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Other Key Concepts

Inflation is the Most Regressive Form of Taxation: 

 

When the government needs money, it can raise it one of three ways: Direct taxation; Borrowing (to be paid back plus interest with future taxes); and “printing” the money, causing monetary inflation.

Of these forms of taxation, inflation is the most regressive. The poorest among us see their cost of living increase. Costs increase for the wealthy as well, but the wealthy are also typically invested in a variety of asset classes that also increase in value due to inflation.

Even worse, inflation doesn’t increase the monetary supply uniformly. There are redistributive effects as those who receive the newly-printed money first (usually big banks and government contractors) are able to spend it before prices rise in response. These “Cantillon Effects”* make inflation truly the most regressive of taxes.

 

Learn more: Because of Inflation, We’re Financing the Financiers - Foundation for Economic Education (fee.org)

Everything is a Trade-off: 

 

One of the most basic ideas of economics is that there are no “solutions”, only trade-offs. This framework is especially valuable when evaluating government policies - and political philosophies!

 

Every government proposal should be analyzed as a comparison between what is “seen” vs. “unseen”*. What will the proposal do? What are the unstated consequences? What was the next-best alternative? Too often, advocates point to a problem, propose a “solution”, and fail to weigh the pros and cons of the proposal - and all the unstated downstream effects.

 

Learn more: Economics in One Lesson - Foundation for Economic Education (fee.org)

Consent vs. Coercion: 

 

It is often said that there are two ways for humans to deal with one another: Peaceful cooperation and Force*. Libertarians argue strenuously for the former. While there is a place for the defensive use of force in a civilized society, the primary method of organization should be based on consent. Anything else is barbaric, and ultimately self-defeating. A society based around force and coercion is at war with itself and cannot last. To the extent that we use coercion, rather than persuasion,  we suffer tyranny.

 

Learn more: (362) The Philosophy of Liberty (HD with voiceover) - YouTube

Freedom of Speech Absolutism:

 

One of the most important attributes of a free society is the freedom of speech. It is through free dialogue that we grope our way towards truth. “Speaking” is akin to thinking. If we allow the government to restrict it, we don’t just lose a little liberty, we lose the capacity for our society to function and progress.

 

It is true that totally free speech can have negative effects. Speech can be mean-spirited. It can be abusive. It can sow fear. It can spread untruths. Despite these downsides, any governmental prohibitions against speech result in much worse outcomes, and inevitably so.

If we allow the government the authority to restrict our speech, we rely on IT to know what’s true and what isn’t; we rely on IT to determine what qualifies as hateful; we rely on IT to decide what we should fear. Given this awful power, the individuals wielding the power of the state will be heavily incentivized to use it in a self-serving manner. The state ossifices. Its power increases. The citizenry suffers. History reveals this truth over and over again. 

 

Prohibition Always Backfires:

 

It is reflexive to see some problem with society and shout, “There oughta be a law!”. This reflex is usually a mistake. Both history and economic theory show that whatever societal ills come from a thing (drug use, prostitution, gambling, etc) when you add government prohibitions, you only make the societal problems worse.

The reason for this is that unless absolute tyranny is imposed, making a “vice” illegal simply moves the activity into the black market. Society still suffers from the behavior, but now also suffers from the violence, corruption, and waste that come from black markets.

Perhaps the die-hard prohibitionist would be OK with tyranny to eradicate some societal evil, but consider: the government can’t even keep drugs out of prisons. What kind of authoritarian nightmare would be required to actually make prohibition “work”? Is that really a society you want to live in?   

 

Moral Hazard – What is it?

 

A moral hazard is a situation where a person (or institution) has an incentive to increase exposure to risk because they are shielded from the full costs of that risk. Where this situation exists, people are incentivized to act “immorally”, since others will bear the costs if things go sideways.

 

One of the best (and worst) examples of moral hazard is the relationship between banks and the US government. It is generally believed (and historically true) that the government will step in and bail out banks that run into trouble. This creates an obvious moral hazard. The banks, seeking increased profits, engage in riskier behaviors than they otherwise would. 

 

The risk (and cost) are then shifted to the taxpayers. Libertarians argue for free markets, where such bail-outs (and therefore the associated moral hazards) do not exist.

 

Rugged Individualism vs. Community: a False Choice.

 

One of the most common (and misguided) critiques of libertarianism is that it is too “atomistic”; that we believe “all men are islands”, or that people should be “rugged individuals” rather than enjoying all the benefits of community.

 

This is nonsense. Libertarians love community. Indeed, it’s essential to human flourishing - if not human existence itself! All libertarians insist on is that our interpersonal relationships  be consensual. We need community. We need institutions. We need vast networks of human cooperation and interconnectedness. Is it so absurd to insist that peaceful consent be the basis for these relationships rather than force? We think not.

“Starve the Beast” Doesn’t Work - Spending is the Problem

 

Sometimes politicians will champion the lowering of taxes as a way to “starve the beast” in Washington or Carson City, presumably to shrink the size of government. These antics are a cynical charade unless they are accompanied by reductions in government spending. It’s the spending that is the problem!

As detailed above, direct taxation is only one of the ways that government finances its spending. It can also borrow (taxing our children - plus interest) and inflate (the most regressive of taxes). All too often, politicians pander to voters without actually doing the work to shrink government. 

 

We support reductions in the tax burden of citizens, of course, but much more importantly, we seek to reduce government spending. It is only by eliminating needless and wasteful government spending that we can truly reduce taxes and starve (or at least tame) the “beast”.