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The Lighthouse is the weekly email newsletter of the Independent Institute.
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Volume 10, Issue 39: September 29, 2008

  1. Financial Bailouts Repudiate American Principles, Argue Eland and Vargas Llosa
  2. Fuel Markets Thrive on Price Flexibility
  3. Ludwig von Mises, Champion of Freedom
  4. This Week in The Beacon

1) Financial Bailouts Repudiate American Principles, Argue Eland and Vargas Llosa

Earlier today the U.S. House of Representatives narrowly defeated a historic bailout for much of the U.S. financial services industry. Nevertheless, recent federal interventions in the financial sector have already made it harder for governments in the developing world to resist nationalizing various industries, according to Alvaro Vargas Llosa, director of the Independent Institute’s Center on Global Prosperity.

“From now on, any petty tyrant anywhere in the world who takes over an industry will shut his critics up by saying that an American administration led by the party of free enterprise has done a de facto nationalization of a good chunk of U.S. capitalism,” writes Vargas Llosa in his latest syndicated column. Opposing nationalizations by citing the example of the United States—as Vargas Llosa and others did in a massive protest in the streets of Peru more than two decades ago—will become less and less effective.

Nationalizations of private enterprise repudiate American principles, but they are not completely outside the realm of the American experience. In his latest op-ed, Independent Institute Senior Fellow Ivan Eland puts the bailout of AIG, Freddie Mac, Fannie Mae, and Bear Stearns in historical perspective. Presidents Woodrow Wilson, Franklin Delano Roosevelt, and Harry Truman nationalized various industries during the wars of their era. (In the case of Truman, the Supreme Court ruled that he lacked the authority to nationalize steel mills during peacetime.) In contrast, the Bush administration has avoided using the pretext of war to justify nationalizations.

“Fairly unique in U.S. history, the Bush administration has nationalized companies—insurance and mortgage guarantors—that have nothing to do with the war the country is fighting,” writes Eland. “Although President Bush likes to liken himself to Ronald Regan, his presidency most closely compares with prior Democratic chief executives during wartime.... But what would we expect from a Republican Party that—all of its grandiose ‘small government’ rhetoric aside—was originally created as a big government party and, in all of its history, has advocated smaller government only during the Warren Harding and Calvin Coolidge administrations?”

“Wall Street Socialism,” by Alvaro Vargas Llosa (9/24/08) Spanish Translation

“Republicans on the Left and Democrats on the Right,” by Ivan Eland (9/29/08)

Purchase Lessons from the Poor: The Triumph of the Entrepreneurial Spirit, edited by Alvaro Vargas Llosa.

Purchase The Empire Has No Clothes: U.S. Foreign Policy Exposed (Updated Edition), by Ivan Eland.

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2) Fuel Markets Thrive on Price Flexibility

When crude oil prices surged last spring, Independent Institute Research Fellow Dominick T. Armentano—virtually alone among the pundits—wrote an op-ed predicting the coming collapse of oil prices. Of the hundreds of op-eds he has written over the years, few sparked the amount of controversy that that one had.

“Letters came from here in the U.S. and abroad, from businessmen, teachers, financial analysts, and even from local legislators, instructing me that I was either an idiot, a shill for the oil industry, or likely both,” Armentano writes in a new piece. “I was told on the best authority that oil prices were going straight to $200 per barrel, and then even higher, and that any talk of lower prices was, well, idiotic.”

Armentano’s prediction, he argues, was based not on wishful thinking, but on 150 years of oil-price data showing that rapid increases in oil prices were almost always followed by dramatic price reductions. (Perhaps the sole exception occurred from 1933 to 1941, when government-imposed tariffs, import quotas, and rationing sustained a price surge.)

Whereas Armentano writes on purely empirical aspects of fuel price changes, Independent Institute Adjunct Fellow Art Carden writes on the ethical aspects of price changes. When gasoline prices rise in Seattle immediately after a hurricane that’s heading toward Houston or New Orleans, this not because sellers are trying to stick it to helpless consumers, but because sellers anticipate reduced supplies in the future. Their price increases thus serve an important function: they prompt consumers to reduce consumption, and they prompt other profit-seeking suppliers to provide fuel to the marketplace. Consumers should want that to happen. “The price rises, but at least everyone who wants gas can get it,” writes Carden. “When the government steps in, ostensibly to ‘help’ people by outlawing price-gouging, they create shortages. With friends like these, disaster victims do not need enemies.”

“Falling Oil Prices: Told You So,” by Dominick T. Armentano (9/11/08)

“Why Did Gas Prices Increase So Quickly,” by Art Carden (9/15/08) Spanish Translation

Antitrust and Monopoly: Anatomy of a Policy Failure, by Dominick T. Armentano

More by Dominick T. Armentano

More by Art Carden

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3) Ludwig von Mises, Champion of Freedom

Today, September 29, 2008, marks the 127th anniversary of the birth of Ludwig von Mises (1881–1973), the Austrian economist and social philosopher known best for his path-breaking critiques of socialism, central banking, and methodological malpractice in the social sciences. Although less well known than his former colleague and Nobel laureate F. A. Hayek, Mises put forth a systematic and rigorous defense of the free society that places him among humanity’s greatest benefactors.

The main reason for Mises’s relative obscurity was his intransigence in matters both substantive and methodological. (For Mises, method and content in the social sciences were logically inseparable.) Another reason why his life and work remain little known and poorly understood owes more to historical contingency: after Mises fled central Europe for the United States in the early years of World War II, his personal papers fell into the hands of the Nazis and later the Soviets, where they remained unknown to the West until the 1990s. Fortunately, Jörg Guido Hülsmann, one of a growing number of scholars following in his footsteps, has put Mises’s papers to good use for his landmark intellectual biography, Mises: The Last Knight of Liberalism.

Richard Ebeling, who studied the Mises papers in Moscow at the end of the Cold War, offers numerous insights about Hülsmann’s impressive book—and about the work of Mises himself—in “The Life and Works of Ludwig von Mises,” the cover article of the summer 2008 issue of The Independent Review. “A monumental effort has clearly gone into this study,” writes Ebeling. “The author’s fluency in all of the relevant languages has assured that practically everything that occurred in Mises’s life has been incorporated into the narrative.”

Not only does Hülsmann’s biography shed light on Mises the thinker, but it also provides previously unknown details about Mises the activist. Mises helped return his country to the gold standard after the Great Austrian Inflation of the early 1920s. In addition, by debunking the myths of price controls he helped pave the way for the economic renaissance of post-war West Germany. Hülsmann offers numerous other examples. If Mises: The Last Knight of Liberalism garners the wide readership it deserves, then perhaps Mises’s ideas may also help eradicate the scourges of inflation, recession/depression, and economic authoritarianism the world over.

“The Life and Works of Ludwig von Mises,” by Richard M. Ebeling (The Independent Review, Summer 2008)

Purchase Mises: The Last Knight of Liberalism, by Jörg Guido Hülsmann.

Also see:

“Keynes versus Mises on Gold as Money,” by Robert Higgs (The Beacon, 4/11/08)

Oakeshott and Mises on Understanding Human Action,” by Gene Callahan (The Independent Review, Fall 2005)

“Has John Roemer Resurrected Market Socialism?” by Michael Wohlgemuth (The Independent Review, Fall 1997)

“Ludwig von Mises’ Legacy for Feminists,” by Wendy McElroy (The Freeman, 9/97)

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4) This Week in The Beacon

This week in The Beacon—the weblog of the Independent Institute—our bloggers weigh in on the length of the Great Depression, the defeat of the bailout bill, the McCain-Obama debate, the Federal Emergency Management Agency, federal protection for Maryland’s blue crab industry, anti–New Deal newsreels, diversity in academia, and credit markets and fear mongering.

As always, The Beacon is open for your comments.

El Independent—the Independent Institute’s Spanish-language website and blog—surpassed one million cumulative visitors earlier this month. Since the blog’s launch in the fall of 2005 by the Institute’s Center on Global Prosperity, Research Analyst and blog moderator Gabriel Gasave has worked to provide more than 10,000 posts on market- and enterprise-based ideas to Spanish-speaking communities internationally.

“It’s an honor to manage a non-commercial, Spanish-language blog that has reached so many people,” Gasave said. “While El Independent is dedicated to promoting the ideas of individual liberty around the world, our focus has been on issues that affect the Latin American community, particularly with regard to immigration, trade, entrepreneurship, and U.S. foreign policy. “

Contributors to El Independent include Gabriel Gasave, Alvaro Vargas Llosa, Hannah Fischer, Alberto Benegas Lynch, Carlos Alberto Montaner, Carlos Ball, and Martín Simonetta.

Visit El Independent and The Beacon today!

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