All States are Empires of Lies


“Most economists are political apologists masquerading as economists,” wrote Doug Casey in one of his columns. “They prescribe the way they would like the world to work and tailor theories to help politicians demonstrate the virtue and necessity of their quest for power.”

Moreover, wrote Casey, “The field of economics has been turned into the handmaiden of government in order to give a scientific justification for things the government wants to do.” This of course is not a new development. Ludwig von Mises was calling the universities of his day “nurseries of socialism” but, thankfully, there is always a remnant of students who resist the statist brainwashing. The above quote about concocted “scientific” justifications for interventionism and socialism, by the way, sounds like a precise definition of Keynes’s General Theory.

Casey’s sound advice is that to be a good citizen one needs to “become your own economist.” Don’t rely on the state’s mouthpieces in the “media” or even academe for your economic knowledge. Educate yourself to some degree; it doesn’t take a university degree. Indeed, everything we do at the Mises Institute is geared toward helping anyone anywhere to become their own economist (preferably Austrian School and not Keynesian or Post Keynesian!) and avoid being bamboozled by the state and its court historian economists.

Mises never joined the American Economic Association, the association of academic economists founded in the 1880s. The association’s founding document provides a clue as to why. “The state is an educational and ethical agency whose positive aid is an indispensable condition of human progress,” the document purred. “The doctrine of laissez faire,” on the other hand, “is unsafe in politics and unsound in morals,” said the statist moral scolds who founded the American Economic Association.

There are exceptions, the Austrian School economists being the most prominent, but the majority of academic economists view themselves as advisors or potential advisors to the state. They are Rothbard’s “court historians” with degrees in economics instead of history. The role that they serve is the same as all “intellectuals” in our almost 100 percent state-funded universities. As Rothbard put it: “The majority [of the electorate] must be persuaded by ideology that their government is good, wise, and at least inevitable. Promoting this ideology . . . is the vital task of the ‘intellectuals.’” In return, the “intellectuals” are given government jobs, grants, placement at prestigious universities, book deals, and myriad other political payoffs. (Mises wrote that history, law, and economics are the disciplines most widely used to bamboozle the public about the supposedly good, wise, and inevitable state).

Take the Fed – please (as Rodney Dangerfield would say). Economist Larry White published a journal article several years ago that revealed that about 75 percent of all articles published in academic economic journals on the subject of monetary policy are published by economists who are in some way associated with the Fed. As Milton Friedman once said, “If you want a career as a monetary economist it is best not to criticize the major employer in your field.” And so they do not.

If there is ever any criticism it is always constructive criticism about how to supposedly become even better at central planning. Most Americans are rationally ignorant of the Fed, and what little they do know about it is overwhelmingly shaped by the Fed’s “court historians,” especially the ones who teach economics at colleges and universities. The Austrian economists (but not all of them) are the only ones to challenge the existence of the Fed and call for its abolition.

In addition to being the federal government’s legalized counterfeiting arm, the Fed is also another appendage of the government’s massive propaganda apparatus. The laughingly labeled “independent” Fed’s research, according to economist Emre Kuvvet writing in The Independent Review, increasingly focuses on “climate change, gender, race, and inequality” – the “woke” political agenda of the Democrat party. The one true statement that Joe Biden made as president was “It’s not Milton Friedman’s Fed anymore.”

The New York Fed has always been considered to be the most powerful and influential of all the Fed branches. Its homepage defines its mission as a “desire to root out the intolerable inequities and injustice grounded in systemic racism . . . steadfast in our commitment to work for a more equitable economy and society.” A clearer definition of socialism would be hard to find.

Kuvvet found that of all the employees of the Fed’s Board of Governors there are 97 Democrats and 2 Republicans. “Leadership positions” on the Board consist of 45 Democrats and 1 Republican. As I said, it’s just another D.C. government propaganda mill.

Some Examples of the Empire of Economic Lies

A typical introductory economics textbook devotes most space to endless stories of “market failure” (free-rider problems, externalities, monopoly and oligopoly, monopolistic competition, asymmetric information, and on and on), and almost nothing about entrepreneurship, the cornerstone of capitalism.

It wasn’t always like that. When the first federal antitrust law was passed in 1890 (the Sherman Antitrust Act) the entire economics profession, which was very small at the time, opposed then new law as being inherently incompatible with competition, as Jack High and I proved by quoting all of them in a July 1988 Economic Inquiry article. They all viewed competition like the Austrian economists always have – as a dynamic, rivalrous process of discovery and entrepreneurship, and thought that antitrust law could only disrupt that process and distort markets.

By the 1930s a new and more “scientific-sounding” theory of “perfect” competition had been invented, which asserted that competitive perfection required all homogenous products and prices in an industry, perfect information in the minds of buyers and sellers, costless entry into and exit from industry, an “many” firms, whatever that might mean.

For the next half century and more, economists would spin thousands o tall tales about how the real world fell short of this “perfection,” defined as market failure, and prescribed regulation, control, nationalization, or regimentation by presumably wise and, well, perfect politicians and bureaucrats. UCLA economist Harold Demsetz labeled this dishonest method of analysis “the Nirvana fallacy”: Comparing the real world to an unachievable never never land of Nirvana. As F.A. Hayek once described it, “In perfect competition there is no competition.” That is, there could not be product differentiation, price cutting, advertising, research and development, the rise to the top of a few superior-performing firms in an industry – all the ingredients of genuine competition.

Generations of students have also been taught that in the late nineteenth and early twentieth centuries large-scale production of electricity, water supply, telephone services and other similar products was producing “natural” (i.e., free market) monopolies. Governments then stepped in and legally mandated public utility monopolies, supposedly to be regulated “in the public interest.” I proved this to be yet another falsehood in my paper, “They Myth of Natural Monopoly.” There was vigorous competition in all these industries. They were monopolized by the state, not the free market, with loot-sharing agreements whereby state and local governments would share in the monopoly profits created by their government-mandated monopolies.

Then there’s the Big Lie of the Sherman Antitrust Act which was supposedly needed because of “rampant monopolization” in the 1880s as the industrial revolution proceeded in America. In an article in The International Review of Law and Economics I showed that the industries being accused of monopolization at the time were by far the most competitive, dynamic, price-cutting, innovative, and production-expanding industries in America. The purpose of the Sherman Act was to stifle competition, not to “protect” it.

One of the most ridiculous things taught to generations of economics students was that because of the free-rider problem the U.S. would be spending far too little on “national defense.” “Efficiency” requires coercive taxation. There are economists who have defended Pentagon corruption and fraud on the basis that it expands defense spending, which is supposedly hindered by that nasty free rider problem. Who on earth would define Pentagon spending as “efficient”? !

It was only in the past ten years that the “mainstream” of the economics profession finally discovered that the massive interventions of the New Deal actually made the Great Depression more severe and longer lasting, something the Austrian economists have said all along. This Big Revelation was made in an article in the prestigious Journal of Political Economy by Professor Lee Ohanian of UCLA, an editor of the American Economic Review at the time. Better late than never.

Nobel prizes in economics have been awarded for many theories of “market failure” that subsequent research proved to be bogus. Janet Yellen’s husband, George Akerloff, was a co-recipient of the award for a paper that, in 1970, predicted that the used car market would soon disappear because of “asymmetric information” between buyers and sellers. He apparently never heard of thirty-day warranties that allow car buyers to determine whether or not they had been sold a “lemon.”

David Card was awarded a Nobel prize for a paper claiming that minimum wage laws do not cause unemployment that was called “deeply flawed” by a National Bureau of Economic Research redo of his study. There are many similar episodes.

Economics students are taught that the root cause of pollution is profit seeking, which ignores the fact that the worst pollution in all the world over the past century, by far, was in the socialist countries of the world in the twentieth century that prohibited private profit seeking. A corollary to the profit-seeking-causes-pollution theory is that wise and benevolent government bureaucrats are needed to solve this problem. This not only ignores political reality, but also ignores how the absence of property rights causes many pollution problems in the first place, and also how entrepreneurs solve many “externality” problems because it is profitable to do so.

In public finance students are taught that tax “loopholes” are inefficient because they supposedly create “artificial” market distortions. It’s much more efficient, they are taught, to let government bureaucrats spend more of your money. Then there’s the cornerstone of Keynesian economics – the canard of “the paradox of thrift” which asserts that savings reduces consumption, which in turn reduces GDP, which leads to lower savings. This theory has “justified” confiscatory taxation of interest income on savings for decades.

The intellectual godfather of mainstream economics will probably always be Paul Samuelson, whose Principles of Economics textbook dominated textbook sales for forty years, with almost all other textbooks during that time being imitations of his book. The statist bias that permeated that book and the others like it can be encapsulated by what Samuelson wrote in his 1988 edition – a prediction that by the year 2000 Soviet GDP would be larger than U.S. GDP.

All of this demonstrates why Austrian economics is more important now than ever. The economics profession has not been immune from the cult of political correctness. In fact, it was politically incorrect before political correctness was cool, as Mises’ comment about how the universities of his day were “nurseries of socialism” shows. Doug Casey was right when he wrote that most economists are political apologists masquerading as economists. Yours Truly recognized this as a college student decades ago, and was blown away by the discovery of Mises and the Austrian School, the writings of which very clearly showed that the Austrians were unique in that they were powerfully devoted to the intellectual search for the truth about how the economic world (and beyond) works, and how governments don’t work, and were not at all interested in being apologists for the plundering class.

*Thomas DiLorenzo is president of the Mises Institute. This article is a version of a speech delivered at the 2024 Mises Institute Supporters Summit.

 


Originally Posted at https://mises.org/


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    Chinese Agent Who Tried To Bribe IRS Against Shen Yun Sentenced To 20 Months in Prison

    Chinese Agent Who Tried To Bribe IRS Against Shen Yun Sentenced To 20 Months in Prison

    Authored by Eva Fu and Cara Ding via The Epoch Times (emphasis ours),

    A Chinese agent who tried to bribe the IRS and manipulate the agency into advancing Beijing’s transnational repression of a U.S. nonprofit has received a 20-month prison sentence.

    U.S. District Court for the Southern District of New York in White Plains on Jov. 19, 2024. Cara Ding/The Epoch Times

    U.S. citizen John Chen, 72, was a principal actor in a $50,000 bribery scheme under the direction of a Chinese intelligence official to revoke the nonprofit status of New York-based Shen Yun Performing Arts.

    Shen Yun has long been on the Chinese regime’s target list. Founded in 2006, the company tours around the world to display the ancient Chinese culture that prevailed before the communist takeover of China, while highlighting the human rights abuses under the regime’s rule. It has often drawn attention to the ongoing persecution of the meditation group Falun Gong.

    Chen pleaded guilty in July after reaching a plea deal with prosecutors. He has spent the 16 months since his arrest in May 2023 in detention, and he will spend another four months in federal custody.

    He will also forfeit $50,000 and face three years of supervised release after serving the full prison term.

    For several months in 2023, Chen had been trying to move a fraudulent whistleblower complaint to help the Chinese Communist Party “topple” Falun Gong, according to court documents. Prosecutors said the whistleblower complaint was “facially deficient” and invoked propaganda rhetoric typical of Chinese authorities.

    During those conversations, Chen emphasized that Chinese leadership was “very generous” in financial support for the plan, according to the court filing.

    “After this-this-this thing is done,” the court document quoted Chen as saying, “reward for work will surely be given at that time.”

    Chen and another co-conspirator, Lin Feng, who served 16 months of detention, paid $5,000 cash bribes to an undercover agent posing as an IRS agent. They promised an additional $50,000 for opening an investigation along with 60 percent of any awards from the complaint if it went through.

    It was “a significant bribe,” Assistant U.S. Attorney Michael Lockard said at the sentencing hearing. He noted that the undercover officer didn’t specify an amount.

    John Chen (L) poses for a photo at an event celebrating the 70th anniversary of Chinese communist rule in Beijing in 2019. Department of Justice

    “The defendant chose the amount,” he said.

    Both Chen and Lin had traveled to Orange County in upstate New York, where Shen Yun is based, to surveil Falun Gong practitioners there, according to a court filing.

    Damian Williams, the U.S. attorney for the Southern District of New York, said the sentencing was a reminder that “the U.S. justice system will hold accountable those who attempt to engage in malicious transnational repression on American soil.”

    “John Chen aligned himself with the PRC government and its goals to harass and intimidate the Falun Gong, a long-standing target of PRC repression. In doing so, Chen boldly attempted to bribe an individual he believed to be an IRS agent to corrupt the administration of the U.S. tax code and pervert the IRS whistleblower program,” he said in a statement on Nov. 19. “This Office will not tolerate efforts like this to repress free speech by targeting critics of the PRC in the United States.”

    U.S. Attorney for the Southern District of New York Damian Williams addresses the media in New York City on Nov. 2, 2023. David Dee Delgado/Getty Images

    Both Chen’s son and his lawyer declined to comment after walking out of the courtroom.

    While Chen’s son, three China-based siblings, two ex-wives, and fiancée have all written letters asking for leniency and describing him as a man who loves the United States, the prosecutors disagreed.

    In a Nov. 5 memo, they argued that a 30-month prison sentence—the longest under the sentencing guideline—would be appropriate because of the seriousness of the case and the need to deter criminal conduct, “particularly in cases of a foreign power’s repression of a disfavored group within the borders of the United States.”

    “The defendant has no mitigating motives or external factors justifying his offense,” the prosecutors wrote, noting that Chen was “not motivated by poverty” and that there was no evidence of Chinese officials’ pressure.

    The curtain call for Shen Yun Performing Arts at the David H. Koch Theater at Lincoln Center in New York City on Jan 11, 2015. Larry Dai/Epoch Times

    Prosecutors noted that Chen had repeatedly referred to Chinese officials as his “friends” and that during the bribery scheme, he “called them ‘blood brothers,’ and described how ‘we’—Chen and his PRC Government friends—‘started this fight’ against the founder of the Falun Gong ‘twenty, thirty years ago.’”

    The memo displayed photos obtained from Chen’s electronic devices and online accounts showing him at a major military parade in Beijing celebrating the 70th anniversary of Chinese communist rule in 2019. Another photo showed Chen shaking hands with communist leader Xi Jinping.

    “Chen was extraordinarily proud of his history with the PRC Government and, in particular, his meeting with Xi,” the memo states, citing a recorded call in which he bragged that he had “climbed, climbed, climbed to this position,” and that “Uncle Xi” met him “three times in 10 years.”

    Chen had also featured those three meetings, along with a photo, in a 2020 digital rĂŠsumĂŠ, according to the memo.

    Chen was aligned with the Chinese authorities in suppressing Falun Gong and “acted as a full-fledged and enthusiastic participant in the crimes,” the prosecutors said.

    “It was his fight,” Lockard said at the sentencing hearing, adding that Chen had tried to use the freedoms he enjoyed in the United States to undermine the country.

    Tyler Durden
    Thu, 11/21/2024 – 23:25

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