The Free Market in Action

A short while back DigiNotar, a Dutch certificate authority, was hacked and their signing certificates were stolen. This lead to incidents where hackers were able to create certificates for any website they chose and those certificates would appear to be valid to every major web browser. For instance a phiser could create a site and the web browser would see the certificate and say it was valid as it was signed by DigiNotar, a trusted certificate authority.

DigiNotar’s business is literally trust so their reputation is everything. Unless people can trust that websites whose certificates were signed by DigiNotar are who they claim to be DigiNotar has no business. Well people can no longer trust certificates signed by DigiNotar and now they’re filing for bankruptcy:

DigiNotar, the Dutch certificate authority (CA) which was recently at the centre of a significant hacking case, has been declared bankrupt.

This is the free market in action. People trusted DigiNotar and DigiNotar failed to uphold that trust so people are no longer willing to do business with that company. As one of the entities DigiNotar’s failure negatively affected was the Dutch government it’s unlikely the company will receive any kind of bailout or otherwise be artificially propped up meaning this is a rare case where we get to see how the free market actually works.

The Morality of Profits

The Firearm Blog has a very interesting piece trying to uncover who owns Kahr arms, which concludes that Kahr’s claim that the company is 100% American owned is likely true. Either way that’s not the part of the article that really stood out to me, it was a quote from Kahr’s current majority shareholder Justin Moon. The quote is pulled from an interview of Justin Moon by Massad Ayoob where Ayoob asked about the speculation people have in regards to Kahr’s ownership. Ayoob asked if Moon’s father or his church owned Kahr to which Moon replied:

I currently am the majority shareholder of Kahr and operate my business to provide high quality firearms to the public and to make a profit.

Emphasis mine. Why would such an small line in a large article stick out to me? Because of the simple fact that many people would consider Moon’s motivation somehow morally wrong. Many people claim that wanting to make a profit is somehow immoral and that we should all strive to rid ourselves of any desires of making money or becoming rich. That belief is utter bullshit though.

Profits are a market mechanism of ensuring scarce resources are put into the hands of those best able to distributed them in a manner that serves society’s wants and needs. Of course this is only true if the market isn’t burdened by government interference but this post is about the moral justification of profits, not the ills of government meddling.

The market is composed of producers and consumers. Producers attempt to anticipate the wants of consumers and do their best at fulfilling those wants while consumers seek out things that best alleviate their discomforts. If your discomfort is hunger you seek food, if your discomfort is having to manually do your bookwork you seek a computer, etc. When a produce manufactures widgets that best alleviate the discomforts of consumers those producers are rewarded through the traded goods they receive in exchange for their widgets. Usually this traded good is money but it can be anything the producer wants in trade for their widget.

If you have two producers of a discomfort alleviating widget the one consumers most demand will sell better. Consumer demand is multi-facetted and their decision includes the price/demand ratio. Should one producer be selling a widget that best alleviates the consumers’ discomfort but at an astronomical price it’s likely the competing producer will see higher profits in the end even though their widget isn’t the best as whatever function it performs. In the end the producer who manufactures a cheaper widget may see higher profits through the volume of sales.

Either way the profits received by the producer is the reward given by consumers for fulfilling their wants and needs. Profits shouldn’t be looked at as immoral because that is the means of which resources best land in the hands of those who have demonstrated an ability to properly distribute said resources. Those profits are then used by the producer to generate new widgets that server to alleviate other consumer discomforts. When you think about it the cycle is beautiful in its simplicity.

Those who claim profits are immoral need to come up with a better means of ensuring our scarce resources are best distributed to fulfill the wants and needs of society. Do know that I will completely ignore any proposal that isn’t voluntary in nature because the whole “might makes right” system only works for those with the most force to wield.

Apparently Nobody Listened to Bastiat

Do you know what’s a scary thought to consider? The fact that the United States Department of Defense is the largest employer in the world. Just stop to think about that, a department in the United States government is the largest employer in the world. Combine that with the fact that this agency is also in charge of war and it really begins to paint a frightening picture. Then you have the other scary fact that the Chinese People’s Liberation Army is the second largest employer in the world.

As expressed by Henry Hazlitt in his book Economics in One Lesson war is not a productive economic activity. Wars only serve to destroy, never produce. Keynesians will say the destruction of goods and property will cause a boost in the economy when it comes time to rebuild all that was destroyed. Austrians point out the fact that replacing what was destroyed isn’t productive as it takes resources away from the development and production of new consumer goods. This fact is usually summed up in Bastiat’s broken window example:

Suppose it cost six francs to repair the damage, and you say that the accident brings six francs to the glazier’s trade—that it encourages that trade to the amount of six francs—I grant it; I have not a word to say against it; you reason justly. The glazier comes, performs his task, receives his six francs, rubs his hands, and, in his heart, blesses the careless child. All this is that which is seen.

But if, on the other hand, you come to the conclusion, as is too often the case, that it is a good thing to break windows, that it causes money to circulate, and that the encouragement of industry in general will be the result of it, you will oblige me to call out, “Stop there! your theory is confined to that which is seen; it takes no account of that which is not seen.”

It is not seen that as our shopkeeper has spent six francs upon one thing, he cannot spend them upon another. It is not seen that if he had not had a window to replace, he would, perhaps, have replaced his old shoes, or added another book to his library. In short, he would have employed his six francs in some way, which this accident has prevented.

Every dollar that is spent replacing what was lost is a dollar that could have been better spent fulfilling a different want. As the shopkeeper had to replace his broken window he was unable to buy a new suit which lowers the production of the tailor. The fact that the two largest employers in the entire world deal with breaking things demonstrates one of the biggest problems with the world economy. Capital that should be going to the production of new consumer goods are instead being funneled into the construction of tanks, bombs, and other weapons of war for use in destroying what has already been built necessitating the replacement of those destroyed things.

Just imagine the advances in technology and standards of living if all the capital used to produce new ways of blowing shit up and replacing what was blown up was instead put to productive uses. We may actually have had flying cars at the turn of the century (sorry I’m still bitter that the promise of flying cars was never fulfilled).

I Guess It’s a Matter of Perspective

I guess boring is really a matter of perspective. The last question of the CNN Tea Party Debate was an inquiry about what personal thing each candidate would have brought to the White House. Bitter over at Snowflakes in Hell found Dr. Paul’s response rather boring:

Paul – He’d teach economics classes. And give boring as hell answers to personality-driven questions.

Heh, what she finds boring I find exciting. I attend a couple of liberty oriented gathers a week and the topic of Austrian economics is often discussed. Two weeks ago I attended a debate between Austrian economics Robert Murphy and Keynesian Karl Smith. Much of my free time is reading literature on Austrian economics. Needless to say having good economics classes at the White House sounded like a pretty good time to me.

The differences in peoples’ interests has always amused me.

So what would my answer to that question had been if I were running for the presidency? My reloading bench and a good stockpile of components. Why? Because the image of me sitting in the Oval Office reloading ammunition makes me smile.

More Proof Ben Bernanke is an Idiot

I’m sure you read the headline of this post and thought to yourself, “Ben Bernanke is proof that Ben Bernanke is an idiot.” That’s true but I like to be thorough when building cases against the intellect of stupid people. Take for instance Bernanke’s recent appearance in Minneapolis (sadly I wasn’t able to join the protest as it took place a noon and I was working) where he pointed out the reason the economy isn’t recovering. Here’s a hint, it’s our fault:

Then he said something new: Consumers are depressed beyond reason or expectation.

Oh, sure, there are reasons to be depressed, and the Fed chairman rattled them off: “The persistently high level of unemployment, slow gains in wages for those who remain employed, falling house prices, and debt burdens that remain high.”

However, Mr. Bernanke continued, “Even taking into account the many financial pressures that they face, households seem exceptionally cautious.”

Consumers, in other words, are behaving as if the economy is even worse than it actually is.

Yes the reason the economy isn’t recovering is because people aren’t spending money due to their overly cautious nature. I’m not sure if Bernanke realizes this but in order to spend money you have to have money. On top of that when you’re unemployed spending any money is a scary proposition because there’s no guarantee that you’ll be able to make more money in the near future. That is to say when you don’t have any sources of income all expenditures or potentially permanent reductions in your available savings.

Anybody with two brain cells to rub together would be able to reach such a logical conclusion. Of course Ben Bernanke doesn’t have two brain cells and thus he is throwing out nonsensical theories to explain why people without work aren’t spending money:

Why? Well, one possibility is that Americans collectively are suffering from what amounts to an economic version of post-traumatic stress disorder.

Let me guess, the next plan the Federal Reserver is going to develop will involve economic post-traumatic stress disorder therapy. Either that or they’ll just try to pump $10 trillion into the economy because if at first you don’t succeed try the same thing again, only harder.

We Can Do This Without You

It appears as though Obama is looking to continue his failed quest to restore the American economy using failed Keynesian methods. Namely Obama is asking Federal agencies to identify “high-impact, job-creating infrastructure projects” that can be done without the need for congressional approval:

On Wednesday, Obama took a now-familiar path in adopting a program–this time a jobs and infrastructure effort–that can happen entirely within his domain. Obama directed several federal agencies to identify “high-impact, job-creating infrastructure projects” that can be expedited now, without congressional approval.

One week before he will make a major address to Congress on jobs, Obama is making sure they know he plans to move forward without them. The president has also directed the Education Department to come up with a “Plan B” updating the 2001 No Child Left Behind law in the absence of congressional action. The message to Congress is clear: Do your work or we’ll do it for you.

Remember that system of checks and balances? Apparently neither does Obama or Congress (as they should be reigning Obama in right now). It looks like Obama is enjoying his near emperor status and has decided to run wild with tyrannical power. We may as well just call him the King of America since he’s able to do all these things without approval from any of our “representatives.” Corollary to that we should start calling Congress the Bitches of America since they seem to be more than happy to lay down while the title of President is slowly changed to King.

I do have a message for Obama though:

His message to lawmakers: We can do this without you.

Our message to the government: We can do this without you. Get the fuck out of our economy and let it become prosperous again.

Only the Government Could Lose Money Selling Alcohol

I believe the government is the only entity on the planet that could lose money by having a monopoly on wine and spirit sales. It makes sense though considering that government agencies design their contraptions and “services” around politically correct ideals instead of consumer demands:

In a report issued today, Pennsylvania Auditor General Jack Wagner says the state liquor control board’s wine vending machines, a wonderful illustration of what happens when a government monopoly tries to act more like a business, are operating at a loss, costing taxpayers more than $1 million since they were introduced a year ago.


When they are working, the kiosks dispense a limited selection of wines at limited locations and times (not on Sunday, of course!) to customers who present ID, look into a camera monitored by a state employee, breathe into a blood-alcohol meter, and swipe a credit card.

I think I see how they’re losing money. When people want to purchase alcohol, like any other product, they don’t want to be hassled anymore than they absolutely have to be. In other words people want to walk in, make their selection, show their state issued identification, pay the cashier, and leave. Making a customer also submit to a breathalyzer test and having their image monitored by some hidden state employee are going to create a rather annoying hassle, especially when the selection of liquor is limited.

So Much Stupid it Hurts

Our old friend the broken window fallacy made a guest appearance on MarketWatch:

That said, the effects of the storm have the potential to boost the fourth quarter’s GDP by this much and more. This is because the need to clean up and rebuild will create numerous jobs — especially in the construction industry, which, as you know, is languishing from lack of activity in housing, shopping centers and office buildings.

Add to this spending on flashlights, batteries, generators, plywood and tools that would otherwise have not taken place. As these items are restocked, this will add to the GDP, as will the wages paid to construction, maintenance and utility workers.

You know what Mr. Kellner, I think your community needs economic stimulus. Would it be all right with you if I were to come over to your home, smash all of the windows in your house, and set fire to your car? Just think of all the work my arson will create for Home Depot, the local glazier, and the automobile company you’ll buy your new car at!