The underlying assumption is that government (correctly understood) obtains its authority from the consent of those living under that government.  In other words, the only legitimate governmental powers are those that have been granted to it by the people.  Now, that seems simple enough.  I think most Americans could agree with that statement.

The next step is to begin peeling back the layers of that assumption to see what it implies.  Imagine that I told you that I was going to rob my neighbor’s house.  You would obviously object that I don’t have the right/authority to do so.  Again, this is something we can all agree with.  But what if I told you that I was going to rob my neighbor’s house so that I could give his clothes to the homeless man down the street?  I may have good intentions, but I’m sure you would still tell me (correctly) that I have no right to do so.  I have every right to give away my own clothes to help the homeless man, but robbing my neighbor is a no-no.

Now, what if I told you that since I don’t have the authority to steal my neighbor’s property to give it away, I would just give you permission to do so?  You’d look at me like I was crazy.  I obviously can’t give you permission to do something if I don’t have the authority to do it in the first place.

So we’ve established that government obtains its rightful powers only from the consent of the governed, that individuals don’t have the right to steal (even if it’s for a good reason), and that individuals don’t have the right to give others permission to steal.  The fun part comes in when we start weaving these three together.

One of government’s favorite activities is to tax the public in order to fund politically popular causes.  This is something we’ve all become very used to, and many Americans support the idea of allowing the government to collect taxes for noble causes.  But let’s take a step back and use the ideas above to answer a few questions.

Q:  What is taxation?
A:  Taxation is the coerced seizure (by government) of money belonging to the people.

Q:  Where does government (theoretically) get the authority to use force to take money from the people?
A:  From the consent of the people.

Q:  Can the people give consent for government to take money from others, even for a good cause?
A:  No, because the people themselves do not have the authority to take money from others, even for a good cause.

Q:  So what you’re saying is that since individuals don’t have the right to steal, they can’t authorize someone else (government) to steal on their behalf, and therefore the only proper means for a government to collect revenue is through voluntary donation?
A:  Exactly.

What it comes down to is that the only legitimate powers of government are those that are granted to it by the people, and which the people themselves have the right to grant. Individuals have the right to defend themselves against violence and fraud, and the government then would have every right to carry out those tasks on behalf of those freely choosing to live under that government. Beyond that, there’s no excuse for government to ever use force to compel someone to do something against his will.

• It all started here at FT.com with Martin Wolf asking readers to weigh in on whether the Austrians really understand financial troubles.

• Keynesian economist Brad DeLong then attempted to dissect what the Austrian school is all about. He failed, but those who know of him shouldn’t be surprised.

• Keynesian economist Paul Krugman didn’t want to be left out, and decided to one-up DeLong and show that he too can misunderstand the Austrian explanation of unemployment.

• Bill Anderson, at his wonderful blog Krugman-in-Wonderland, had to step in at this point to put Krugman in his place. Little did he know that Krugman wasn’t finished.

• Later in the afternoon, Krugman, seemingly wanting to increase the amount of attention he gets for being ridiculous, decided to call the Austrians “Keynesians in denial”.

• Bill Anderson (it must be tiring to keep an eye on Krugman’s nonsense), responded once again to remind everyone of how tiring it is to have to explain things to Krugman over and over again.

• Robert Wenzel of EconomicPolicyJournal.com chipped in to express surprise at Krugman’s sudden discovery of civility. Is Krugman starting to get it…even just a little bit?

• By this point, Wirkman Virkkala at LibertarianStandard.com says what we’re all thinking, “Apparently, Paul Krugman has never read the work of Ludwig von Mises and F.A. Hayek.”

• Tyler Cowen also feels the need to misinterpret the Austrian explanation of the slump before calling for a Frankenstein’s monster of AustroKeynesiaRealBusinessCyclism.

• Arnold Kling goes back to Krugman’s original post and gives a simple answer to why transitional unemployment is worse in the slump than in the boom.

• Robert Wenzel comes back in to point out that Austrian business cycle theory was largely developed BEFORE Keynes, and that this would make the claim that Austrians are “self-hating Keynesians” a bit ridiculous.

• Finally (as of 10:38pm Central), Pete Boettke of CoordinationProblem.org steps in and calmly explains that, yes, even a broken clock is right twice a day, and Keynes did recognize that economic transitions are complex. For this, the fact that Austrians recognize this point is not an “ah-ha!” moment.

My apologies to anyone I’ve left out.

There’s quite a bit of interesting supplemental information here for those whose curiosity has been piqued.

Mises Circle? Is that like Stonehenge?

For the unitiated, the Ludwig von Mises Institute holds periodic traveling mini-conferences, bringing together some of the most fascinating scholars working under the economics umbrella. This latest event featured Doug French, Robert Murphy, Thomas DiLorenzo, George Reisman, Peter Klein, and David Gordon, all speaking on the topic “Economic Downturn: Cause and Cure”. Check out the audio files here.

The common perception of the electoral process is that two or more political parties put candidates up against each other to allow the citizens to select their representation. Apparently, that’s not the way it works in Illinois. Of the 139 Illinois legislative races up for grabs in 2010, 62 of those (45%) are unopposed, giving Illinois voters no choice in their representation. Of these, 47 are unopposed Democrats and 13 are unopposed Republicans.

To break this down further, 10 of the 21 State Senate races (48%) and 52 of the 118 State Representative races (44%) will be unopposed.

This gives third parties a tremendous opportunity in 2010…that is if we decide to step up and give the voters a choice. The Libertarian Party, commonly described as fiscally conservative and socially liberal, is uniquely positioned to be able to find common ground with voters regardless of the opposition. Voters who otherwise would have stayed home out of frustration will have the opportunity to make their voices heard. Unopposed politicians will not be able to claim a mandate when they can clearly see the percentage of voters who took time out of their day to come and vote for a long-shot.

I strongly encourage third-party readers to click here to search your address and see which political districts you may be eligible for. Signature requirements for Illinois legislative races are not completely unreasonable and will give third parties a tremendous opportunity to present an alternative to the corrupt politicians who have been running Illinois for so long.

Once you know what districts you’re eligible for, click here to see whether your district is unopposed and contact your local party affiliate to let them know you want to get involved. To put it bluntly, the people of Illinois have had enough, and you can help them take their state back.

Make your choice, but be logical; for as long as you exclude, as you do, coal, iron, corn, foreign fabrics, in proportion as their price approximates to zero, what inconsistency it would be to admit the light of the sun, the price of which is already at zero during the entire day!

Note: as I was writing this, I noticed that a modern update has been posted by D. W. MacKenzie entitled “A Petition from Producers of Everything Connected with Healthcare”. Check it out and have fun.

Mark Spitznagel, founder and chief investment officer of the hedge fund Universa Investments LP explains the Misesian story of how government-induced credit expansion encourages continued investment in wasteful and unsustainable lines of production (as opposed to allowing the free market to allocate resources into the lines most highly-valued by consumers) and eventually leads to a situation where the system “collapses under its own weight”. Furthermore, Spitznagel credits Ludwig von Mises with predicting the Great Depression and states,

“How curious it is that the guy who wrote the script depicting our never ending story of government-induced credit expansion, inflation and collapse has remained so persistently forgotten. Must we sit through yet another performance of this tragic tale?”

With every passing day, it is becoming more and more apparent that the Keynesian policy recommendations so popular today, despite being discredited by the stagflation of the 1970s, are doomed to failure. Supporters of freedom cannot afford to let this opportunity pass us by. When even a statist organ like the Wall Street Journal is publishing op-eds admonishing policy makers, “Don’t encourage consumption, but rather encourage saving and the repayment of debt”, it shows that the loss of freedom is not inevitable so long as those who understand sound economic reasoning remain vigilant.

Does anyone remember back in January when Obama & Co. announced that unless we passed the American Recovery and Reinvestment Act (worth $787 billion), unemployment would rise to approximately 9%, and that the “stimulus plan” would keep unemployment below 8%? Well, we got that plan–and quite a bit of other government meddling with the economy–and things are even worse than the administration claimed they would have been had they done nothing. Harvard economist Greg Mankiw has maintained a nice graphic (below) to illustrate how things are progressing.

This really isn’t all that surprising. Despite the common belief that FDR’s New Deal got us out of the Great Depression (after only 17 years!), the reality was that businesses could see the writing on the wall, and chose not to make investments in what they felt was a hostile environment. As Robert Higgs argued in his book, Depression, War, and Cold War,

[T]he insufficiency of private investment from 1935 through 1940 reflected a pervasive uncertainty among investors about the security of their property rights in their capital and its prospective returns.  This uncertainty arose, especially, though not exclusively, from the character of the actions of the federal government and the nature of the Roosevelt administration during the so-called Second New Deal, from 1935 to 1940.

Now before you say that we’re lucky that businesses today aren’t so pessimistic, I call your attention to the chart below showing the current status of private domestic investment.

As the Washington Post reported on Friday in their article “Some Giants Sitting on Piles of Cash”, many business executives are smart enough to see that the climate being created by Washington is not one in which they should be taking risks. One of the businesses highlighted, Nucor Corp., is not investing because, as stated by their CEO Daniel DiMicco, “we don’t have a lot of confidence that the right things are being done in Washington to reinvigorate the economy…”.  On top of that, attempts by politicians to “stimulate” their favorite sectors of the economy are only ensuring that what investments are made, are made in the wrong areas.

It’s time for Obama & Co. to get out of the way and allow the economy to function as it should. The more politicians monkey with efforts to produce and to create real wealth, the longer it will take to see recovery. If this op-ed from the Wall Street Journal is any indication, things just may be beginning to look up.

Check out the calendar and be sure to order a couple for your home, your office…your car?

For those wishing to investigate further, I recommend the following articles:

“Anatomy of an Economic Ignoramus” by Thomas E. Woods, Jr.

“The Noneconomic Objections to Capitalism” by Ludwig von Mises

Also interesting is the video below, where a student gets Michael Moore to admit that America does not really have a free-market system.