Don’t be put off by the length of this video. The video is from the Mises Institute, and reviews Henry Hazlitt’s “Economics in One Lesson” by asking Austrian economists to give their synopsis of each chapter in the book. If you want an excellent introduction into economics, then put this on in the background while you work.

Contents:

1. Walter Block – The Lesson
2. Thomas DiLorenzo – The Broken Window @ 15:58
3. Jeffrey Herbener – Public Works Means Taxes @ 24:28
4. Tom Woods – Credit Diverts Production @ 41:56
5. Robert Murphy – The Curse of Machinery @ 56:41
6. Walter Block – Disbanding Troops and Bureaucrats @ 1:12:21
7. Mark Thornton – Who’s Protected By Tariffs? @ 1:29:35
8. Peter Klein – “Parity” Prices @ 1:47:06
9. Guido Hulsmann – How The Price System Works @ 2:09:13
10. George Reisman – Minimum Wage Laws @ 2:36:41
11. Joseph Salerno – The Function of Profits @ 2:52:45
12. Roger Garrison – The Assault on Saving @ 3:13:18

Joe Hockey, shadow treasurer of Australia and Member of Parliament, delivered an excellent speech at the Grattan Institute, on liberty, personal responsibility and a call for limited government. Below are snippets of his speech:

On Individual Worth and Liberty:

I believe that we are equal in our worth, if not necessarily in our talents. I have a role, you have a role, each of us has a role to play in the process of our own governance. This is what liberty means. This is what it means to be free.

On Liberty:

[John Stuart Mill'] famous statement of liberal principles is that:

“the only purpose for which power can be rightfully exercised over any member of a civilised community, against his will, is to prevent harm to others. His own good, either physical or moral, is not a sufficient warrant.”

And just in case we have a tendency to gloss over words like “freedom” and “liberty”, Mill defines it in the most compelling way:

“The only freedom which deserves the name is that of pursuing our own good in our own way, so long as we do not attempt to deprive others of theirs, or impede their efforts to obtain it.”

I believe that individual liberty must be the foundation of our society, even when it clashes head on with the perceived communal good. That belief rests on John Locke’s positive view about human nature – that there is an essential good, rationality and an innate desire to co-operate in all men and women. I share his conviction that happiness is achieved when individuals are permitted to flourish in ways of their own choosing, according to their own conscience and beliefs.

On the other side of the coin, though, individual liberty is based on an acceptance that we are all fallible – that there is no certainty that any one person or any one society knows “the truth”. It is only through diversity, debate and discourse that we can come closer to understanding what is right.

Free vs Open Societies:

On the one hand you have societies that are free and open. The press is free and the judiciary is independent. Elections are free and regular. An open mind and spirit of enquiry are fostered. The arts and sciences flourish and innovation is encouraged. Multiculturalism, diversity and tolerance are hallmarks of a liberal society. The existence of dissent and debate are regarded as positive signs. Authority is respected only when that respect is earned. It is from this that economic and entrepreneurial activity arises in a way which, over time, raises the living standards and dignity of all citizens.

And on the other hand, you have societies that are not based on individual liberty. In those societies conformity and control are the guiding principles. The alleged good of society (usually only code words for the benefit of the ruling elites) are extolled above the rights of individuals. There may be art and science, but there is little creativity. Dissent leads not to debate, but to detention. Economic activity is centrally controlled and usually stagnating. Wealth is created, but only for the few.

On Eroding Liberties:

Liberalism not only confers the rights of individual liberty on a nation’s citizens, but it also demands that citizens accept their civic responsibilities.

I am however concerned that some of the liberties we take for granted in Australia are being eroded by the actions of government.

I fear that step-by-step and in a way that barely registers in the consciousness of most people, we are losing some of the protections against the arbitrary and interfering actions of the State.

Some of these changes are driven by the community itself. It is hard to empirically quantify, but I am concerned that our society is becoming less self-reliant and placing more store in government to solve our problems.

On Globalisation:

Globalisation also represents the great potential of economic liberty. The breakdown of tariff walls, which restricted individuals and companies from trading, the internationalisation of the labour force, and the reform of failed centrally controlled economies has delivered wealth to large portions of the world’s population.

We rightly paused during the recent financial crisis to reign in the excesses and address some of the flaws in the global financial system, but the shock of recent events has not diminished my faith in either market forces or the positive power of a globalised economy.

Wealth should never be the sole indicator of progress. However globalisation, and the economic growth it is delivering to developing nations, is the most effective poverty reduction program in operation today. For example, between 1990 and 2015 the World Bank estimates that the number of people living on less than $1.25 a day will halve – from 1.8 billion people to 950 million people.

On Anti-Terror Laws:

As a liberal, a legislator and a lawyer, it is the Anti-Terrorism laws, enacted by a government of which I was a member, that has given me great cause to reflect on our individual rights.

Are there occasions I ask, in which the welfare of the majority warrants the restriction of the rights of the few? It is one of the challenges that we face in seeking to apply Mill’s principles.

In this case, the Australian government – like its counterparts elsewhere – was responding to terrorism threats that potentially put the lives of thousands of people at risk.

But did the solution also have the potential to limit the freedoms we hold so precious?

Under normal circumstances, much of the powers conferred on enforcement agencies by the Act are ones that I would be horrified to see any democratic government advance.

In particular, I make mention of “preventative detention” without charge that severely limits access to legal assistance or even outside communication; “control orders” that limit movement and may be in force for up to ten years; and expanded police stop, search and interrogation powers.

However, I reached the conclusion that the threat to liberty of so many justified the actions we took against so few. When effectively the whole polity is under threat from attack by people determined to bring it down, then the government’s primary responsibility is to secure the safety of its citizens.

These are war-time measures. If the nation was under immediate threat of invasion, I suspect that debate and concern would have been more muted. However, the war against terrorism is far less tangible. It’s like a guerrilla war where the enemy is not as easily discernible.

What is important to me is that the restrictions on individual liberty contained in our Anti-Terrorism legislation do not become permanent. The Act includes a sunset clause for some of its more draconian elements, which is essential. There is a compelling case for those sunset clauses to be something less than their current ten years.

But what if the war against terrorism is to last a life time? As the government’s White Paper released last month concluded, there is no end point in sight. Do these laws effectively stay on the statute books forever because the threat of terrorism will persist for generations to come?

It is my own view that the loss of individual liberty that these laws represent cannot stand for all time. What we must do is objectively, dispassionately and regularly review their efficacy, preferably in a bipartisan way. If we find the laws have not been used, or have not been needed, then they should be repealed. I would not find it acceptable to declare a situation an “emergency” one day and then declare it “permanent” the next.

On Internet Censorship:

we see the current Federal government seeking to introduce laws that will effectively censor the Internet. Of course we all want to stop unlawful material being viewed on the Internet. There are appropriate protections that are in place for that. But I have personal responsibility as a parent. If I want to stop my children from viewing other material that I feel is inappropriate then that is my responsibility to do something about it – not that of the government.

What we have in the government’s Internet filtering proposals is a scheme that is likely to be unworkable in practice. But more perniciously it is a scheme that will create the infrastructure for government censorship on a broader scale. Protecting liberty is about protecting freedoms against both known and future threats. Some may argue that we can surely trust a democratically-elected government in Australia to never try to introduce more wide-spread censorship. I am not so sure!

In Summary:

Our desire for a fair go. Our healthy scepticism. Our belief in self reliance, diversity and our multicultural society are the values that have guided Australia’s development. They cannot be taken for granted. It is the duty of us all to ensure that every new generation of Australians – whether native born or recently arrived – share those ideals.

It is the fundamental duty of governments, parliaments, places of learning, and our civic and cultural institutions and for us as fellow citizens to fight to maintain the fire of liberty for which our Diggers fought.

And that is why it is right for our veterans to remind us that the price of liberty is eternal vigilance.

Globalisation requires startups to be global from day one. This does not mean that you need to have sales offices, distribution networks and advertising to all corners of the earth. It means that your startup’s culture must pursue a global market, which means that your startup must continually think about scale. Being able to scale from a small to a large business is one of the most important aspects of entrepreneurship. By thinking big, you can start developing your sales systems, your operations, your human resources to ensure that as you grow, the administrative burden does not grow faster than your business.

The obvious advantage of thinking global is that you are not limited to your immediate local market. Many people, especially in Australia, bemoan the fact that we have a relatively small and low-density population – and ideas do not succeed because of this fact. I do not buy this argument and neither do the hundreds of entrepreneurs who have taken their business globally after starting in small market. We are a lucky country with great entrepreneurs trying to make a difference. Going global also increases the perceived (I say perceived because real value comes from successfully building a business, not PR spin) valuation, which can help attract investors, licensees and potential suitors to your company.

Going global from day one is hard. It requires a lot of planning, research, foresight, risk and, most importantly, excellent execution. My investments, judging business plan competitions, and my own work in startups have always evaluated business opportunities whether it can efficiently serve a global market.

When I did my economics unit at University I learnt that if you tax goods at a rate higher than other goods, you will discourage consumption of that good. This is the basis of all “Sin” taxes on alcohol and cigarettes. A corollary is that investment in producing that good will similarly be discouraged.

This elementary fact is lost on the Federal Government’s treasury chief, Ken Henry:

The review reportedly tabled by Australia’s Treasury chief, Ken Henry, and leaked to media last week, recommends scrapping individual Australian state royalty taxes on mining projects in favour of a 40% uniform national resource tax.

For the record, the corporate tax rate is 30% of profits. Thus Ken Henry is proposing a 33% tax rate hike (from 30% to 40%)  just “because you are a miner.” Apparently this is to help fund the aging population.

Here are just a few unintended consequences:

1. Small to medium sized businesses in the mining sector now find it harder to attract capital, as investors will now be attracted to other companies with a lower tax rate. In other words, the return on investment for miners is now 33% lower.
2. Shareholders in mining companies now get 33% less in dividends, meaning less money to re-invest, save or spend, leading to reduced economic output.
3. Replacing the state royalty taxes, now means that states will find it harder to compete for mining businesses to set up in their states. Competition between states reduces royalty tax rates in the long term.
4. Mining exploration is discouraged, thus leading to lower rates of mining activity, thus leading to lower economic output (including lower exports).
5. Superannuation returns from funds invested in mining companies will be lower, thus actually adding to the problem of funding the aging population that it is purportedly trying to solve!
6. Mining companies will have greater incentive to explore overseas and not in Australia.
7. Discouraging mining activity may actually reduce tax receipts due to the Laffer curve effect.
8. (UPDATE) Companies delay investment decisions due to proposed resource tax, thus dampening economic activity.

On Saturday, I swam (along with 4,300 participants) the Lorne Pier to Pub 2010, a 1.2km open water swim that I have been training for the last few months. My goal was 22 minutes and my result: 20 min 49 secs. So I was pretty happy with my effort.

Lorne Beach with the Pier in the background

It was a beautiful 34 degree day and so too was the turquoise blue southern ocean. Upon registration I received a wireless tag to measure my time and place. I squeezed into my new steamer wetsuit (with help from my wife and a touch of Vaseline).

We stood aside the famous pier and were marshalled into the water. The course ran parallel to the beach and then a left turn to the shore towards the end. It was a short 2 minute swim to the starting buoy – just what was needed to calm the nerves and get the cobwebs out. I was so excited and nervous that I forgot to put my goggles on. Eye protection rectified, I soon hear the 15 second count down and subsequent gun – and we were off!

The first few hundred meters were tough. I had never swum in a wetsuit below, but was impressed with its added buoyancy and glide in the water. In my “wave” there were about 300 odd swimmers so there was the inevitable body clashes and kicks to the head. Once we were a few minutes in, things settled down and I got into my usual rhythmic stroke and tried to enjoy the experience. I also remembered my training drills to look up every twenty strokes or so to ensure that I was still on course. I don’t think I strayed too far away, it is hard to tell. One difficulty I had was knowing how far left I had to go, which made it had for me decide when to switch to a higher gear.

I finally made it to the penultimate buoy which required a left turn towards the shore. Not long to go. I start to increase my stroke and kick rate, but I began to fatigue – damn that lactic acid! At the final buoy I looked up and about hundred metres away I saw swimmers standing up and running onto the shore. Must be close now.

Finished! Time to suck in some O2. Me closest to the camera.

As my fingertips start to scrape the sand on the ocean floor, I realise that it’s probably time to stand up and sprint to the finishing line. The only problem is that the finish line is about 150m away. As I emerge from the ocean, my head is spinning, my mouth gaping trying to suck the precious oxygen in, water streaming down my face. Legs are jelly as I try to run from the water onto the shore. Try to imagine yourself in COD4: Modern Warfare when you are shot a few times and your vision goes blurry. That’s what it felt like and the finish line was my cover.

As I reached terra firma, I sprinted to the finish line, overtaking a couple of people. Thank goodness for my beep tests and sprint sessions – they definitely helped me there. At the finish line I am spent and there a few people lying around on the sand exhausted. A friendly official helps me unzip my wetsuit. It was then that I realised I had done it!

I then met up with my beautiful family and held my daughter, Ava, in that celebratory pose you see professional athletes do all the time with their kids.

The Klass Family

Mel, Ava, I dedicate this race to you.

Helen Lovejoy approves of the Internet filter

I never thought my country would resort to this. Under the guise of “won’t someone think of the children” the Australian Government, led by Communications Minister Stephen Conroy, have green-lighted the use of Internet filters:

The Federal Government will introduce compulsory internet filtering to block overseas sites which contain criminal content, including child sex abuse and sexual violence.

Communications Minister Stephen Conroy announced the changes today following a controversial trial* to filter the internet which was conducted earlier this year.

Senator Conroy says some internet content is simply not suitable in a civilised society.

Read that last sentence again. That should make one shudder. Individuals decide what is decent and right about a civil society, not an authoritative government.

For the record I am completely against child pornography. These filters will be easily circumvented by paedophiles and scum who get off looking at such stuff. We should be investing in better law enforcement and linking with international police agencies to catch these guys and throw them in jail. Having an Internet filter with rules set on the whim of a government bureaucrat simple impedes our freedom without making a substantial difference to stopping child pornography.

Let’s hope the Opposition, Greens and Independants put a stop to it in the senate.

*Results of the trial can be viewed here

Much of our political discourse focuses on the left/right divide in a simple one dimensional domain. If you’re not left, you’re right. If you’re not right, you’re left. There is a third way: Libertarian. As a way to describe where libertarianism fit I have created this two-dimensional chart to help explain:

The vertical axis describes the economy; on the horizontal, the civil society.

Free markets or “laissez faire” capitalism allows business and individuals to freely trade and undertake voluntary exchanges for good and services. State control occurs when the government or central authority is the primary decision maker on what good and services are traded amongst its people.

On the civil society side, puritanism is the support of a “morally correct” way of living and generally has it’s roots in religious fundamentalism. On the other side, we have civil freedom where an individual is free to choose how they live their life without interference from other groups.

It is not surprising then, that libertarianism, lovers of liberty, are in the top right quadrant.

UPDATE: I am not sure what to call the ??? quadrant  – but I would sure hate to live in that world.

Have a look at the opening film of Copenhagen Climate Summit:

All the elements for a good old fashioned scare mongerin’:

• Poverty. Check.
• Scared Children. Check.
• Polar bears threatened. Check.
• Floods. Check.
• Drought. Check.
• Earthquake. Check.
• Storms. Check.
• Tornadoes. Check.
• “Expert” Testimony*. Check.

These people have no shame.

* Includes the renowned scientists, Archbishop Desmond Tutu and UN Chief Ban Ki Moon.

I am participating in the 2010 Pier to Pub at Lorne on January 9, 2010. It is a 1.2 km open water course. I heard that the rule of thumb is that for every 1km of open water swimming is the equivalent of 2kms in the swimming pool. Thus my target is 2.4km in a swimming pool (48 laps of a 50m Olympic sized pool). My progress via Google spreadsheets (which is automatically updated) is below: