"Economic theory has identified four sources of economic progress"

In January Javier Milei explained to a room of Davos delegates to the WEF forum how the world works, and how economic progress and prosperity happens. This is an excerpt. [Milei's speech was originally in Spanish, and the English version at the WEF website has been transcribed by AI. I have edited slightly it for smoothness and clarity. Emphases mine]

As early as 380 BC, Xenophon pointed out that economics is a form of knowledge that enables men to increase their wealth while arguing that private property is the most beneficial vehicle for the life of individuals.

Xenophon ... [first] highlight[ed] the benefit of private property by stating that the owner's eye fattens his cattle. [Or as the English saying has it: "It's the master's eye that makes the mill go"]... Xenophon then delves into the dynamic realm, noting that efficiency also entails increasing wealth: that is, increasing the available quantity of goods through entrepreneurial creativity, namely through trade, innovation, and recognising opportunity. ...

"[T]he institution of private property deserves a separate chapter. By focussing on it, the Austrian School of Economics from Mises, Hayek, Rothbard, Kirzner and Hoppe to Huerta de Soto has demonstrated the impossibility of socialism, thereby dismantling the illusory idea of John Stuart Mill that postulated independence between production and distribution; a form of academic deafness that led to socialism, and cost the world the lives of 150 million human beings -- while those who managed to survive the terror, did so in absurd poverty.

In line with [those writers'] previous remarks, and consistent with Xenophon's second [point], economic theory has identified four sources of economic progress.

First, there's the division of labour, which was illustrated by Adam Smith through the pin factory example. At its core, this is a mechanism that generates productivity gains, manifested as increasing returns. Although its limit is determined by market size, the size of the market is positively affected by this process. However, it is also worth noting that this virtuous process is not infinite and that its ultimate limit lies in the endowment of initial resources.

Second, there is the accumulation of capital, both physical and human. With regard to physical capital, the interaction between saving and investment is crucial, highlighting the fundamental role of capital markets and of the financial system in carrying out such intermediation. On the human capital side, the focus should not be limited to education alone, but should also include the development of cognitive capacities from birth, as well as nutrition and health, basic elements for gaining access to education and the labour market.

Third, there is technological progress, which consists in being able to produce a greater quantity of goods with the same amount of resources, or to produce the same output using a smaller quantity of inputs.

Finally, there is entrepreneurial spirit, or rather the entrepreneurial function, which, according to Professor Huerta De Soto constitutes the main driver of the economic growth process. Because, although the three factors mentioned are important, without entrepreneurs, there can be no production, and living standards would be extremely precarious.

In fact, the entrepreneurial function is not so much focused on short-term efficiency, but rather on increasing the quality of goods and services, which, in turn, leads to higher standards of living. On this basis, what truly matters is to expand the frontier of production possibilities to the maximum extent possible.

Thus, dynamic efficiency can be understood as an economy's capacity to foster entrepreneurial creativity and coordination.

In turn, the criterion of dynamic efficiency is inseparably linked to the concept of the entrepreneurial function, which is that typically human capacity to perceive profit opportunities that arise in the environment and to act accordingly to take advantage of them. This makes the task of discovering and creating new ends and means fundamental, driving spontaneous coordination to resolve market imbalances.

Moreover, this definition of dynamic efficiency proposed by Huerta de Soto coherently and appropriately combines Schumpeter’s idea of creative destruction with North's concept of adaptive efficiency.

Naturally, given the role of the entrepreneurial function, the institutions under which it develops are of vital importance. In this regard, both Douglass North and Jesús Huerta de Soto consider one of the key functions of institutions to be that of reducing uncertainty.

So, while North presents them as a set of humanly devised constraints that structure social interaction in a repetitive manner, Huerta de Soto considers that these institutions, conceived by human beings, emerge spontaneously from a process of social interaction without being designed by any single individual, and that they reduce uncertainty in the market process.

As Roy Cordato points out, the appropriate institutional framework is one that favours entrepreneurial discovery and coordination. Accordingly, within this framework, economic policy should aim to identify and remove all artificial barriers that hinder the entrepreneurial process and voluntary exchanges.

Given the decisive influence of institutions on economic progress, this directs our attention to the importance of ethics, as societies that adhere to stronger moral values and ethical principles in support of institutions will be dynamically more efficient and will therefore enjoy greater prosperity.

Accordingly, the fundamental ethical problem is a search for the best way to foster entrepreneurial coordination and creation.

Therefore, in the field of social ethics, we conclude that conceiving human beings as creative and coordinating actors entails accepting axiomatically the principle that every human being has the right to appropriate the results of their entrepreneurial creativity.

So the private appropriation of the fruits of what entrepreneurs create and discover is a principle of natural law because if an author were unable to appropriate what they create or discover, their capacity to detect profit opportunities would be blocked, and the incentive to carry out their actions would disappear. Ultimately, the ethical principle just stated is the fundamental ethical foundation of the entire market economy.

So, what we've just demonstrated is that free enterprise capitalism is not only just but also efficient and also that it is the one that maximises growth.

[Full speech here]

RELATED: Here's Per Bylund at the latest Ludwig Von Mises conference explaining that it's entrepreneurs, not politicians, who change the world for the better.

Seymour's Bill is frightening the luvvies so much they can't read

DAVID SEYMOUR'S REMARKABLY TEPID Regulatory Standards Bill is getting frightened and bewildered luvvies to put down their lattes and type indignant emails to their MPs.

Fuel for many of this outraged commentariat (Anne Salmond was the first; Brian Easton is the latest) is provided by a book-length screed by one Quinn Slobodian called Hayek's Bastards, "The premise of Quinn Slobodian’s new book," says the bookplate, "is that authoritarian right-wing populism is a mutated version of classical liberal economics." A version labelled "neoliberalism" by its opponents.

A counter-intuitive thesis to be sure, So I checked on some actual classical liberals to see what they thought of the book. (Pointless asking Trump followers, since we know none of them can read. Or "neoliberals," none of whom actually exist.)

Phil Magness, an economic historian  who most recently convinced over 150 economists and scholars to sign a declaration opposing Trump's economically harmful, constitutionally dubious tariff policies, wonders aloud at the absurdity of the book's central thesis. Which is Slobodian's apparent conviction "that Trumpism traces its intellectual origins to the Austrian economists Friedrich Hayek and Ludwig von Mises." This would undoubtedly astonish all three. 

Slobodian's attempts to link the three suffers, Magness says wryly, "from a lack of clear evidence for the parentage. Undeterred, Slobodian supplies the links by making them up."

As they say, if you have to lie to make up your criticisms, it suggests you probably don't have any.

Slobodian of course relies on the fact that few if any of his credulous readers will bother to actually read Hayek or Mises. (Easton for one would benefit hugely from the experience.) But if you want a candid study of how to quote somebody to say the precise opposite of what they say — in this case Mises quoting others to denounce their racial prejudice is used to suggest their vile views are his own — then Magness's review is a good place to start. 

This is not even sleight of hand. It's a conjurer simply assuming his audience are too dumb to notice. "Deliberate deception" is how another commentator describes it. It's a consistent pattern. Here's Slobodian in 2015, for example, showing how to get Mises to support something he was writing to oppose:

Slobodian demonstrates his pattern of ripping quotes from their
context to give the opposite impression of an author's intention.

It's complete dishonesty: a "scurrilous  ... slipshod attempt to taint and tarnish the reputation of one of the leading economists of the 20th century, and one of the most consistent and outspoken defenders of the classical liberal ideal of political, social and economic liberty and the free society," says Misesian Richard Ebeling in his response to the deception.

We live at a time when one of the worst accusations that can be thrown at someone is the charge of “racist.” Have that word tied to your name and it not only results in moral condemnation, it potentially throws into discredit almost anything and everything that person has said or done. That makes it a serious matter when an individual never identified with such racist views or values has that accusation attached to them. ... The actual facts show this is a fundamentally baseless accusation that attempts to taint and tarnish the reputation of one of the leading economists of the 20th century ...

[O]ne of the most embarrassing observations that can made about an author’s work [is] being slipshod scholarship. Professor Slobodian has 93 footnotes in his article. Over 50 of them reference Mises’s writings or correspondence. Looking them up, I found many instances in which the page reference to a paraphrase of a passage or a quote in one of Mises’s works was not to be found where Professor Slobodian indicated it to be.

In some instances, this was not simply being off a page or two; the page referenced turned out to be in a portion of one of Mises’s works that had nothing to do with the theme or idea that Professor Slobodian was referring to....

In addition, there are instances in which Professor Slobodian asserts or implies views or states of mind held by Mises at some point in time. But the footnoted reference sometimes refers to some other scholar’s work that when looked up did not refer to or imply anything about Ludwig von Mises. For example, at one point (p. 4), Professor Slobodian says, “But for Mises, a war had shaken him the most. Japan’s defeat of Russia in 1905 brought about a non-white power into the elite white club of empires. The event resonated with the rhetoric of the ‘yellow peril’ widespread at the turn of the century, understood as both a racial demographic and commercial threat.” And he footnotes a[nother author's] work about Asian intellectuals in the period before the First World War.

Professor Slobodian then says, “Mises’s response was different but no less radical,” and then references how Mises [allegedly] saw the economic significance of increased global competition from Asia ... The juxtapositioning of these two ideas, one following the other, easily creates the impression that Mises, while having a “different” response, was part of the group worried about a “yellow peril.

There is nothing to suggest in Mises’s writings actually referenced that he held or expressed any such race-based fear in the wake of the Japanese victory over Russia. But the implication is easily left in the reader’s mind.

Slobodian is fundamentally dishonest.

Christopher Snowdon has more:

The first two chapters find Slobodian searching for hints of racial prejudice in the work of Hayek and Mises. For the former, the best he can manage is a reference to ‘the Christian West’ in a 1984 speech. For the latter, who may well have been Austria’s least racist man in the 1930s, it is an even greater challenge. 

Slobodian revives two articles he wrote about the lifelong supporter of open borders in 2019 that have been heavily criticised by Phillip W. Magness and Amelia Janaskie for ‘inverting Mises’s meaning in a light that erroneously casts him as sympathetic to racism or colonialism.’ 

One does not need to be an expert on Mises to see that Slobodian is guilty of selective quotation. One only needs to read the whole paragraph from which the quote is taken. For example, Mises is quoted as writing in 1944: ‘There are few white men who would not shudder at the picture of many millions of black or yellow people living in their own countries.’ Slobodian puts this in a context that implies that Mises shared this revulsion and cites it as evidence that Mises had ‘partially legitimised closed borders for nonwhite migrants as a near-permanent feature of the world order.’ But the very next sentence of Mises’ text reads: ‘The elaboration of a system making for harmonious coexistence and peaceful economic and political cooperation among the various races is a task to be accomplished by coming generations.’ It should be obvious that Mises was not endorsing the prejudices of the majority, but merely acknowledging the existence of such prejudices and hoping that they could be overcome.

And here's Slobodian's problem, and the reason he must so transparently mis-quote: "There is simply no through-line from Mises or Hayek to the alt-right." 

By referring to right-wing populists of the present day as Hayek’s illegitimate offspring (‘bastards’) Slobodian allows himself a certain amount of wriggle room, but if a student believes the exact opposite of the teacher, can he really be portrayed as a follower?

The fatal flaw in this book is that Slobodian has clearly started with his conclusion and worked backwards. An author who was interested in writing about the roots of the current wave of right-wing populism would start with the right-wing populists and study their words and deeds.

Which is what Misesian Jeffrey Tucker did many moons before Slobodian even thought about slithering into print — "the most important political book in recent memory" is what my own reviewer called it.

BUT THIS BRIEF GLIMPSE  into a fetid authorial swamp was not just to alert you to a shitty book from an author too incompetent to even formulate real arguments. It's to show you how bereft of clothing are the nakedly insubstantial objections to Seymour's bill, that so many rest their objections on a ad-hominem without even a home. As Richard Ebeling says so tellingly in a recent article, "“Progressives” Blame F. A. Hayek for Everything They Dislike."

That so many of these "progressive" objections to a fairly unobjectionable Bill rest unthinkingly on Slobodian's animus and deception — for a historian used to checking sources, Anne Salmond's was an example of one of the most dishhonest — suggests the same thing said of Slobodian's book could be said about the objections to the Bill: if you have to lie to make your arguments, then perhaps you don't really have any.

I only wish they were right that it is something they need to be scared about.

All you need to read on Hans-Herman Hoppe. Ever.

For some reason, pseudo-intellectual Hans-Herman Hoppe is taken seriously by many who should know better—and by many others who can’t be bothered picking apart his errant constructs and castles in the air.

This is a fellow who claims monarchy is your ultimate guarantee of liberty and peace, ignoring centuries of history—not least the causes of the American Revolution, and the role of the Hapsburg, Romanov and Hohenzollern clans in plunging the world into war.  This roving rationaliser once presented a lecture in which he claimed (seriously) that Ludwig von Mises had set the intellectual foundation for not only economics, but for ethics, geometry, and optics, as well. This bizarre claim, says a fellow who was there, “turned a serious scholar and profound thinker into a comical cult figure, a sort of Euro Kim Il Sung.”¹

Such is the fellow called by some “one of the most important libertarian scholars of our time”—important in my estimation only because he personifies Ayn Rand’s estimation of libertarians as “hippies of the right.”
One of his modern admirers claims he is known for his “rigorously logical” examination of culture, human action, and the state, that “he has greatly improved the quality of libertarian discourse,” and (between breaths) “that ‘Hoppean’ has become a synonym for rigorously supported scholarly support for libertarianism.”

Take that!

This is, in a nutshell, bollocks. His approach has been characterised as “wholly axiomatic-deductive,” eschewing entirely the evidence all around him, even to check his conclusions. This is an approach wholly reliant for its success on correct starting points, without which it’s best characterised as “an organised way of going wrong with confidence.” Which he does.

The fellow can’t even write properly, as you’ll see when his own words are quoted. But since in some small poorly-ventilated circles he’s widely admired, and since this particular admirer has conveniently put up a post for us called “Hans-Herman Hoppe in 10 Great Quotes,” many of which he’s then summarised for us in plain English, let’s run some of them down here so you’ll be able to see the idiocy for yourself—an example of someone trying to justify politics by shortcuts without resorting to the philosophical thinking necessary to ground that politics—and hopefully become immune yourself to the nostrums of this snake-oil salesman next time you come across them.  (The deluded admirer’s summary, or Hoppe’s original ramblings, are in bold; my responses in italics.)

1. Hoppe presents self ownership, the idea that one owns their physical body, as the starting point from which further property rights derive.  He argues that all human rights derive from property rights…
Right off the bat here’s a clue to Hoppe’s methodology: start with what you want to prove i.e., ownership. And conclude with where you started, i.e., ownership. Which method of argument is a prime example of a simple logical fallacy. (Rigorously logical, right?) 
And it’s not even true to say we own our physical bodies—as if my body is something separate from me. Because, in fact, my physical body is me—my body and I are an inalienable whole, thank you very much, just as yours is—and it’s from this inescapable fact of human nature that the whole concept of ownership and property rights begins, and is required: because each of our bodies has certain urgent requirements and certain abilities and inabilities.
The most urgent requirement is this: we need to stay alive. And the most obvious inability is: what we need to stay alive doesn’t just fly into our mouths pre-cooked. So in order to stay alive as human beings we need to be free to produce the values necessary to live and flourish—we don’t come pre-equipped with the gear necessary to survive even several nights in the open, for example, but we do come equipped with the equipment (i.e, our thinkbox) allowing us to think and plan and make that gear. To produce that valuable stuff.
Even to plant and plan ahead to grow crops and plant forests, so we can produce food and build shelter so we never need to be in the open unless we want to.
For all of which, in short, we need the security and certainty of  individual rights so we can live like human beings—i.e., to think and to plan ahead, and (with property rights) to keep the fruits of all those cunning plans. 
So, in fact, all human rights derive from human nature—with property rights as their consequence, not their starting point. This is a harder and longer argument to make (and if you want to read it presented well and with more rigour than I’ve managed here, then Tibor Machan, ‘The Right to Private Property' and Tara Smith’s Moral Rights & Political Freedom are probably your places to start²), but at least it doesn’t rely on a logical fallacy for its starting point. 
And it has the enormous advantage that it’s also true. 

2. Hoppe advances a concept known as ‘argumentation ethics’, which asserts that the very act of engaging in a discussion tacitly accepts the concept of self ownership…
Seriously. This flatulent rationalistic nonsense waiting for the wind to blow it away is presented as “rigorously logical”!  In fact, the very act of engaging in argument does tacitly accept the concept of free will (since the act of arguing recognises we have a choice in what ideas we choose to accept), but the fact you are arguing with me merely shows we’ve agreed to argue rather than punch each other in the face. Which we might at any moment, especially if you confront me peddling this rubbish.

3. “Property and property relations do not exist apart from families and kinship relations.”
So much for individual rights then, right, since only families and clans can have ‘em. That’s a quote from Hoppe himself by the way, because you wouldn’t believe it otherwise, his justification for which is that “families, authority, communities, and social ranks are the empirical-sociological concretization of the abstract philosophical-praxeological categories and concepts of property, production, exchange, and contract.” Which shows not just how flawed his reasoning process is, but also how badly he writes. 

6. “In every society, a few individuals acquire the status of an elite through talent. Due to superior achievements of wealth, wisdom, and bravery, these individuals come to possess natural authority, and their opinions and judgments enjoy wide-spread respect. Moreover, because of selective mating, marriage, and the laws of civil and genetic inheritance, positions of natural authority are likely to be passed on within a few noble families. It is to the heads of these families with long-established records of superior achievement, farsightedness, and exemplary personal conduct that men turn to with their conflicts and complaints against each other. These leaders of the natural elite act as judges and peacemakers, often free of charge out of a sense of duty expected of a person of authority or out of concern for civil justice as a privately produced ‘public good.’”
And thus, as if by magic, we get monarchs! Whose selective mating and marriage, and the laws of genetic inheritance, led to the chinless wonders who plunged the world into war in every decade in nearly every century until they lost power.
If you want the personification of Hoppe’s ideal today, an example of this “natural elite,” one with a “long-established record of superior achievement, farsightedness, and exemplary personal conduct,” then think Prince Charles. And tampons. Or the Kim Il Sung lineage.

7. “Democracy has nothing to do with freedom. Democracy is a soft variant of communism, and rarely in the history of ideas has it been taken for anything else.”
It’s true that democracy and freedom are not great bedmates (i.e., the counting of heads regardless of content) but it’s beyond poor scholarship to to say that it has been common in the history of ideas to say this. And to compare it to communism? Communism was a collectivist plague that killed over 100 million people.  Whereas democracy has become simply a bumbling way to bribe people with their own money. To confuse the two suggests a confused thinker.

And finally, since who can really be bothered reading any more of this, there’s this, in Hoppe’s own words. (Remember, this fellow is supposed to be a libertarian…):

11. In a covenant founded for the purpose of protecting family and kin, there can be no tolerance toward those habitually promoting life-styles incompatible with this goal. They – the advocates of alternative, non-family and kin-centred lifestyles such as, for instance, individual hedonism, parasitism, nature-environment worship, homosexuality, or communism – will have to be physically removed from society, too, if one is to maintain a libertarian order. 

Does anyone need to say more? 

Hoppe’s ideal society seems to be a monarchy, in which today’s representative of the “natural elites”—his idealised version of Prince Charles, Peter the Great and Caligula, all rolled into one, presumably—owns everything not otherwise nailed to the ground, allowing him to physically remove from this realm, that is to say, his realm, anyone who tries to enter (i.e., to immigrate) or who outrages the propriety of Hoppe’s, or the monarch’s, rather stuffy morals.

Thus does a flawed starting point become, by “rigorous logic,” an argument proving that freedom is monarchy, rights are tribal, and Prince Charles is your ideal man.

It’s no coincidence by the way that this moron—who discusses property rights without understanding their derivation, and freedom without inquiring into its source—is the intellectual guru of the likes of Stephen Kinsella, who discusses property without understanding how it got here, and intellectual property without understanding the role of the mind in creating it—ending with the contention, essentially, that your body can own only what it can physically attach itself to.

My advice is you don’t waste your time reading their slop, unless (as Per-Olof Samuelsson has done) it’s just as an exercise in extracting logical fallacies.

* * * *

1. Tom Palmer, "For Mises' Sake. 
2.  In which she points out, for example, that “Individuals do not possess property rights simply because material goods are part of what life requires. The other essential leg of the case stems from the origin of goods’ value.” Which she then proceeds to answer.
3. Murphy & Callahan and Roderick Long, all of them libertarian sympathisers, have taken the time to say more, though not quite as well as they could have.