Tuesday, July 29, 2014

The absolute advantage fallacy in land use planning

If there is one thing in which I agree with Paul Samuelson, that would be that comparative advantage is the most important but also most misunderstood concept in economics. We know that this concept is not well understood by trade policy designers. That's not a surprise. But, what I came to realize today is that this concept is poorly understood by our land use planners as well.

Land use planners argue that "prime agricultural land" should be zoned for agriculture. But, "prime agricultural land" may also be even "primer" land for commercial buildings or some other purpose. This land may have a comparative advantage as commercial space, despite it being the best agricultural land.

Similarly, even though I may be the best heavy duty industrial cleaner in southwestern Ontario, my comparative advantage is not in heavy duty cleaning but in economic research and teaching. Just because I am a "prime industrial cleaner" does not mean that I have to be legally required to be an industrial cleaner. Just because some land is "prime agricultural land" does not mean that this land has to be legally zoned as farmland.

Utilitarianism and the Politics of "Humanitarian" War

Typing the phrases "cost benefit analysis" and "war in Iraq" into Google finds about 15,000 hits (for these exact two phrases together). The results include scholarly articles, blogs of law experts, TV-news websites, newspaper articles, speeches of politicians and so on. These results are a rough indication of the size and scope of the utilitarian quest for the correct estimate of costs and benefits of this war. The estimates attempt to include not only the monetary expense but also "human suffering," "national security," "freedom," etc.

Another recent military operation where similar arguments were used was the 2008 bombing of the Gaza strip. It has been described by its promoters as an attempt to prevent the future suffering of Israeli civilians while keeping the Palestinian civilian suffering at a minimum. The underlying premise was that any civilian casualties of the war can be justified by claiming that they were a necessary step in preventing far-greater future civilian casualties.

These cost-benefit justifications of humanitarian wars can be summed up in the words of Frida Ghitis, a political analyst and a regular columnist for the Miami Herald and World Politics Review. Ms. Ghitis wrote to me that "war is sometimes justified to stop even worse atrocities. That's the humanitarian rationale."[1]

Thus, it is recognized that the humanitarian war, just as any other war, implies some costs in the form of suffering or death of innocent victims. But this suffering or death is justified if it is a necessary collective sacrifice for a greater benefit, regardless of whether the victims involved agree to being sacrificed.

Friday, July 25, 2014

The morality of the response to the human shield tactic

The current Gaza conflict has raised an important question: Who is to blame for the death of civilians? Is it Hamas, as it allegedly uses civilians as human shields, or is it the Israeli army? Since the definitions of a human shield can me quite stretchy, let us use the strictest possible definition in the following hypothetical example.

Suppose Jim physically restrains Janis, puts her between himself and Kurt, and then starts shooting at Kurt. The only way Kurt can shoot back at Jim is if he shoots Janis first.

When Kurt kills Janis, is it Kurt or Jim the person we should blame for Janis's death? One might argue that it is Jim who is morally responsible because if he had not used Janis as a human shield, Kurt would not have to defend himself and kill Janis.

But, while it is Jim who decided to use Janis as a human shield, he did not make the decision whether Janis will live or die. It is Kurt that made that decision. Kurt chose to save his own life by ending Janis's. He chose that outcome instead of the alternative: letting Jim kill him. If Kurt let Jim kill him, then Jim would be morally responsible for Kurt's death AND for restraining Janis against her will, but obviously not for her death, since she would still be alive. While Kurt is perfectly free to choose his own death, it is hard to escape the conclusion that he does not have the right to choose whether someone else will live or die.

Obviously, Janis did nothing to deserve being killed, so we can't derive Kurt's right to kill her from anything Janis did. Also, we can't derive Jim's right to Kill Janis from something someone else, including Jim, did. If we were to derive Kurt's right to kill Janis from a third person's actions, we would put Janis at the mercy of a third person. Would you want that someone's right to kill you be conditional on something I do when you have absolutely no way of controlling my actions?

If we claim that Kurt is not morally responsible for Janis's death, we are also claiming that Kurt had a moral obligation to save his own life. In other words, we are claiming that, had he not defended his own life, he would have done something morally wrong. Or, by defending himself he was trying avoid doing something wrong, which is choosing to be killed. Is it morally wrong to choose to be killed? I don't think it is. In fact, most of us think it is heroic to sacrifice one's own life for the sake of saving someone else's. On the other hand, most of us think it is selfish to take someone's else's life in order to save one's own life.

Instead of concluding, it would be useful to stress that both Jim and Kurt have choices to make, but Janis is completely helpless. Jim has the power to decide whether Kurt will live or die, and Kurt has the power to decide whether Janis and Jim will live or die. Therefore, the correct questions are:

1. Does Jim have the right to restrain Janis?
My answer - No, and therefore Jim is guilty of restraining Janis.

2. Does Jim have the right to choose whether Kurt will live or die?
My answer - No, and therefore Jim is guilty of Kurt's death if Kurt refuses to shoot, and Jim kills him.

3. Does Kurt have the right to choose whether Janis will live or die? My answer - No, and therefore Kurt is guilty of Janis's death if he chooses to shoot.

4. Does Kurt have the right to choose whether Jim will live or die?
My answer - Yes, and therefore Kurt is not guilty of Jim's death if he (Kurt) chooses to defend himself.

Monday, July 21, 2014

Is war an excuse for abandoning the rule of law?

I've been somewhat quiet about the Israel-Hamas conflict, mostly because the whole thing depresses me, and I don't think I can do much to help anyone there. One thought, however, is important to mention.

Imagine you are a parent whose child was killed in the fighting between the two warring sides. Both sides claim that they were defending themselves against the aggressor, and although their intention was not to kill your child, his death was, according to them, an unavoidable consequence of their self-defense. Therefore, they claim, they are not morally or legally liable for the death of your child.

What would you say to them? Would you accept their justification? I don't think I would be satisfied with their justification because I don't think it is my child's duty to die for the sake of someone else's self defense. Neither I nor my child ever agreed to a contract in which we would accept paying with our lives for someone else's safety.

This is recognized by law in most jurisdictions. If you killed an innocent bystander while defending yourself in the US, your action would be labeled as reckless injury of a third person. For example, Sec. 9.05. of the Texas Penal Code states:

"Even though an actor is justified under this chapter in threatening or using force or deadly force against another, if in doing so he also recklessly injures or kills an innocent third person, the justification afforded by this chapter is unavailable in a prosecution for the reckless injury or killing of the innocent third person."

One might argue that the definition of a reckless injury of an innocent third person does not apply in the Israel-Hamas conflict--i.e., that the injury or death was an unavoidable consequence of necessary self defense. This is fine, but this claim is a matter of a legal dispute in court. I doubt that any of the parents of the children killed in the Israel-Hamas conflict will ever get the chance to accuse anyone, in the court of law, for the death of their children. This is tragic and sad.

So, the least we can do is to refuse using war as an excuse for abandoning the rule of law. The fact that an innocent person was killed during a war doesn't make that person any less dead than an innocent person killed in peace time.

Thursday, July 17, 2014

Morality face-off: Dawkins vs. Rajsic

Dawkins' Position: Dawkins went on to say that one of his former school masters “pulled me on his knee and put his hand inside my shorts,” and that to condemn this “mild touching up” as sexual abuse today would somehow be unfair.

Rajsic's Position: The only thing a grown man should be morally allowed to touch up is scratched car paint.

Whose position do you support?

Tuesday, July 15, 2014

Why libertarianism?

The minimum that a moral theory should achieve is to be able to unambiguously separate all human actions into two categories: (1) morally permissible actions, and (2) morally impermissible actions. I have shown here and here why various forms of utilitarianism cannot achieve this purpose. Other strands of consequentialism, which is a moral philosophy according to which actions should be judged on the basis of their consequences, suffer from the same problem. Why?

Imagine that you want to eat a greasy burger. Is this a morally permissible action? Using the consequentialist approach, we would first have to determine all the consequences  of you eating a greasy burger. Although this seems a rather benign action, we must admit that, at best, we can only propose some scientific hypotheses about the effect of eating a greasy burger on your health. But, scientific theories and hypotheses are only tentative statements about the world. They are not the same as truth. In other words, we will never know if our theories about the effects of eating a greasy burger are true or not. More importantly, we will never know the full scope of the consequences of any human action.

But, let us, for the sake of argument, assume that we have godly powers, so we can look at any action and know all of its consequences on all people from now to eternity. Suppose, for example, that eating a greasy burger today would shorten your life by one day, and suppose that we know all the consequences of you dying one day earlier (i.e., one more day of pain for your family and friends, one less day of food, water and air consumption, more work for the funeral home in your neighborhood, etc. etc... But, even knowing all that, and much more, won't help us determine if these consequences are overall desirable. Are they good or bad? Depending on who you ask, you might get different answers. All these answers will be equally subjective, so we have no reason to consider one of them to be more valid than any other.

So, even if we assume that we have perfect knowledge, we still can't determine whether eating a burger is morally permissible if we use consequentialist ethics. Note that this does not mean that consequences don't matter. They do matter in individual decisions, but they are also always speculative and subjective in nature, and that's why they are not fit to be moral criteria. Imagine going to jail for eating a greasy burger. This might sound absurd, but if enough people believed that the consequences of you eating a greasy burger are bad enough, they might well put you in jail. If you are not convinced, think again. The prohibition era treatment of alcohol consumption was not far off.

Libertarianism, however, does satisfy this bare minimum required of a moral theory. Libertarianism defines the limits of permissible actions using objectively measureable quantities: space and time. If you own the space in which you want to eat your burger, if you own the burger, and if you don't use anyone else's property during your eating of the burger, then it is morally permissible to eat that burger. Otherwise, it is not morally permissible.

Thus, the reason why libertarianism is superior compared to consequentialist moral theories is not that it makes the world a nicer place, although I believe it does; it is superior because it satisfies the necessary condition for being a moral theory, while consequentialist theories don't. We may argue about whether or not this is sufficient for accepting libertarianism, but we must admit that this reason alone is sufficient for rejecting the status of a moral theory to utilitarianism and its derivatives.

Wednesday, July 9, 2014

Oda efikasnosti srpskih građevinskih radnika

21. maj -- Premijer, Aleksandar Vučić

Vučić je poručio da odmah, u narednih desetak dana, treba krenuti u obnovu infrastrukture. Drumska mreža je nastradala više nego železnička i neki putni pravci neće dugo biti otvoreni ni za putnički, a posebno ne za teretni saobraćaj. On je naveo i da će se najhitnije krenuti u obnovu kuća i to, pre svega, onih ljudi, koji su ostali u potunosti bez „krova nad glavom“. Učiniće se sve da se taj posao završi za dva do tri meseca.

27. maj, Krupanj -- Premijer, Aleksandar Vučić

Za četiri meseca biće obnovljene oštećene i srušene kuće, obećao je premijer Aleksandar Vučić građanima Krupnja.

"Ovde je 38 kuća u potpunosti srušeno. Svih 38 kuća obnoviće država Srbija. Takođe, 168 kućaje oštećeno. Svuda ćemo pomoći i građevinskim materijalom i radnom snagom i na druge načine"

28. maj --  Premijer, Aleksandar Vučić

Premijer Srbije Aleksandar Vučić rekao je da je situacija na poplavljenim područjima svaki dan sve bolja, da je država napravila plan i da za nekoliko dana kreće u snažnu obnovu. Svi kojima su porušene kuće - dobiće kuću, poručio je Vučić. Naveo je da je ukupna šteta od poplava oko milijardu evra.

9. jun -- Premijer, Aleksandar Vučić

"Posao obnove počeće sledeće nedelje. Ljudi kojima su kuće uništene ne mogu da dočekaju zimu bez krova nad glavom. Sve porodice kojima su kuće značajno oštećene dobiće do 250.000 dinara u novcu, a naći ćemo načina da dobiju i aparate i nameštaj."

7. jul, Krupanj -- Predsednik opštine Krupanj Rade Grujić

"Kada je reč o kućama, tačno je da gradnja nije počela izuzev dve kuće, ali čeka se zakon o obnovi, a mi očekujemo da veoma brzo posle toga počne izgradnja kuća"

9. jul -- Ministar građevine, Zorana Mihajlović

Govoreći o protestu nezadovoljnih građana Obrenovca, Mihajlovićeva je rekla da nestrpljenje svakako postoji i poručila da Vlada jeste tu i da zna šta radi. „Biće sve, ali ne može odjednom”, rekla je ministarka.

Dakle da rezimiramo, obnova porušenih i oštećenih kuća će biti završena 28. jula ili 28. avgusta ili 27. septembra 2014., ali ne može sve preko noći. Zato ćemo dva, od ta dva, tri ili četiri mjeseca, provesti u pripremi zakona o obnovi iako je premijer obećao da će "posao obnove" početi krajem maja pa je to nenajavljeno "pomjerio" na 16. jun. Očigledno je u taj "posao" uključio i mjesec dana čekanja (između 17 maja i 16 juna) da počne zasjedanje Skupštine i mjesec dana zasjedanja (između 16 juna i dana kad će novi zakon biti izglasan).

Ako je suditi po ovome, srpski građevinski radnici su među najefikasnijima u svijetu, a zasigurno su efikasniji od srpskih političara. Političarima treba dva mjeseca (a možda i više od dva) da odluče da radovi mogu da počnu. Građevincima će biti potrebno najmanje dve nedelje (od sad do 28. jula), a najviše dva i po mjeseca (od sad do 27. septembra) da završe sve radove na obnovi porušenih i oštećenih kuća. E pa, što bi rekli stanovnici Krupnja--srećan vam rad!

Sunday, July 6, 2014

Five common misconceptions about Austrian economics

These five misconceptions were recently publicized in a piece published by Bloomberg View, and there have been some great responses to that piece. I'll take a slightly different route and try to explain why poor interpreters of Austrian thought have these misconceptions about Austrian economics. Note that there are poor interpreters of Austrian thought among Austrian enthusiasts as well. And it seems that the Bloomberg piece itself focuses only on these misguided Austrian enthusiasts. This is unfortunate because it creates the impression in the general public that the 150-year history of serious intellectual work in the Austrian tradition can be reduced to a number of ridiculously shallow propositions. I'll trace these misinterpretations back to the likely original Austrian ideas that have been misunderstood or lost in translation.

Misinterpretation 1: Austrians believe that the Federal Reserve money-printing is a government plot to boost big banks.

Original Austrian idea: The fact that many Austrian economists warn about the consequences of the expansionary monetary policy pursued by the Federal Reserve does not, by any means, imply that Austrian economists believe this policy is a "plot." Austrian economics is not a conspiracy theory, but, more importantly, it is not a mere exercise in historical forensics. Austrians simply point out the fact that, if the Federal Reserve "prints money" to save banks that have made unwise business decisions in the past, we can expect more of the same problem in the future as the same banks keep making unwise business decisions. At the core of this position is the idea that profit is a signal that a firm is making good business decisions, while loss is a signal that a firm needs to change something in order to stay in the market. Without these signals, we wouldn't know who is performing well within the market and who is not. Profit is like a mark that a student gets on a test. Marks tell us which students can pass the course and which students need to either improve or try changing their occupation. Bailing out banks that operate with a loss is like giving passing marks to bad students. Whether giving passing marks to bad students in the banking industry is a plot or not is a matter of historical inquiry into the facts of the actual situation. But, even labeling this situation as a plot does not change the economic consequences of subsidizing bad performers in the banking sector.

Misinterpretation 2: Austrians believe that prices are rising much faster than anyone thinks.

Original Austrian idea: Austrian economists put a lot of emphasis on prices because they recognize that prices are signals of otherwise unavailable information about people's desires and availability of resources. This information is necessary for the coordination of millions of individuals within the market. One of the important features of the Austrian theory is that it stresses that an increase in the money supply generally affects prices of different commodities differently. Some prices rise sooner, while others rise later. Some don't rise at all, while some may even fall. A potential problem with this arises if an increase in the money supply changes relative prices in a way that gives misleading signals to market participants. If this happens, then market participants make decisions based on prices that are poor indicators of the underlying plans made by other market participants. This leads to a lack of coordination within the economy and can ultimately lead to a recession. So, when you hear an Austrian warning that prices of some commodities are rising much faster than the official overall inflation figures would suggest, they are not necessarily claiming that the official inflation rate is a bad indicator of the overall increase in the price level of all commodities. They are warning about these price increases because they might be caused by an increase in the money supply, not by a change people's desire for this commodity or by a change in its availability. This would be a false signal to market participants that they should consume less and produce more of that commodity, which would lead to excess supply in the future. A common term for such excess supply is a bubble. The bubble bursts once people realize that the price signal they were receiving was false. Most of us are familiar with the recent housing market bubble.

Misconception 3: Austrians believe that real “inflation” means money-printing, not an increase in prices.

Original Austrian idea: This is partly a definitional issue, but the core of it is about understanding the origin and consequences of increases in prices. If all prices were rising at the same rate all the time, then we would have little to worry about because people's expectations and plans would always be adjusted to these increases. However, Austrians stress that increases in prices that can happen as a consequence of money printing (physical or electronic) are neither uniform across commodities nor are they predictable over time. This is why an increase in some prices may happen soon after a large quantity of money has entered the market while others may happen years later. In fact, depending on people's (and banks') desire to hold money balances (not to spend or invest money), an increase in the money supply might not affect prices at all for as long as people want to keep their money in idle accounts. This is why we don't get much understanding of the underlying economic process by just looking at prices. But, if we keep track of the money supply, then we may realize that, even if prices are not rising, they may start rising as soon as people decide to spend or invest the money that has been printed and given to them. This is why Austrians stress the importance of increases in the money supply in understanding inflation.

Misconception 4: Austrians believe that printing money can never boost the economy.

Original Austrian idea: It would be unwise to claim that anything can never happen. So, I would be surprised if any conscientious social or natural scientist would claim that an event can never happen. What many Austrian economists will tell you, though, is that money printing tends to temporarily boost some sectors, and not the whole economy. In Misconception 2 above we said that this "boost" can, in fact, be a consequence of false price information created by a sharp increase in the money supply. If this is the case, an Austrian would tell you that we can expect a bust of the "boosted" sector in the future, once people realize that the "boost" was simply a case of excess supply in this particular sector.

Misconception 5: Austrians believe that academic economics is a plot to use mathematical mumbo-jumbo to cover up government giveaways to big banks.

Original Austrian idea: Austrian economists often warn against uncritical application of mathematical formalism, but this does not mean that Austrians are opposed to any use of mathematics in economics. If you open Mises's Human Action, one of the most important treatises in Austrian economics, you will find that he sometimes uses numerical and algebraic examples to illustrate a point. This is math, although relatively simple math. What Austrians warn about is not the use of math in general but its uncritical use that blurs the fundamental features of the economic problems we wish to study. Austrians are not the only economists that warned about this. Ronald Coase, a Nobel laureate in economics was not an Austrian, but he was a fierce critic of uncritical mathematical formalism.

Another important point we should understand before we turn to analyzing the claim that the use of math is a "cover-up" for government giveaways is that not all academic economics contains math. In fact, there are prominent academic economists who are Austrians and who may or may not use math to illustrate their points. Thus, it is possible to be an academic economist without using "mathematical mumbo-jumbo" and it is possible to be an academic Austrian economist.

Is the use of mathematical formalism a cover up for government giveaways? Just like the question in Misconception 1 about a potential plot between the Federal Reserve and big banks, this is not a question of particular interest for an economic theorist. It might be an interesting research question for historians of economic thought, which is just a small segment of the economic discipline.

However, a more profound problem that Austrians point out is that the use of mathematical formalism creates an illusion of knowledge where actual knowledge does not exist. This gives us an impression that we can design policies with predictable outcomes when in fact the model on which we base these policies does not capture the key features of reality we want to predict. For example, this was the central idea of Friedrich Hayek's 1945 paper on prices as sources of otherwise unavailable information, information that is generally assumed to be known in mathematical models of the market. Assuming that unknown information is known removes the need for markets as means of economic coordination, Hayek stressed. All economic planning in such a world could be performed by the government. However, claiming that mathematical formalism creates incentives to turn over the economy to the government is not the same as claiming that the use of mathematics is a plot by anyone. And, even if this was a plot, this fact would be of little importance for Austrian theory.  


Austrian economics is a complex, multilayered approach to economic thought with a long history. It requires careful analysis and consistent application of critical thinking to get a full appreciation of the implications of some of the Austrian insights. This applies both to the critics and to Austrian enthusiasts. Let us not insult the serious scholars in the Austrian tradition with shallow interpretations of their work.

Thursday, July 3, 2014

Comparative Advantage in Supply Managed Industries: Lessons from a Subjectivist, Market Process Perspective

A potentially usful reading list for Noah Smith

Noah Smith's "critique" of "Austrian economists" is a poor piece of writing. When you critique an idea, you first need to state the idea clearly. Then name the authors that support this idea and provide evidence for this (i.e., direct quotes). Then, when you have established that you are critiquing actual ideas espoused by actual people, and only then, you can proceed to critique the ideas. In your critique, you need to clearly state which criteria you are using, explain why these criteria are better than any other criteria, and then provide evidence that the actual statements of actual people you listed earlier do not meet these criteria. This piece is missing most of these elements.

While Smith does not mention any names of any actual Austrian economists except for Robert Murphy, Jonathan Finegold Catalan points out prominent Austrian economists who don't fit into Smith's "critique" on the issues of the Federal Reserve, inflation or the use of mathematics in economics. Jonathan makes the point that, even when some Austrians hold the positions that Smith claims they hold, this is only a small minority of Austrians.

But, let's not forget that the Federal Reserve, inflation, and views on mathematical modeling are only a small part of Austrian economics. For an overview of elementary readings in the rich array of topics covered by Austrians, we might refer to this reading list that I borrowed from another Austrian and my former PhD mentor. I will certainly use some of these texts for my Environmental Law and Regulation course this fall. This list includes topics in valuation and prices, competition as a dynamic process, the Economic Calculation Debate, capital theory and production, theory of the firm, and business cycle theory as well as a number of applications of the Austrian theory. I would be happy to see Noah's critique on these topics as well, but this critique should follow the principles of writing integrity described in the first paragraph of this post. Otherwise, it would be just another cheap publicity stunt.

Elementary Readings in Austrian Economics

Carl Menger (1871/1994) Principles of Economics translated by James Dingwall and Bert Hoselitz, Libertarian Press, Grove City.

Ludwig von Mises (1949/1998) Human Action:  A Treatise on Economics, Scholars’ Edition, Ludwig von Mises Institute, Auburn.

Murray Rothbard (1962/2004) Man, Economy and State with Power and Market, Scholars’ Edition, Ludwig von Mises Institute, Auburn.

Peter Boettke (1994) The Elgar Companion to Austrian Economics, Edward Elgar, Cheltenham

I.       Historical Context

Gene Callahan (2002) “A Brief History of the Austrian School,” in Economics for Real People: An Introduction to the Austrian School, 2nd Ed., Ludwig von Mises Institute, Auburn, pp. 307-319.

Peter Boettke (1997) “Where Did Economics Go Wrong?  Modern Economics as a Flight from Reality” Critical Review, 11(1): 11-64

Roger Garrison (1982) “Austrian Economics as the Middle Ground:  Comment on Loasby” in Method, Process, and Austrian Economics:  Essays in Honor of Ludwig von Mises, edited by Israel Kirzner, Heath, Lexington. Pp. 131-138.

II.       Valuation and Prices

Menger pp. 114-225.

Mises, Chapter XVI, pp. 324-394.

Friedrich Hayek, (1945) “The Use of Knowledge in Society” American Economic Review 35( 4): 519-530.

Randy Barnett (1992) "The Function of Several Property and Freedom of Contract" Social Philosophy and Policy 9(1): 62- 94

Steven Horwitz (1994) “Subjectivism” in Boettke, pp. 17-22.

Jack High (1994) “The Austrian Theory of Price” in Boettke, pp. 151-155.

III.       Competition as a Dynamic Process

Friedrich Hayek (1978) “Competition as a Discovery Procedure,” in New Studies in Philosophy, Politics, Economics and the History of Ideas, Chicago: University of Chicago Press.

Israel Kirzner (1997) “Entrepreneurial Discovery and the Competitive Market Process:  An Austrian Approach” Journal of Economic Literature 35(1): 60-85.     

Israel Kirzner (1973) “Market Process vs. Equilibrium,” in Competition and Entrepreneurship, Chicago: University of Chicago Press, pp. 1-30.

Joseph Schumpeter (2003/1946) Capitalism, Socialism and Democracy, Routledge, London.

Mark Addleson (1994) “Competition” in Boettke, pp. 96-102.


IV.       The Economic Calculation Debate

David Steele (1981) “Posing the Problem: The Impossibility of Economic Calculation Under Socialism” Journal of Libertarian Studies, 1(1): 7-22

Don Lavoie (1985) Rivalry and Central Planning, Chapter 1, “Introduction” Cambridge University Press, pp. 1-27.

Mises, Chapter XXV and XXVI, pp. 685-711.

Karen Vaughn (1994) “The Socialist Calculation Debate” in Boettke, pp. 478-486.

Peter Boettke (2001) Calculation and Coordination: Essays on Socialism and Transitional Political Economy, Routledge, New York.


V.        Austrian Capital Theory and Production

Israel Kirzner (1966) An Essay on Capital, Augustus Kelly, New York.

Mises, Chapter XVIII, pp. 476-520.

Rothbard, Chapter 1, pp. 47-72, Chapter 8, pp. 509-556

Peter Lewin (1994) “Capital Theory” in Boettke, pp. 209-215.

Roger Garrison (1985) “A Subjectivist Theory of a Capital Using Economy” in Gerald O’Driscoll and Mario Rizzo The Economics of Time and Ignorance, Basil Blackwell, New York.


VI.       Austrian Perspectives on the Theory of the Firm

Frédéric Sautet (2000) An Entrepreneurial Theory of the Firm, Routledge, London.

Nicolai Foss and Peter Klein (2002) Entrepreneurship and the Firm:  Austrian Perspectives on Economic Organization, Edward Elgar, Cheltenham.

Rothbard, Chapter 5, pp. 319-366.

Richard Langlois (1994) “The Boundaries of the Firm” in Boettke, pp. 173-178.


VII.     Austrian Business Cycle Theory

Roger Garrison (1996) “The Austrian Theory a Summary”, in The Austrian Theory of the Trade Cycle and Other Essays, Auburn: Ludwig Von Mises Institute, pp. 111-120.

Steven Horwitz and William Luther (2010) “The Great Recession and its Aftermath from a Monetary Equilibrium Perspective” Working Paper 10-63, October, Mercatus Center, George Mason University.

Robert Batemarco (1994) “Austrian Business Cycle Theory” in Boettke, pp. 216-223.


VIII.    Applications

Environmental Economics

Roy Cordato (2004) “Toward and Austrian Theory of Environmental Economics” The Quarterly Journal of Austrian Economics, 7(1): 3-16.

Charles Steele (1994) “Resource Economics” in Boettke, pp. 300-303.


Economics and Law

Graham Dawson (2013) “Austrian Economics and Climate Change” The Review of Austrian Economics 26 (2):  183-206. 

Linda Schwartzstein (1994) “An Austrian View of the Legal Process” Ohio State Law Journal 55(5): 1049-1078.


Land Use Planning

E. C. Pasour (1982) “Agricultural Land Protection: Is Government Intervention Warranted?” Cato Journal, 2(3): 739-758.

E.C. Pasour (1983) “Land-Use Planning: Implications of the Economic Calculation Debate” Journal of Libertarian Studies, 7(1): 127-139.


Welfare Economics

Roy Cordato (1992) Welfare Economics and Externalities in and Open Ended Universe:  A Modern Austrian Perspective Kluwer, Boston.

Murray Rothbard  (1979) “The Myth of Efficiency” Reprinted from Time, Uncertainty, and Disequilibrium, Mario Rizzo, ed. (Lexington, Mass: DC Heath, pp. 90-95.

Murray Rothbard (1997) “Towards a Reconstruction of Utility and Welfare Economics” in The Logic of Action I: Method, Money and the Austrian School, Edward Elgar, Cheltenham, pp. 211-254.

Jesús Huerto De Soto (2009) The Theory of Dynamic Efficiency, Routledge, New York


Monetary Economics

Andres Alvarez and Vincent Bignon (2013) “L. Walras and C. Menger:  Two Ways on the Path of Modern Monetary Theory” European Journal of the History of Economic Thought 20(1): 89-124.



Roger Garrison (2001) Time and Money:  The Macroeconomic of Capital Structure Routledge, New York


Comparative Advantage

Predrag Rajsic and Glenn Fox. "Implications of Hayek’s and Coase’s Market Process Perspectives for Canadian Supply Managed Agriculture." PAPERS & PROCEEDINGS of the 2nd Annual Toronto Austrian Scholars Conference.


Predrag Rajsic and Glenn Fox. Quota Prices as Indicators of Comparative Advantage in Supply Managed Industries. No. 145972. Canadian Agricultural Trade Policy Research Network, 2012.


Network and Information Economics

Jack Birner and Pierre Garrouste (2004) Markets, Information and Communication:  Austrian Perspectives on the Internet Economy, Routledge, New York


Competition Policy

Domenic Armentano (1999) Antitrust:  The Case for Repeal, Revised Second Edition, Ludwig von Mises Institute, Auburn.


Development Economics

David Harper (2003) Foundations of Entrepreneurship and Economic Development, Routledge, London.

Peter Bauer (1957) Economic Analysis in Underdeveloped Countries, Duke University Press, Durham

Peter Bauer (1967/1976) Dissent on Development, Revised Edition, Harvard University Press, Cambridge 

Christopher Coyne and Peter Boettke (2006) “The Role of the Economist in Economic Development” Quarterly Journal of Austrian Economics 9(2): 47-68.


Intellectual Property

N. Stephen Kinsella (2008) Against Intellectual Property, Mises Institute, Auburn

Rothbard, pp. 745-754.

Wednesday, July 2, 2014

Thank you for not sending an eviction notice. Kindness works.

Anyone who rents an apartment in Ontario is probably familiar with the consequences of the stranglehold that provincial housing regulations have on both landlords and tenants. Due to these regulations, tenants and landlords have few incentives to treat each others kindly.

I wrote about my unpleasant experience as a tenant here. After over six years of tenancy, my landlord sent my family an eviction notice because of a single late rent payment. Since the late payment was a result of a simple oversight, I suggested that the landlord send us a reminder in the future, as a sign of respect for our long business relationship. Saying that I got little to no understanding for this suggestion from the landlord would be an understatement. I was in fact told, with a patronizing tone, that this is not their responsibility and that, even if they wanted to send me a reminder, they are not legally allowed.

My landlord claimed that the only legally allowed correspondence between us when a late payment occurs can be the official N4 eviction notice. Of course, this statement is ridiculous. This might be the only legally recognized form of communication, but this does not mean that other forms are not allowed. This simply means that other forms cannot be used as evidence in court. The landlord's refusal to concede this point during our phone conversation only illustrates the level of disrespect shown for our relationship. And this is what ultimately resulted in my public analysis of this case, which was reprinted by various outlets since then, and, apparently, it might have reached my landlord too.

Even though I didn't expect that my analysis and a critique of the current state of the tenant-landlord relationship in Ontario would change anything, it seems that it did have some effect. When I came home from work today, I found this nicely designed reminder note from my landlord. It had a nice gentle colour and a friendly informal font, all the things marketing professionals worry about when they want to communicate with their customers. So, it seems that my landlord is legally allowed to send informal reminder notices after all.

In response, I wrote this in the memo section of my rent cheque: Thank you for not sending an eviction notice. Kindness works.

Tuesday, July 1, 2014

What a ten-year-old can tell you about social justice

This is the conversation I had with my ten-year-old daughter, Ewa, recently while we were sitting in the car waiting to pick up my wife from work.

Ewa: We talked about fairness at school today.

Me: Aha; and how did it go?

Ewa: This is the story that the teacher told us. Imagine there are three people wanting to watch the fireworks. There is a fence in front of the three people. One of these three people is tall, so he can see over the fence. The second person is of medium height, and he can see over the fence only if he stands on something, like a wooden box. The third person is short, and he can see the fireworks only if he stands on something tall, like two wooden boxes. Now, let's suppose the tall person has three wooden boxes and the other two have none. It would be fair if the tall person gave one box to the medium height person and two boxes to the short person so that all three can see the fireworks.

Me: Ok, and how would they persuade the tall person to give them the boxes?

Ewa: I don't know; they would tell him that they need them because they want to see the fireworks.

Me: What if the tall person is not persuaded and he still wants to keep the boxes, would that be unfair?

Ewa: Well, I don't know.

Me: Ok, do you think it would be fair if the short person and the medium height person tried to take the boxes against the will of the tall person? For example, they beat him up and take the boxes.

Ewa: No, then the government would tell them not to fight over boxes that are on its land.

Me: So, the land on which the event takes place is owned by the government and the boxes are owned by the government?

Ewa: Yes, the land is owned by the government, but the boxes are just some random boxes lying around.

Me: Are you sure you don't know anything more about the boxes; who put then there, who made them etc.?

Ewa: I don't know. The teacher didn't say anything about that, and I just assumed they are some random boxes that no one wants.

Me: Well, the three people in our story all seem to really want them.

Ewa: Look, this is what the teacher told us: It is fair that everyone gets what they need, but they have to make it happen themselves.

Me: Ok, now I know a little bit more about the situation. Would then threatening the tall person that the two other persons would beat him up if he doesn't give up the boxes count as "making it happen themselves"?

Ewa: Well, no. The government wouldn't let them fight.

Me: Could then the two shorter persons go to the government and ask that it take the boxes away from the tall person and that it gives the boxes to them.

Ewa: They can go, but the government doesn't do that.

Me: Sure it does. Remember when the teachers were striking and carrying those banners around. They wanted the government to make laws that give them higher wages and better working conditions. So, in their case, higher wages and better working conditions are like those three boxes for the two shorter persons.

Ewa: Well, I don't know; maybe the government could ask the tall person to give the boxes to the other two.

Me: Suppose the tall person still refuses to give up the boxes. Could the government come, take the boxes, and, after that, beat up the tall person to punish him for being unfair.

Ewa: Well, I guess since it is all happening on government land, the government could take the boxes, but it shouldn't beat up the tall person.

Me: Why not? The government can write a law that requires the tall person to be punished for being unfair and not giving up the boxes.

Ewa: The government wouldn't write laws like that.

Me: Why not? It has in the past. For example, there was a law in Canada that would make me a criminal if I wanted to buy a bottle of wine. I would go to jail.

Ewa: Really? Then the government doesn't always do what's right.

Me: Hmm, interesting thoughts.

By this time, my son, who is three, was getting pretty frustrated by this conversation, so he overtook it by reciting the ABC song as loud as he could. This was probably the ideal moment to leave the conversation where it is and let the ideas simmer in the child's mind.

My hope is that, through this conversation, Ewa learned that the concept of fairness is not as straightforward as initially presented. There are several important and complex concepts that I lead her to grapple with in order to start searching for her own definition of fairness. We dealt with the concepts of property, case history, lobbying and political activism. Finally, we discussed the justness of government actions and laws. For this purpose, I used the learning method that I called--discovery through inquiry.

Discovery through inquiry is important in developing critical thinking skills, which are crucial whenever we deal with moral concepts like fairness or justice. As I show here, many social conflicts arise as a consequence of different understandings of the concept of justice. Letting our children realize that it is not easy to figure out what is just and what is not might help them be more patient when they meet someone with different moral beliefs as adults.