Efficiency or Property Rights: Thomas Woods’ comments on the Chicago School of Economics

This was originally posted at City of God.

Thomas Woods, in his book The Church and the Market, spends a little time in the first chapter distinguishing the Austrian and Chicago schools of economics. One major difference between the schools is on the issue of central banking and monetary policy. We’ve had occasion to discuss this on the blog in the past, and I’m not particularly interested in raising it again here. However, Woods brought to my attention another difference which is of much greater concern to me, and this is over a moral issue. The difference is this:

The classic case in Chicago law and economics, famously described by Ronald Coase, is the example of the train that emits sparks that set fire to a farmer’s crops. (The example occurs prior to the introduction of diesel engines.) Either the farmer or the train will have to bear the cost of this damage. On the basis of strict liability, of course, the farmer has the right to the property in question and therefore the right to enjoy its fruits unmolested. The train should compensate him for his loss or install some kind of spark retarding device. But Chicago decides this case in such a way that overall wealth is maximized. (25)

Thus economic efficiency becomes an ethical value that is weighed against the property rights of people. The Austrians vehemently disagree with this point. They argue

that the rights of property should not be compromised in order to satisfy any wealth maximization calculus, and that as a rule strict liability should be observed. (They offer these critiques in their capacities as moral philosophers rather than qua economists, a point to which we shall return in our discussion of economics as a value-free science.) Walter Block has described it as “evil and vicious to violate our most cherished and precious property rights in an ill-conceived attempt to maximize the monetary value of production.” (26)

Woods provides one quote from a defender of Coase to make clear that the Chicago school explicitly teaches what he says they teach:

In defense of Coase, Chicago economic Harold Demsetz argues that “[e]fficiency seems to be not merely one of the many criteria underlying our notions of ethically correct definitions of private property rights, but an extremely important one. It is difficult even to describe unambiguously any other criterion for determining what is ethical.” Here is efficiency analysis with a vengeance. (26)

Now, I’m not sure any other way to describe this theory besides the words Block used: evil. Quite clearly, this is a form of coarse utlilitarianism, and one which will undoubtedly help the well-connected over against those who have little wealth. And I think this point is something where those on the left and those who support a view of property rights as natural rights (be they conservative or libertarian) can find agreement.

Obama budget and investment strategy

Obama’s mendacity has reached cosmic proportions.  The AP reports the extent of his new budget, a whopping 3 trillion dollars (cela veut dire $3,000,000,000,000 pour mes amis qui ne comprennent des chiffres en anglais!  Pour ceux qui sont en Afrique francophone, cela donne 1537770000000000 CFA selon le taux actuel).  This includes 1.75 trillion dollar deficit, which he repeatedly blames on the Bush administration by calling it the deficit that we’ve inherited.  Excuse me.  But you don’t inherit deficits but debt.  Deficit spending is a result of the current administration’s decisions.  But the double-speak rises to unbelievable proportions when he says,
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Obama and "investment" (Updated)

examiner.com)

Projected US Federal Budget Deficit (Source: examiner.com)

The stimulus bill has passed the Congress and awaits signing by President Obama.  The AP reports:

President Barack Obama, savoring his first major victory in Congress, said Saturday that newly passed $787 billion economic stimulus legislation marks a “major milestone on our road to recovery.”

Speaking in his weekly radio and Internet address, Obama said, “I will sign this legislation into law shortly, and we’ll begin making the immediate investments necessary to put people back to work doing the work America needs done.”

Now I have to say that the term “stimulus” is euphemistic for “wasteful government spending”.  But the term “investments” for this bill is ridiculous.  If the US government doesn’t raise sufficient money to cover this deficit, it will lead to inflation.  Inflation is form of robbery.  Do you have a savings account?  At 20% inflation like what we had during the Carter years (I was alive in those days, I remember it), your savings account will have lost 1/5 its value in one year.  In five years its worth nothing.

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Hyper-Inflation: Think the economy is bad now? Just wait

The post on Obama and inflation in Zimbawe has received 257 hits so far.  Well, here are a couple experts who agree with me.

Peter Schiff calls the US economy a “ponzi” economy.  He warns that stimulus package suggested by Congress will lead to a “unmitigated disaster”.  He warns of hyper inflation (not just double digit inflation) similar to Latin American countries or to the Weimar Republic.  He compares the interventionist government with Hoover and Roosevelt which is leading us into a new depression.
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Obama: Inauguration Day

Obamessiah

Obamessiah

I received an e-mail today from Africa, and this is the way I was greeted:  “Reçois mes fraternelles salutations en Christ. En ce jour de l’investiture d’Obama comme président noir américain, je crois que vous vous portez bien dans la grande famille de Barnabas venture.”  I suppose that many of my African friends believe that it is a momentous and historic occasion that son of their own soil is becoming today the most powerful man in the world.  Let me just say a few words of caution.

Obama is a man.  His father is a Luo and a Muslim from Kenya, his mother a white America.   His political roots are socialist and communist.  Regarding social values, he favors abortion and homosexual unions, just as Democrat Party platform dictates.  As a Christian, I have trouble with the social values of the Democrat Party.  As an investor, I am very wary of Obama’s political and economic agenda.  We can start with the plan to more than double the deficit to over a trillion dollars.  This will give Obama additional spending power of 8.3% of the USA GDP.
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