grosz

Instability of a mixed economy

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Hello,

I am having difficulties grasping Ayn Rand's contention that a "mixed economy" must necessarily lead either to a full dictatorship or to complete freedom.

Now, to my knowledge, there is no empirical evidence in history for such a transition, which means that a proof of the above relies solely on knowledge of Objectivism and of relevant economical principles.

One such principle is "controls lead to further controls."

Why is this principle true?

Is it impossible for a nation to survive with just a form compulsory taxation, without ever introducing further controls on the economy?

What about flourishing mixed economies, such as Singapore? This city-state is supposed to be a semi-dictatorship, yet it is very rich and prosperous.

What about the Scandinavian countries?

How is it possible to prove this contention without getting too rationalistic?

Will "the best minds" necessarily flee mixed economies at some point?

I realize this is an enormously abstract issue and that understanding it requires thorough knowledge of the role of principles in human life.

I also realize it must have been brought up many times before.

Still, if someone could give me a few pointers........

Thanks

-- Ori

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Now, to my knowledge, there is no empirical evidence in history for such a transition...

There is: Nazi Germany.

I think Peron's Argentina may be another example, but I'm not positive on the state of things before his Presidency.

I don't have much to offer in terms of a full explanation of the principle, though, as I am quite shaky in my understanding of this point myself.

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Good questions.

I think the underlying reason why a mixed economy is unstable is that human history is moved by ideas; and most importantly, by philosophical ideas.

So: what does it mean when people accept a "little bit" of statism? It means that they accept the idea that an individual's rights can be violated if the state, or the "public" can show a need to do so. And once people accept that idea, there is nothing, in principle, stopping them from taking more and more of a man's rights until they're all gone. People need philosopical ideas; they follow the ones they've accepted. (This still leaves room for people changing their ideas, but that only happens with very purposeful effort. The default is for people to follow the existing dominant ideas.)

In other words, the same principle that leads to a little bit of statism, leads to lots of statism. (And therefore, one can also see that the only way to roll back statism is to remove its philosophical roots, by replacing them with a better philosophy.)

The same thing would happen in reverse. If, in a mixed economy, people end up rejecting statism because of new philosophical ideas becoming prevalent in the culture, then all of statism is doomed. This time, people will follow their good ideas, and there will be no reason for them to tolerate the existence of even a little bit of statism.

But I don't know how fast these changes have to take place, and in fact, I think that philosophy can't answer that question. How long will it take a country to decline from a mildly mixed economy all the way to totalitarianism? Nobody knows, because the situation is so complex, but also, because man has free will, and is capable of replacing bad ideas with good ones.

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There is: Nazi Germany.

I really ought to study some history: I read nothing except Ayn Rand and computer science textbooks!

Good questions.

I think the underlying reason why a mixed economy is unstable is that human history is moved by ideas; and most importantly, by philosophical ideas.

So: what does it mean when people accept a "little bit" of statism?  It means that they accept the idea that an individual's rights can be violated if the state, or the "public" can show a need to do so.  And once people accept that idea, there is nothing, in principle, stopping them from taking more and more of a man's rights until they're all gone.  People need philosopical ideas; they follow the ones they've accepted.  (This still leaves room for people changing their ideas, but that only happens with very purposeful effort.  The default is for people to follow the existing dominant ideas.)

I understand your reasoning and agree completely.

But: how do we apply it to existing "stable" mixed economies, such as Singapore?

I mean, as an Israeli citizen I get to witness the principle taking place in reality on a daily basis, since there is constant political turmoil here.

However, Singapore seems to be really "stable": citizens gladly pay their taxes, spend the rest of their income in subterranean shopping malls, and generally look pleased - yet it is a known fact that there are dictatorial elements in their laws, even some form of censorship.

You write "And once people accept that idea, there is nothing, in principle, stopping them from taking more and more of a man's rights until they're all gone."

But why would anyone take away more and more rights?

Why would anyone in the Singapore government decide to deviate from their present course, introduce new statist laws, new controls, etc. - when everything is going so well? Why would anyone want or need to?

There just doesn't seem to be any "necessity of further controls" brought by the existing controls - not in Singapore.

So, basically, the question reduces to "where is the necessity?"

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I really ought to study some history: I read nothing except Ayn Rand and computer science textbooks!

I highly recommend Dr. Peikoff's book, The Ominous Parallels. It's a full analysis of this very subject, with Nazi Germany as the context used to concretize the principles.

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Ori, I am unclear about the problem. I count six questions. It is good to ask a blizzard of questions about a subject -- if (1) you know what the subject is, explicitly, and (2) you can identify which question is the essential one, that is, the one that, once answered, will lead to answers for the others.

I do not know what the subject is here. Is it, first, the role of principles in an individual's life and, second, the consequences of that on a society, a political system, or an economy?

I am also unclear about which field of knowledge you are working in with these questions. In other words, is your essential puzzle one in the specialized science of economics, psychology, or history? Or are you asking a philosophical question, in this case, a question about politics as a branch of philosophy?

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I am having difficulties grasping Ayn Rand's contention that a "mixed economy" must necessarily lead either to a full dictatorship or to complete freedom.

Could you provide an exact quote, along with the source? That would help because Ayn Rand's position seems to be the focus of your inquiry.

I would want to know, for example, whether she really meant that a particular mixed economy (part statist and part free) is, at a given time, inevitably movingtoward either laissez-faire or full dictatorship -- that is, is inherently unstable -- or whether she meant that such an economy must necessarily become either laissez-faire or dictatorial. There is a difference between the two positions. Which one was Ayn Rand holding, if either?

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One such principle is "controls lead to further controls."

Why is this principle true?

Grosz,

George Reisman, a professor of economics at Pepperdine and in my opinion the best living economist, recently gave a talk entitled "Why Nazism Was Socialism and Why Socialism is Totalitarian." That may interest you with respect to your question. (The video is available online.) Specifically, listen for the section in which he explains why interventions need to get progressively harsher in order to perpetuate the sham.

-Jared

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I do not know what the subject is here. Is it, first, the role of principles in an individual's life and, second, the consequences of that on a society, a political system, or an economy?

Hello Mr. Laughlin,

The subject is: Why is a mixed economy necessarily unstable?

Why can't a mixed economy exist for a long time with a constant number of economic controls, i.e. why must there be "further controls"?

Where does one find instability in what appear to be perfectly stable mixed economies, such as those of Singapore and the Scandinavian countries?

I am also unclear about which field of knowledge you are working in with these questions. In other words, is your essential puzzle one in the specialized science of economics, psychology, or history? Or are you asking a philosophical question, in this case, a question about politics as a branch of philosophy?

Since Ayn Rand actually stated this principle in print, I assume she had managed to prove it to herself. So I am looking for a philosophical proof of sorts.

I am also looking for a proof of the principle that "controls necessitate further controls," which, I believe, comes from economics.

Could you provide an exact quote, along with the source? That would help because Ayn Rand's position seems to be the focus of your inquiry.

Oh... Ah... Well, "the good stuff" isn't here ... it's at my parents' house.

Could it be "The Intellectual Bankruptcy Of Our Age"? I am not sure...

I would want to know, for example, whether she really meant that a particular mixed economy (part statist and part free) is, at a given time, inevitably movingtoward either laissez-faire or full dictatorship -- that is, is inherently unstable -- or whether she meant that such an economy must necessarily become either laissez-faire or dictatorial. There is a difference between the two positions. Which one was Ayn Rand holding, if either?

There is a possibility of going back and forth, i.e. varying the degrees of freedom and of controls over different periods of time, so I believe Ayn Rand's position is that mixed economy is, at any given time, necessarilymoving towards either dictatorship or laissez-faire.

But is a mixed economy necessarily unstable? That is what I want to know.

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I am currently rereading Alan Greenspan's articles in Ayn Rand's Capitalism: The Unknown Ideal. His article on Gold and Economic Freedom may be helpful in this discussion. The beginning paragraph is

'An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense--perhap more clearly and subtly than many consistent defenders of laissez-faire-- that gold and economic freedom are inseperable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other. '(p.96, Capitalism : The Unknown Ideal)

He concludes on p. 101 with the following.

'Deficit spending is simply a scheme for the "hidden" confiscation of wealth. Gold stands in the way of this insidious process. It stands as a protector of property rights. If one grasps this, one has no difficulty in understanding the statists' antagonism toward the gold standard.'

I think that the idea that a mixed economy is either heading towards complete statism or complete freedom is correct. Nazi Germany is the example of complete statism. Complete freedom? Well, that is still an "Unknown Ideal."

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There is a possibility of going back and forth, i.e. varying the degrees of freedom and of controls over different periods of time, so I believe Ayn Rand's position is that mixed economy is, at any given time, necessarilymoving towards either dictatorship or laissez-faire.

I would suggest setting aside any statements about what Ayn Rand's position might or might not be until you or someone else provides an exact quote in context.

But is a mixed economy necessarily unstable? That is what I want to know.

If my memory serves me, from several decades ago, Ludwig von Mises explored this issue in Socialism. Perhaps Henry Hazlitt's Economics in One Lesson also touches on this, at least indirectly, because the "one lesson" is that every act of statist legislation has long-term detrimental consequences (which, we know, require more legislation to "fix" with statist "solutions").

Again from memory, Ayn Rand and others working under her editorial review recommended both Mises and Hazlitt (with severe limitations) as economists -- that is, as better than the Keynesians then running rampant.

So, if you are looking for an economic explanation of the momentum in one direction or another, then I would begin with those sources. If you are looking for a philosophical explanation, then I would turn to Leonard Peikoff, Ominous Parallels, for an explanation of the role of philosophy in history (which includes economic history). If legislators operate on statist principles then they will produce statist legislation. If their principles are mixed but weighted toward statism then they will gradually add more and more statist legislation, especially to fix problems caused by earlier statism.

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Where does one find instability in what appear to be perfectly stable mixed economies, such as those of Singapore and the Scandinavian countries?

Are you saying that the government of Sweden, for example, has no more statist legislation today than it did 100 years ago? If so, could you sketch how you arrived at that conclusion?

I would also like to add a comment about the term "necessarily" -- which you used earlier in connection with an economy drifting in one direction or another. At no time, so far as I can remember, did Ayn Rand or any other Objectivist ever suggest that an economy is fated to become either free or totalitarian.

In other words, the assumption is always valid here that all individuals involved in setting the direction of an economy have free will. So, by looking hard at the mess they are creating and logically seeking solutions, honest mixed-principle legislators could come to the conclusion that statism is destructive and the economy should move toward laissez-faire.

The argument that I have heard from Objectivists over the years is that given certain principles (for or against freedom), and given that individuals act on principles, then the appropriate consequences will follow.

If you agree that philosophy causes history, and that laissez-faire vs. statism are philosophical positions, then how could an economy possibly be stable if one principle acquires a growing place in the culture?

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I would suggest setting aside any statements about what Ayn Rand's position might or might not be until you or someone else provides an exact quote in context.

Here are a few.

The issue which neither camp dares identify is the fact that a "mixed economy" is an unstable, untenable mixture of capitalism and socialism. Most Democrats do not want to establish socialism; most Republicans do not want to advocate capitalism. So both are reduced, by default, to the lowest of all common denominators: to the position of "well-meaning statists," which is a contradiction in terms.
No, we have not reached that stage. But we are certainly not "an essentially private enterprise system" any longer. At present, we are a disintegrating, unsound, precariously unstable mixed economy-a random, mongrel mixture of socialistic schemes, communistic influences, fascist controls, and shrinking remnants of capitalism still paying the costs of it all-the total of it rolling in the direction of a fascist state.
Inflation is a symptom of the terminal stage of that social disease which is a mixed economy. A mixed economy (as I have said many, many times) is an invalid, unstable, unworkable system which leads to one of two endings: either a return to freedom or a collapse into dictatorship. In the face of an approaching disaster, what is the attitude of most of our public leaders? Politics as usual, evasion as usual, moral cowardice as usual.

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...But: how do we apply it to existing "stable" mixed economies, such as Singapore?

...

However, Singapore seems to be really "stable": citizens gladly pay their taxes, spend the rest of their income in subterranean shopping malls, and generally look pleased - yet it is a known fact that there are dictatorial elements in their laws, even some form of censorship.

I know next to nothing about Singapore, but a question comes to mind here. You say there is censorship in Singapore, so I assume people are not free to criticize the government as they would like to. If so, then why do you assume the people gladly pay their taxes? And how deep is the significance of the fact that they "look pleased"? Censorship, after all, means that the people are not free to speak their minds.

Also: how long has Singapore been an independent country, with its current form of government? I ask because there's always the possibility of a slow movement toward statism. (For instance, the US has been drifting that way for over 100 years, and we're still a quite free country.)

You write "And once people accept that idea, there is nothing, in principle, stopping them from taking more and more of a man's rights until they're all gone."

But why would anyone take away more and more rights?

Why would anyone in the Singapore government decide to deviate from their present course, introduce new statist laws, new controls, etc. - when everything is going so well? Why would anyone want or need to?

There just doesn't seem to be any "necessity of further controls" brought by the existing controls - not in Singapore.

So, basically, the question reduces to "where is the necessity?"

First, see what Burgess said about "necessity" in this context. There's never any necessity in human action (in the sense of "could not have been otherwise"). But within that context... why would anyone take away more and more rights? you ask.

Because people need ideas to guide their actions; they don't just automatically stick with the status quo. What ideas will they use? Probably the ones they've already accepted. And they've already accepted the idea that statism is acceptable. So if anything happens that requires further action, they'll look to more statism to solve the problem. After all, it sounds like Singapore has a reputation as a country where "a little bit of statism works", so if they accept that idea, then the natural choice would be to add a little more if some new situation makes some action necessary.

There's something else here. The world never stands still. One cannot achieve some concrete situation in a country and then freeze things. There will be new inventions, new markets, other countries will change (perhaps getting aggressive?), with the result that any country whose government thinks it has found the "right combination" of statism and freedom is going to be faced with choices to make in the future when its environment inevitably changes with the times. And when they have choices to make, they have to act on some ideas.

Sometimes a situation can be quite unstable and yet everything looks fine. There are all kinds of contradictions, and yet the countries in question look, to a casual observer, to be perfectly stable. And then along comes a crisis and reveals that the situation was anything but stable and long-lasting. The example that comes to mind is Europe in 1914. It may have looked stable, but all it took was those two murders in Sarajevo, and the whole house of cards fell down. Given a crisis like that, every country is going to have to decide what to do; keeping that old comfortable status quo just isn't an option. And when they decide what to do: will they turn to freedom, or statism? The answer to that question will depend on the philosophical ideas people hold.

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Are you saying that the government of Sweden, for example, has no more statist legislation today than it did 100 years ago? If so, could you sketch how you arrived at that conclusion?

I really don't know anything about Sweden except for the fact that it is the one country routinely cited as an example of a "success" in socialism.

(Actually, I also know there many lovely blondes there.)

I have heard Miss Rand attribute Sweden's alleged success to "good PRing," but that's not exactly an explanation, and she said that in the 70s. Thirty-something years later, and we still hear about Sweden all the time. So either the PRing is really that good and I should try and find out the facts, or Sweden's actually managed to work something out.

I would also like to add a comment about the term "necessarily" -- which you used earlier in connection with an economy drifting in one direction or another. At no time, so far as I can remember, did Ayn Rand or any other Objectivist ever suggest that an economy is fated to become either free or totalitarian.

In other words, the assumption is always valid here that all individuals involved in setting the direction of an economy have free will. So, by looking hard at the mess they are creating and logically seeking solutions, honest mixed-principle legislators could come to the conclusion that statism is destructive and the economy should move toward laissez-faire.

But isn't this just a different way of saying that depending on the dominant philosophy and governing principles, an economy is fated to become either/or?

In other words, aren't Objectivists actually saying "The direction can change at any given moment, but so long as certain principles are enacted, the economy will in fact move in that direction, and will reach a certain end (again, unless the principles are repudiated)"?

The argument that I have heard from Objectivists over the years is that given certain principles (for or against freedom), and given that individuals act on principles, then the appropriate consequences will follow.

If you agree that philosophy causes history, and that laissez-faire vs. statism are philosophical positions, then how could an economy possibly be stable if one principle acquires a growing place in the culture?

Because I am having difficulties grasping why acceptance of statist principles necessitates growth. In other words: I think my problem can be reduced to a failure to grasp the principle "controls lead to further controls."

But this is a purely economic principle, if I understand correctly.

I will purchase the books you mentioned and study some economics.

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But isn't this just a different way of saying that depending on the dominant philosophy and governing principles, an economy is fated to become either/or?

"Fated" means beyond the control of the individuals involved -- that is, regardless of what they choose to consider and act on. So, no, Objectivists don't hold that the direction or end-point of economic or other cultural change is "fated."

In other words, aren't Objectivists actually saying "The direction can change at any given moment, but so long as certain principles are enacted, the economy will in fact move in that direction, and will reach a certain end (again, unless the principles are repudiated)"?

Yes, of course. This seems obvious. But nothing in what you have said is "necessary." Instead such statements by Objectivists are merely applying the Law of Identity: A thing (such as an individual or a government) acts according to its nature. The thing that is different about humans is that they can change their "programs," so to speak

Are we having a miscommunication? Do you agree that the principles one holds determine one's actions? If one holds statist principles one will act as a statist. Right?

Do you agree that statism causes problems? Do you agree that part of what it means to be statist is to seek coercive, governmental solutions to problems -- including problems caused by earlier statist legislation? If so, how could statism, if dominant, not lead to more statism in practice (assuming no changes in principles)?

In other words, how would you expect stability to be achieved over the long-term (say, two or three generations)?

Because I am having difficulties grasping why acceptance of statist principles necessitates growth. In other words: I think my problem can be reduced to a failure to grasp the principle "controls lead to further controls."

The only way to grasp -- or test -- a principle is to start with a flood of examples. Starting with Mises's Socialism and perhaps some of his other writings, plus Hazlitt's Economics in One Lesson, might precede a study of some particular example.

A classic might be the history of drug prohibition. I can't recommend a particular book. I rely on what I have observed over the last 40 years or so: progressive statism, that is, statism that causes problems by creating enormous profits for drug dealers, and then leads to further statism such as raising taxes to build larger prisons to house the drug-convicts and to "help" addicts, the very people who are buying the drugs in the first place -- at inflated prices, leading to increased (true) crimes, leading to questionable police procedures such as seizure of assets (which the police use for themselves to further wage the ever-expanding "War on Drugs").

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I am having difficulties grasping Ayn Rand's contention that a "mixed economy" must necessarily lead either to a full dictatorship or to complete freedom.

Responses to your post have shown that Ayn Rand does not maintain that a mixed economy will "necessarily" lead in either direction. That issued is settled.

If you have further questions, it might help if you give a little background about why you are asking this question. For example, are you trying to decide whether to support laissez-faire capitalism or a mixed economy? Do you believe that a mixed economy is okay as long as it doesn't get worse?

In other words, what is at stake here for you? If you decide that a mixed economy can be perfectly stable for thousands of years -- what then? What consequences would that conclusion have for you?

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...

Because I am having difficulties grasping why acceptance of statist principles necessitates growth. In other words: I think my problem can be reduced to a failure to grasp the principle "controls lead to further controls."

But this is a purely economic principle, if I understand correctly.

I will purchase the books you mentioned and study some economics.

Controls leads to further controls because statism causes problems which the populace thinks can be solved by further controls, so they implement further controls, which causes even more problems, and so on. People react to problems by increasing government controls if they believe statism is the right solution. They are almost always ignorant of the causal relation between the controls and the problems.

Here's a little causal diagram:

government controls-->problems-->more government controls---> more problems-->even more government controls-->even more problems, etc.

Now the precise nature of the causal relation (signified by "-->") between "government controls" and "problems" is a complex issue of economic theory, covering such things as the government manipulation of money supply, price controls, regulations, taxes and other duties, etc. and how they affect the overall performance of the economic system in terms of productivity, profits, real wages, employment, etc.

From the diagram, you can see that it seems the movement towards statism must accelerate, but only if the people continue to believe in statism. Usually however, they swing back and forth, as the USA has done recently, tipping wildly towards statism in the early to mid 20th century and then slightly reversing or halting that trend in the late 20th century. Western Europe likewise swung wildly in the 20th century, becoming deeply statist in the early 20th century, reversing that trend in the mid 20th century right after WWII and then becoming statist again in the late 20th century. How was the trend reversed in the mid 20th century? It wasn't a total reversal of course, but West Germany et al did pursue a highly free economy policy in the 50's and 60's, having quickly eliminated price controls and a myriad of regulations, and only gradually implementing and strenghtening their welfare states later on. Great Britain, meanwhile, instituted a massive welfare state immediately after WWII. Not surprising, it was the poorest performer of all the major Western European economies. For more details, see the economic history of France, West Germany and other Western European states in the post-WWII era.

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Singapore may be enjoying some economic prosperity, but I am not so sure they are enjoying freedom. There was an incident where an American youth was caught spraying graffiti in Singapore. I do not remember how long ago this was but the controversy about this incident was the form of punishment the youth was going to receive. I believe it was twenty lashings with a bamboo rod.

The punishment was not because of damage to personal property but because the graffiti was considered an act against authority. Singapore also has very little tolerance for illegal drug use. I do not advocate drug use, but I recognise in a free society an individual is free to put whatever substance he wishes into his body. I am not so sure Singapore is a good example of a successful mixed economy. At some point, their prosperity will stagnate.

A better example might be to look at Japan. After World War II, Japan's prosperity vastly improved. In the 90's their economy stagnated and has been

in recession ever since. Until Japan allows more economic freedom, their economy will continue to stagnate.

My favorite quote from Ayn Rand, which I have sitting above my computer monitor is

"Intellectual freedom cannot exist without political freedom; political freedom cannot exist without economic freedom; a free mind and a free market are corollaries."

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Thanks for all the replies.

I believe my error can be attributed to rationalism and lack of knowledge of the relevant theories (especially economics).

I was thinking of a hypothetical country that has a fixed, constant number of controls, and which is headed by statists who don't really want a dictatorship, just economic prosperity, clean streets and very little crime.

This was my starting point. I then hit the "play" button in my head, and waited for more controls to appear.

I couldn't think of a reason for the very first "new control" to appear, since in my head the hypothetical country was "doing ok."

I then compared this hypothetical country to Singapore, and they seemed to match. This was quite disturbing, because I really wanted Ayn Rand's principle to be true... :wacko:

So my problem was "why should the first "new control" be introduced?"

This, of course, is a silly question, because there are many factors involved, and as Jay P wrote, "The world never stands still."

Thanks again guys for helping me with this.

There are two things I must clarify:

1. I am, of course, an advocate of complete laissez-faire, because I understand its validation and roots in metaphysics, epistemology and ethics.

It is improper to judge a political system by its potential results, because judgment has to be done by reference to principles.

It is clear to me that a mixed economy's potential for stability does not alter the fact that it is immoral and wrong.

I started this thread simply because I wanted to get some help in grasping the principle.

2. The entire "necessity" thing was just poor wording on my part. I never meant to use that word in the same way as the irrational philosophers do, and never has the concept of "historical determinism" been underlying my thoughts on this matter. When I use that word in a context dealing with humans, I always regard it as conditional: If certain principles are enacted, then such and such will necessarily result.

Thanks again.

-- Ori

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Hello Grosz,

You're asking a lot of questions, and I don't think I can answer them all. But I will make a try:

1. About the principle "controls lead to further controls", this is entirely true. It is not true in the sense that controls necessarily results in further controls. But it is true that once controls have been imposed there's also a great tendency to impose further measures as a "remedy" for the problems caused by the first controls and interventions. Take for instance rent controls. Once you have rent controls, in combination with inflation, you will end up with shortages on housing. Since most politicians don't know and/or care about economics, they will usually blame the market for the problems. Thus they will suggest some government measures to solve the housing shortages. One such measure might be to subsidize housing. But this will have to be financed by higher taxes, which in turn will cause other problems. These problems will then also be blamed on the market, and once again the politicians will suggest another intervention to solve the problems caused by the higher taxes. Etc. This process will either continue until the politicians and the public realize that they have to do something, which means that they will have to de-regulate the economy, cut spending and taxes, etc. It's either that or they will end up in a society under total state control, i.e. a dictatorship.

You can read about this process in this address by Ludwig von Mises: http://www.mises.org/midroad.asp

2. Concerning the Scandinavian countries I would like to say two things. First of all, the Scandinavian countries are not socialist. They are mixed economies, or to be more specific they are, to lend a expression from von Mises, "hampered market economies". Let me quote George Reisman in CAPITALISM: A TREATISE ON ECONOMICS:

In these three countries [israel, Sweden and the UK], the economic system has always been characterized by private ownership of the means of production - not only de jure, but de facto. This private ownership, to be sure, has labored under all sorts of restrictions and prohibitions, but still it has been private ownership, and production in these countries has been carried out primarily at the initiative of private owners for the sake of private profits. The philosophy of the ruling political parties of these countries may have been socialism and socialism may have been their ultimate goal, but their actual practices, up to now [1996], has not been socialism. The correct description of these economies is von Mises's expression "hampered market economy," and that description applies to the economy of the United States, too.

Thus, the mixed economies of countries like for instance Sweden, where I live, are flourishing only to the extent that they are capitalist, i.e. enjoy a relatively high degree of (economic) freedom. To the extent that we have government intervention in the economy, we are paying a high price for it. Just to give you an indication: the unemployment rate is about 20% in Sweden. This is very much due to very strong pro-union legislation, the regulations on the labor market, very high taxes, high unemployment relief levels, etc. Swedens economic development was much better before the 1970s, when the welfare state was much smaller and economy were freer. It was our high degree of economic freedom in the past - not interventions - that once made Sweden one of the wealthiest countries in the world. You can read more about this in this article: http://www.lewrockwell.com/orig6/sanandaji1.html

Regards,

Carl Svanberg

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