for them to understand something, whether that subject be simple or complex, in a manner which the child can best grasp at their development stage.

However, those who are kept within the regimented education system who do not benefit from it, will be left behind, unable to truly explore their potential. Even those who may benefit from this method, or are able to get by, will face little challenge and will be held back.

School is not meant to keep you in an immobile, easy to handle position, it is meant to enlighten you on unknown knowledge or challenge your held knowledge and expand it.

These are the social issues with the public, government provided school system, and these do connect to long term economic issues, such as due to their being zero choice with education alongside it being mandatory up to the age of 18 (it was 16 when I was younger, that’s how old I am), young people end up leaving the school system with no work experience, making it almost impossible to acquire the most basic of jobs, leading to an influx of higher education applications in order to acquire even no skill to low skill work; but we will delve into higher education later. This also leads to people entering permanent long term work at later stages in life, causing the retirement age to face a need of increasing.

“Economics is all about human action, choice, and the outcomes of these choices; a public education system completely erodes choice, because the individual has no say as to where their resource (money) goes”

But what about the purely economic?

This is where the government formula can be best seen; a monopoly on force, plus an assumed consent to take resources from private citizens, alongside an assumed value on behalf of the individual from the top down, creates an economically and socially stagnated school system.

In order for any transaction to increase value, it must be voluntary and consensual. It must also serve a need which the individual who holds said need wishes to satisfy via the  relationship between the use value and exchange value of all parties involved.

Economics is all about human action, choice, and the outcomes of these choices; a public education system completely erodes choice, because the individual has no say as to where their resource (money) goes; even if the parent doesn’t value or places a low value on the education that is being given to their child which could arise for various reasons, such as unsatisfactory quality, it not meeting the educational needs of the child, lack of religious elements; all of these and others can decrees the overall, subjective value the parent holds for said school. Yet the parent is forced to pay for the school via their taxes, as well as the entire system as a whole.

In most of our everyday lives, operating in the world of commerce, if you are unsatisfied with a product you pay for on a regular basis, you can cease further transactions and search for a good which provides use value to you for the duration of time required for it to satisfy your need. Or in another instance, if there is a product which serves no value to you, or if there is an industry which produces economic goods which do not serve any need to you, and therefore no use value, you are under no obligation to enact any transaction or give any money to said industry or purchase any product; with public education on the other hand, that is not the case. A government run and owned education system holds a legal monopoly, and regardless how many people hold no value to it, it will continue to receive funds via forced extraction; taxation.

This legal monopoly creates no incentive for improvement or to consider what the customers (i.e. the citizen) values, and ends with a system which faces no risk; solely relying on the (forced) selflessness of others to provide quality (it is entertaining that we are told constantly that human beings are selfish and evil, yet we persist in creating publicly funded industries which rely on humans selflessly devoting themselves to others via sacrifice of their value and being idealised angels).

Do not misunderstand this as an attack on teachers, the problem isn’t with teachers, as most enter this roles because they have a passion for working with children and young adults; they love passing on knowledge or they are dedicated to a particular subject (maths, English, history, economics etc.) and the teaching of the subject is an added bonus, the attack and criticism is directed towards the education system, not those who are at the end of the system. It is the standardisation, regimentation and regulation of schooling; the format which has been chosen for each individual on their behalf with the magic of assumed consent, and the legal monopoly of the school system, which creates these rigid environments for both teachers and students; if the teachers have little to no wriggle room for methods, because it doesn’t “fit”, then ultimately it is children who suffer, and all of this boils down due to a lack of real choice.

“A private, market education would allow education providers to supply schooling models, methods, and qualifications which parents actually valued; in a market we all vote through the price mechanism”

So how can we solve this problem? How can we create school choice?

I would propose the solution to be very simple; markets.

We should focus on the complete privatisation of the school system, and the establishing of a school voucher program.

Education is an economic good, and like all economic goods it requires the pricing system to determine how to allocate resources, and how to calculate choices based on demand (prices are determined by the equilibrium of consumer demand and producer supply; which allows the consumer to calculate an economic goods use value and the producer to calculate its exchange value).

A private, market education would allow education providers to supply schooling models, methods, and qualifications which parents actually valued; in a market we all vote through the price mechanism, if a school is producing outputs which large numbers of parents do not value, that school will lose out on income and have to adjust to programs that are valued. An additional measure should be considered, that being, adding a “pay-per-package” aspect to schooling. What I mean by this I will explain:

Suppose you have a child and you wish to send them to a private school which specialises in teaching methods best suited for your child; this could be a hands-on approach, a focus on exams, strong levels of independence for students or a greater emphasis on interactions with teachers. The school teaches Maths, English, History, Art, Science, Geography, Cooking and Religious Studies; Maths and English are mandatory subjects, as they are required not just for any and all jobs, but for the child to be able to make basic functions in the real world, all others are optional. Under a pay-per-package system, the parent would be able to choose which subject(s) they value for their child’s growth. A parent could decide they’d rather teach cooking at home as they can supervise much better, and so would not purchase the cooking classes. Or, if the family isn’t religious they could decide to not purchase the religious studies. This system would ensure parents are truly having what they value for their child’s growth provided, and only paying for what they consent to, and what they actually value.

Many would ask how are parents expected to pay for this type of schooling, and this is where a voucher system comes into play.

The voucher system would act as a money substitute, being valued to the equivalent of a certain amount of money, to ensure children from poor households are able to obtain an education. The voucher would be an anonymous program, meaning only the voucher holder and the head of the school, will know who is in use of vouchers; this would ensure children are not ostracized for using or not using a voucher or money.

A voucher program should only be seen as a temporary measure during a transfer period from the public system to a private system; if a voucher system is kept as a permanent aspect, then it runs the risk of causing more demand than there is supply, resulting in prices rising very rapidly, disincentivizing schools from finding ways to lower costs (since like higher education, they’d be guaranteed in getting the money and so would face no incentive for cost reductions) or a combination of both.

After said period schools would be free to create their owns payment options and special offers. These could be in the form of a subscription basis, pay-per-package, a pay-per-class program, a pay in advance program for couples about to start a family as to reserve a place for their child, or the school in question could run its own voucher program for children in care or who are disabled.

In the end, we need to recognise that education is one of the most important things in this would, and the last people we should want running it, are those who face no cost or risk for bad choices on behalf of others, resulting in those people suffering due to the decisions of others.

The very heart of the education issue, should be held on the principle of freedom of choice.

Josh L. Ascough is on Instagram at

COVID-RECOVERY – The Potential For Human Liberty

Opinion Piece by Josh L. Ascough

Nearly a month into the COVID-19 lockdown, and what we saw as normal life seems a distant memory.

It can feel like a lifetime has gone by since we all could go to the pub for a cold beer (or in my case, gin) after a long day. It can bring a great level of reflection on just how important little things were to us enjoying our own, individual lives; things that would bring value to us no matter how big or small we perceived them, whether they be financial, emotional, mental or physical.

Going for a picnic, visiting family and friends to share stories and good memories, working at a job that brought food to the table, all of these and more can feel alien to us now; as the old saying goes, “you don’t know what you’ve got until it’s gone”.

“we as a country have to have the conversation, and now is a good time; nay, an important time to have it. If we’re to return to our liberties, better protect them and enhance them, we need to have the conversation now”

But in order to get these back, and make our lives better, we need to take a moment to now consider not when we will recover, but how we will recover, and how we will not simply bring things back to the old system but make them better. Not just so we are better prepared for another pandemic, but so we can also improve upon our own, subjective standard of value; we as a country have to have the conversation, and now is a good time; nay, an important time to have it. If we’re to return to our liberties, better protect them and enhance them, we need to have the conversation now.

We’re supposedly coming close to the peak period of the COVID-19 pandemic, after said point, we will (hopefully for our economy and social values) be working towards lowering the restrictions in place from the lockdown in an attempt to bring society back to a state of normality.

But it shouldn’t, and cannot be seen as a simple task of simply, flipping a switch; the economy isn’t something which can simply be halted and allowed to resume without serious ramifications, and harm to peoples’ living standards, values, and their ability to satisfy their needs.

It is the same for the social aspect of human existence, it isn’t something that can simply be shut down and allowed to reopen as if nothing happened.

So after saying this, how do we return to normal life?

  • How do we better protect our freedoms?
  • How do we further acknowledge what our freedoms consist of?
  • How do we restrict the power of the state when it can shut society down at a whim?

These are all questions we cannot rely on the government to answer for us, we have to sit down as individuals and find the answers within ourselves.

As the late Margaret Thatcher once said:

“Freedom is the birth right of every citizen”.

I’d argue it’s about time we put that statement into practise for the long term benefit; not the quick fix, short term we are so used to practising simply because “it’s easy”.

So what are my answers to these questions? I will answer these questions after giving a brief note:

These are not “end game” solutions that lift us into utopia; no such place exists nor could it ever exist. No central end game plan can bring about the utopia ideal of, how Adam Smith described, The Man of System; the man who believes he can plan a society from a central point of power, and believes himself to know what is best for everyone around him. These are intended as solutions to better lift the burdens on the people placed there by the government. To better embrace and protect each individual’s freedoms. To call out the fallacy of the faux-rights many claim demand for, such as the “right” to not be offended, or the artificial “group rights” of  (insert group type here;) each human being has individual rights, we are all human beings, so we all have the same rights; whether each human beings’ rights are acknowledged by the state, is another topic for another time.

Now that the fine print is out of the way, let us delve into the answers. I will give you my perspective, as an Austrian Economic writer, and as a true, real Liberal.

In order to better protect our rights and freedoms, we first need to understand and acknowledge what they are; whether the state wishes to acknowledge them or not, you and I must, so we can better fight for them.

We as human beings hold certain inalienable rights and freedoms; the right and freedom to live, the right and freedom to speak, the right and freedom to choose, the right and freedom to think, and the right and freedom to our property. All of these are the foundation of a truly Liberal society.

“My right to life does not mean I can force a doctor to operate on me, as his labour is his property”

My right to life does not mean I can force a doctor to operate on me, as his labour is his property; he must be compensated for the use of his property. Freedom to live means quite simply, I cannot kill another man. I may value my child’s life over that of a stranger’s life, but that does not mean I get to decide who is deserving of life and who is not; each individual’s life and body are their most fundamental forms of private property; you don’t get to decide whether I am deserving of life or not, nor do I get to make that choice for you.

My right to speech means exactly that, I get to speak; whether you or the government likes what I have to say or not, whether it is uncomfortable or not, whether it is good or evil, whether it is offensive or not; all speech matters. Freedom of speech not only ensures that each individual can speak from their mind and heart, but when it comes to combating ideas that seem dangerous, it is the best weapon; how can you or I know the substance of a man’s ideas, if his ideas are forbidden from being heard? If evil or dangerous ideas are forced underground and the speech that encompasses these ideas is censored, how can you know how many people support the ideas when they are covered by a veil of sensitivity? This does not mean there are no consequences for my speech, there are social consequences: for example, the government has no authority to force legal action against a man who calls trans women “men”, but that doesn’t mean the trans woman has no right to talk back, criticise, challenge, mock, or insult. Is the trans woman an individual human being? Yes? Then the trans woman has a right to speech too! The individual in question has a right to choose whether to associate with that person after their use of language or not; which brings us to our next right, choice.

My right to choose does not mean I get to choose whether you live or die, or that I get to choose how you must live your life; rights do not contradict themselves. By doing such an act, I would be infringing on your right to life and your right to choose; remember, each individual has the same individual rights. Freedom of choice ensures that each man’s consent is not only necessary, but vital to him being able to run his life with what ensures he can best satisfy his needs, values and identity. I as an individual get to choose what actions are best for my life, what healthcare coverage I wish to engage with, who I desire to be friends with, who I allow access to my property, how to best provide for myself and my family, whether I allow someone to be intimate with me and my body or not, who I wish to give my money to if anyone etc. As stated above, this does not mean I face no consequences for my choices. As an individual, I must accept that all choices add profits and losses to my person, and it is up to me which risks I am willing to take and which profits are worth the risks; whether they be long term or short term. I made the choice to start smoking when I was nineteen, I knew the tobacco companies were not responsible for any damage dealt to my lungs; they did not force the cigarette into my mouth, I made a conscious decision and accept any consequence that comes to me due to my actions, I’m a free individual, it is my body, my property. Do I regret my choice? No. Do some smokers regret it? Yes. Does me not regretting it mean I get to tell others they’re not allowed to give up smoking? Absolutely not!

My right to think is heavily linked to speech, however it does have separate elements. My right to think ensures I can believe what I choose to believe, and no individual or state can force me to stop. I can believe in whatever religion I want or whatever philosophy I want. I have the right to think a certain way about another individual, religion, culture or society, but as stated before, I cannot force others to believe or think the same way through violence enacted by myself or on my behalf  by the state. I am an Atheist, but though I do not think or believe any deity exists, it doesn’t mean I can force churches to close, stop individuals from reading religious text, make others become Atheists through the threat of a steel boot; I can attempt to convince through my right to speech, but if they make the choice to ignore my arguments, I do not then garner the authority nor does the state, to then put a gun to their head (figuratively or not) and decree “you will think x or else”.

My right to my property, is slightly different to the previously mentioned rights, though it is none the less important to a truly Liberal society. Each individual has a right to property to which he is in ownership of and holds command over. The farmer is in ownership of his cattle; they are his private property, it is not owned by society, nor does he owe anything to society; he cannot be told how to use his property; if he is an economizing man, he will make the choices which best serve his needs and priorities the needs most important to his subjective values and situation. Every individual looks to better serve his needs in relation to how much he values the goods necessary to do so, and will exchange his commodities for goods which hold better use value to him. The same is true for the consumer as well as the producer. The consumer has a right to his private property in the form of money, and cannot be coerced into spending it in ways he does not deem valuable to him or that would risk him not being able to serve the needs he perceives as more valuable. The producer has a right to the capital he has command over, and cannot be forced to use his property in such a way that would risk his ability to provide for his needs he classifies as most valuable to him. I cannot force you to give me your car, nor can you force me to give you my money. If I or you wish to exchange property, there must be a mutually beneficial exchange, and only those involved within the exchange are in a position to set the standards for said action; the good you wish to exchange must have more use value to me than the exchange value of my good, and your commodity must have a higher exchange value to you than its use value. The fruit of your labour is your property, and you have a right to it.

All of these rights and freedoms are the very essence of a Liberal society, but they are completely undermined by not just the COVID-19 lockdown, but a number of policies, institutions, and regulations our government places on human existence.

I will go over these in brief and how we can better these for the full acknowledgement of all of our rights and freedoms, but overall, the issue can be summed up in two statements, which I ask the reader to ponder over.

  1. Government and society positions itself on the notion of  ‘Assumed Consent’.
  2. The Government does not believe in ‘ Inalienable Rights’, but rather ‘Loaned Rights’.

I think it best to cover the topic most find difficult first; our healthcare system.

The fact that many would view the following statement as heresy, should be a clear indicator that many have been overcome by nostalgia for days which never existed, idealism, self-deceit, and a lack of either will, or desire for change; the statement is as follows:

The NHS Is A Government Run Centralised Monopoly.

Now this is not an attack on the doctors and nurses, they work extremely hard within a system poorly structured; we should consider change not just for the better satisfaction of patients, but for the hard working doctors and nurses to be able to better operate. Patients, nurses and doctors deserve much better.

There are two primary reasons for this statement, one of which is based in economics, the other is in direct opposition to our right to choose; these are:

  1. The Tragedy of the Commons.
  2. Centralised Planning of Healthcare.

The Tragedy of the Commons, is when there is no distinction between one man’s property and another man’s property; where a product, or service, is owned by everyone. With this, people face zero opportunity cost and tend to take more than what they need, causing supply to not be able to meet with demand, as there is no pricing system in place to coordinate causes, allocate resources or incentivise choices; this in turn creates rationing, shortages, long waiting periods before new supplies can become available, and additionally causes quality to drop dramatically with the costs rising exponentially.

On the subject of a Centralised Government Monopoly, The primary issue with this format, is that the central organised body, the government, due to having no income of its own; its income after all comes in the form of forcing money from citizens, whether they be consumers or producers by the means of taxes, and so faces no risk to itself should it make choices, which may be well intended, but that do harm. The other issue with this system, is that, as indicated, the NHS is a government run monopoly. Due to its legal monopoly status; not a monopoly status based on higher competitive abilities, such as more attractive wages, higher quality, lower prices, but due to an essentially limitless budget and a monopoly status derived from force and power of authority, where even in the case where fewer need or want it, it continues to have money forcefully taken from people, it creates a lack of incentive for efficiency, a lack of opportunity cost, and a lack of risk and loss on the part of the provider. Let us imagine for a moment, there was a company, let’s say a company which makes lifts; this company, no matter how large or small its consumer base is, no matter how many people want its services or not, has access to a limitless budget which it forces from people’s pockets; how much waste would be created from this company? What standard of quality do people believe this company would produce, considering it faces zero loss? Most people would rightfully say, it would create an unprecedented amount of waste, funnelling much towards its inputs but creating very few outputs, and would rightfully say that the standard of quality, would be so low, that under normal circumstances, where loss and risk are possible, this company would’ve gone bankrupt and possibly even sued.

“the government assumes a right to take a man’s property in order to fund a system, which he may not want to use, or he may not value. Neither you nor the government has a right to any man’s property simply because he lives within the same society”

This format directly contradicts every individual’s freedom of choice, right to his private property, and is a clear example of “assumed consent”. For simply being a citizen, the government assumes a right to take a man’s property in order to fund a system, which he may not want to use, or he may not value. Neither you nor the government has a right to any man’s property simply because he lives within the same society; you cannot assume consent without restricting the right to choice, or the right to the private property a man has ownership and command over.

I would consider the best option for recognising our right to our private property, right to choose, and create less assumed consent, would be to reform our healthcare system. This can be done by privatising hospitals, expanding which industries can enter the healthcare market, and altering the NHS into simply, a tax funded health insurance program, where individuals are not assumed to be consenting of payment, but is an opt-in system for those who cannot afford market rates, which holds no legal monopoly by increasing taxes if consumers do not choose it as an option, but operates under competition; both public and private can benefit from competition.

Additional measures to take to better protect property rights, freedom of choice and reduce assumed consent, would be to reform the tax system.

Through the acts of direct taxes such as Income tax, the government not only harms the living standards of those already on low income, but through direct tax does not recognise their right to private property and the fruits of their labour. The government not only assumes consent to plunder the citizens, but the direct tax is the state’s position of loaning property rights to those who already (if rights were taken seriously) hold ownership of the goods he possesses command over; his money!

In order to abandon this notion of loaned rights, it would suit us to reform the tax system into one of indirect tax. An indirect tax is not along the lines of the income tax, but requires the individual to consent to perform certain actions first; the sales tax is an example of such a tax: it is not taken from the individual regardless of actions or choices he takes, but is based on the individual making the conscious, free choice to a consenting transaction.

Another area, which I would consider the most important in order for the legitimate protection not just of rights, but of value and living standards, is the subject of the central bank.

“Money is not a creation of government; a money occurs when a certain economic good has acquired a certain degree of use value as well as exchange value; providing it with an intrinsic value for trading”

Money is not a creation of government; a money occurs when a certain economic good has acquired a certain degree of use value as well as exchange value; providing it with an intrinsic value for trading. This has allowed over the centuries for the development and strengthening of the consumer/producer relationship, however, the creation of the central bank has not only destroyed this relationship, but shifted it to a relationship between government and corporations.

Through the creation of the central bank, the government has bestowed upon itself the legal monopoly not just that of money production, but the power to define a money and through the elimination of the gold standard, the power to print limitless quantities; forever weakening our lives and values.

If we truly want to end Cronyism, we need to destroy The Central Bank.

Our rights continue down the route of being disregarded through the enactment of “hate speech” laws; fining people and arresting people for what they say depending on whether they address certain words towards “protected groups”.

“The government has no right to determine what hateful speech is and what is not…. there is no such thing as group rights, each individual has individual rights, so everybody has the same rights; including the right to speak”

The government has no right to determine what hateful speech is and what is not; nor should it be positioning itself into deciding which “groups” are “protected” groups. As stated before, there is no such thing as group rights, each individual has individual rights, so everybody has the same rights; including the right to speak. This also fails to take into account context, I think many of us remember the Count Dankula case. A man who was arrested after making an edgy joke, by portraying his pug as a Nazi, only to have the courts declare “we decide the context”; the irony being the only people in history who would’ve been offended to the point of arrest over such a joke, would’ve been the Nazis. In addition, this type of pandering can be seen as what I would call, condescending compassion: group x is so fragile and unable to handle confrontation, we must protect them from slogans and terminologies which may upset them. It’s just another one of the ironic traits of the self-righteous planners of social systems, when you really break down the position, turning round to say, a black person and saying “you’re a part of group A, so you will find x offensive, so you must be protected because you cannot handle yourself” sounds very condescending. I am by no means justifying racist, sexist or any of the “ist” forms of language, but you don’t combat bad ideas by burying them under the carpet. This type of policing of language, due to the governments nature, always leads to context being ignored through blanket, one size fits all policies, and a method of silencing opposition without forming any argument; it shouldn’t be hard to use freedom of speech to explain why Nazism is bad; banning its language just displays a lack of ability or desire to make an argument, which, if those who decree hate speech have arguments that are so bad they have to censor the words of opponents, they have failed to do the simple task of thinking.

In order to be able to think or speak, you have to risk being offensive.

I don’t care what you are, I care who you are.

In order to protect the right to speech as well as all of our inalienable rights, we need to form a codified, British constitution, detailing the individual rights of all who live within the nation.

Overall, not just the government, but we as individuals need to recognise, the government has only one role through its power of legal monopoly over force; to protect the rights of all.

Josh L. Ascough is on Instagram at