Table of Contents
The fundamental facts that brought about cooperation, society, and civilization and transformed the animal man into a human being are the facts that work performed under the division of labor is more productive than isolated work and that man’s reason is capable of recognizing this truth. But for these facts men would have forever remained deadly foes of one another, irreconcilable rivals in their endeavors to secure a portion of the scarce supply of means of sustenance provided by nature. Each man would have been forced to view all other men as his enemies; his craving for the satisfaction of his own appetites would have brought him into an implacable conflict with all his neighbors. No sympathy could possibly develop under such a state of affairs.
– Ludwig von Mises
In this book, I have attempted to offer an overview of economics through the lens of human action, in particular, how humans act to meet their economic needs, which revolve around increasing the quantity and subjective quality of their time on Earth. Reason allows humans to recognize and appraise the benefits that can accrue to them from actions. Reason lets them orient their lives toward those actions that help them achieve their subjective ends, and away from those that do not. Actions, traits, and patterns of behavior conducive to economic progress will proliferate over time, as they confer an advantage on those who adopt them. Social systems of organization that allow strangers to interact peacefully, productively, and voluntarily will allow their members to increase their well-being significantly by engaging in larger and more sophisticated division of labor. Civilization can be understood as the extended social order that emerges from human utilization of reason, lowering time preference, and cooperating in the pursuit of improving life over time.
Civilization has many definitions. They will differ between one civilization and the other, and from one period of time to another, yet the essential underlying reality to all conceptions of civilization is an improvement of material conditions. The improvement in material conditions itself may not be the most significant part of civilization to participants of civilization, but it is what makes all other parts possible by providing human society with high productivity and high life expectancy. Material conditions may not be the end of civilization, but they are the inescapable means to it. More than just material profit, civilization offers us an unparalleled method for improving our chances of survival and our quality of life. The move from barbarism to civilized society was not some accident or coincidence—there were very compelling economic reasons behind it. By settling down into a relatively more peaceful social order, humans are able to protect themselves better from nature and predators. From the first human societies, all the way to the modern, highly specialized, and technologically advanced global economy, there is a long, winding road, whose every step was taken because of its economic expediency.
Human civilization is inescapably linked to the economizing methods we have found to increase the value and quality of our time on Earth. Both require lowering time preference, capital accumulation, and the division of labor, which in turn require peaceful social cooperation and human ingenuity, which applies human reason to whatever problems it confronts and attempts to achieve the best outcomes possible. These are the three processes that elevate human labor above the labor of animals, allowing us to build civilization and increasingly master our environment and surroundings.
The essential starting point of human civilization is the lowering of time preference. This shift in human thought and behavior allows us to ascend from being governed by the base instincts that govern all other animals, and instead defer to reason. Lowering time preference, and developing the capacity for delaying gratification, is the starting point for all savings, which allows for capital accumulation and an increase in productivity and living standards. Beyond just saving, lowered time preference makes people more likely to be civilized in their behavior. They become more likely to think of the consequences of their actions, and thus more conscious of the patterns of behavior that are conducive to growing the division of labor, which is another enormously powerful way of increasing human well-being. Without the division of labor, man is left alone, at the mercy of nature. With the division of labor, his productivity increases, and he can partake in societal civilization. But to do so, he first needs to be able to engage in the division of labor, the economic phenomenon that binds people together in civilization, making them interdependent and reliant upon one another. As the number of people with whom a person interacts in the division of labor grows, it becomes more imperative to develop social institutions and norms for clear and reliable ways for strangers to deal with each other: These are the civilized manners and mores. Human institutions, culture, customs, and traditions revolve around making human behavior conducive to an extended social order. The most important tenet on which social cooperation rests is the respect for property. Much of social order stems from the need to inculcate into humans the ideal that civilized society is only possible through respect for property and the adoption of civilized manners.
Society is defined by the phenomena that lead to lowering of time preference, as these are what allow society to grow, in terms of both capital accumulation and peaceful cooperation. Civilized society exists to the extent that people lower their time preference, save, engage in the division of labor peacefully, and use their reason. The more the division of labor grows, the more civilized we need to become as we deal with more people. Civilization emerges as the manifestation of lowered time preference. The lower the time preference, the more civilized we become.
To the extent that a social institution survives and thrives, it can only do so if it is conducive to human civilization. Social institutions do this by offering members civilizational benefits, meaning lower time preference, better ability to engage in the division of labor, and higher productivity. Family is an essential institution for societal development. Family allows us to discount less heavily what comes after our own life. We become concerned about a part of us that will survive us, what will happen to our children when we die lowering our time preference. By developing a concern for and strong identification with descendants, humans lengthen the period of time for which the consequences of their actions matter. Without many generations’ sacrifice of present enjoyment for the sake of future generations, the world today would have a lot less capital accumulated, and we would be far more primitive. Concern for future generations is essential to maintaining civilized society, and having children is a very powerful way to lower time preference.
Humans’ desire to give their children a better life might be the key motivation for engaging in human society and civilization. Without concern for children and the world after us, there is a reduced incentive for our actions to account for the consequences that come after our death. Among animals, only human reason can develop such a strong bond with its progeny. By being productive, engaging in the division of labor, accumulating capital, and lowering our discounting of the future, humans can have a good chance of providing their children with a better life. Much of what has made us human, and much of our human experience from as far back as records exist, revolves around providing our offspring with a better life. This is a powerful driving force of civilization, and a good tool for individual life, as it orients humans toward low-time-preference cooperative and reasonable behavior, which, when practiced over generations, accumulates into a priceless inheritance to which all humans are born: human civilization. The world’s languages, religions, traditions, technologies, ideas, physical infrastructure, and magnificent buildings—these are the legacy of ancestors who lowered their time preference, divided their labor, and cooperated to build civilization. More than just human intelligence, it is our ability to collaborate, build civilization, and accumulate capital, physical and in the form of ideas, that allows us to conquer nature, live safely, and subdue violent animals, human or otherwise.
Civilization can be understood as the most effective way to sustainably extend and improve the value of our life on Earth. It is practiced intergenerationally. It is a long-term process—as long as humanity itself—of trying to accumulate knowledge and capital and improve the quality of life. Every civilized human spends his or her life toiling in hopes of improving their life, and if they start a family, hoping to give their child a better life. Civilizational advance can be understood as equivalent to long-term sustainable economic development—not just because it results in higher living standards, but also because it can only be attained through increased peaceful interaction among a growing number of people, lower time preference, and innovation. Civilization as a process is what happens when successive generations live better lives than their predecessors. Decivilization is what happens when successive generations have worse lives than their ancestors.
The Cost of Civilization
The fruits of civilization are enticing, and virtually all who have tasted them have become lifelong addicts. Very few people have left human civilization to live alone in nature, and for those who do, the experience is usually neither long nor pleasant. But the fruits of civilization cannot be conjured at will and out of thin air. They require significant sacrifice in terms of delayed gratification and, more generally, the curbing of human instincts and bringing them under the reign of reason. With reason, man can calculate the expected payoffs of different courses of action. And he can take the most beneficial to him, even if it may involve a negative early cost. As Mises puts it:
Rational conduct means that man, in face of the fact that he cannot satisfy all his impulses, desires, and appetites, foregoes the satisfaction of those which he considers less urgent. In order not to endanger the working of social cooperation man is forced to abstain from satisfying those desires whose satisfaction would hinder the establishment of societal institutions. There is no doubt that such a renunciation is painful. However, man has made his choice. He has renounced the satisfaction of some desires incompatible with social life and has given priority to the satisfaction of those desires which can be realized only or in a more plentiful way under a system of the division of labor. He has entered upon the way toward civilization, social cooperation, and wealth.
This magnificent edifice of economic cooperation spans thousands of years and incorporates the labor of tens of billions of people, and it rests on one foundation: self-ownership. If you accept the idea of self-ownership, you may interact peacefully with others in a mutually beneficial way, and you can gain from this interaction goods you could never obtain if you were to attack them instead. The incredible achievements of modern civilization were only possible because of productive free people worldwide coordinating their work through free exchange. No violent ruler could ever muster what free-market capitalism built in the modern era. No slave owner could ever get slaves to produce the marvels produced by free people who willingly choose to work. Even after decades in which millions were murdered to secure obedience, Soviet industry produced little more than painted rust, and was reliant on trading with the capitalist world to survive for as long as it did. The problem, as discussed in Chapter 12, is not the lack of incentive or any one particular mistake; the problem is the absence of a market in the means of production. Without widespread ownership of the means of production and the development of a market in capital goods, there is no rational way of allocating capital most productively. The output of a modern society is not something that can be produced by one controlling mind—it requires billions of people worldwide to voluntarily work in a free market, using prices to calculate the costs and benefits of alternative options to decide which is the most productive and profitable. No coercive authority could replicate this. Individuals must be free to own the fruits of their labor and suffer the consequences of their mistakes.
Only then can they obtain the productivity and living standards to live in a civilized society. Without the acceptance of the concept of self-ownership, every society would devolve into violent internecine conflict, destroying productivity and life. Violence destroys, and its fruits cannot compare to the fruits of productive cooperation under the division of labor.
To partake in civilization, humans must abstain from many courses of action that are instinctively desired. The most fundamental requirement for civilization is respect for property rights. For people to willingly cooperate in an extended social order, they need to accept that other people have ownership over their own body and property. Without a widespread acceptance of the illegitimacy of initiating aggression against strangers, there is little point in partaking in civilized society. There is no use planting the tree of civilized behavior if its fruits are constantly up for grabs. The prohibition of murder, assault, and theft forms the basis of all human societies and is a main tenet of religious and political institutions.
More broadly, the customs, traditions, and moral norms that permeate civilized society can best be understood as the patterns of behavior contributing to enjoying the advantages of economic trade and civilized living in population centers. Honesty, conscientiousness, and trustworthiness make it more likely for strangers to engage in business with one another to the benefit of all involved. Sexual restraint allows for the formation of families and for their sustainability, leading to a decline in time preference and the development of civilization. Immorality, on the other hand, expressed through disregard for the future, violations of the property and body of others, deceptiveness, untrustworthiness, a lack of conscientiousness, and lack of sexual restraint, makes conflict more likely, and stable long-term civilized institutions like marriages, cities, and companies more difficult.
Civilized behavior revolves around long-term satisfaction and forsaking the immediate satisfaction we would get from following our instincts. Acting impulsively on animalistic instincts compromises our long-term goals, while reasonably delaying gratification helps us achieve them. The uncivilized barbarian, the undisciplined child inside each man, would like to immediately, violently assault anyone who bothers him, to take whatever he fancies regardless of who owns it, to lie to get his way, to force sexual intimacy on anyone he fancies. And many uncivilized and undisciplined people do indeed engage in this behavior. It takes years of education, rearing, and refinement for humans to learn to subdue these base instincts and instead defer to reason in anticipation of future gain. This is not easy, but civilization can only exist if human reason leads us to subdue our instincts and cooperate.
The Case for Civilization
Should humans bother to engage in civilization? Why, after all, would humans sacrifice their innate instinctive nature to fight strangers and acquire their property? Are the material comforts of economic growth worth giving up on living our humanity to its fullest, with its ups and downs? Mises offers a first answer:
Biology does not provide any standard for the appraisal of changes occurring within living beings other than whether or not these changes succeeded in adjusting the individuals to the conditions of their environment and thereby in improving their chances in the struggle for survival. It is a fact that civilization, when judged from this point of view, is to be considered a benefit and not an evil. It has enabled man to hold his own in the struggle against all other living beings, both the big beasts of prey and the even more pernicious microbes; it has multiplied man’s means of sustenance; it has made the average man taller, more agile, and more versatile and it has stretched his average length of life; it has given man the uncontested mastery of the earth; it has multiplied population figures and raised the standard of living to a level never dreamed of by the crude cave dwellers of prehistoric ages.
This is the utilitarian and consequentialist argument for civilization summarized. Civilization gives us more material comforts and allows us to live longer. That might seem like a compelling enough case for most, but it is not necessarily a definitive answer. It could be argued that a shorter and more brutal life, allowing us to express our animalistic instincts to the full, is preferable to the instinctive prison of civilized behavior. The fact that the civilized life is likely to be longer and easier does not necessarily mean it is better than the uncivilized life. Ultimately, value is subjective, and there is no objective mathematical basis for asserting that all humans will necessarily value civilization more than savagery.
Another argument for civilization comes from the concept of natural rights. Humans are born with inalienable rights and with no right to aggress on the rights of others. Civilization is simply the order that emerges from a society in which humans use their reason to discern these natural rights and then agree to respect each other’s natural rights. This is an argument that is compelling to people who are already subscribed to civilizational institutions—in particular, religions—which inculcate in them a positive valuation of civilization. But this argument is not compelling to all, and most people, even those who are religious, are unable to consistently respect the natural rights of others, finding many justifications for initiating aggression when it suits them.
But rather than invoking utility math or religion, a case for civilization can be constructed from the methodology of economics and this book: Examining human action and deriving its implications and what that tells us about humans. The intellectual brain formulates sophisticated arguments and is mostly used for entertainment and rationalization purposes. Human reason is, to a point, governed and regulated by real-world consequences.
The vast majority of humans choose to live in civilization, even though the majority of Earth’s surface is uncivilized wilderness. Very few people decide to truly leave civilization and forsake the products of the division of labor. Retiring to a farm does not count as forsaking civilization, as long as the equipment for the farm is the product of capital accumulation. Very few populations on Earth remain uncontacted and unwilling to establish contact with outsiders, and even these few tribes will have their own isolated civilization, capital accumulation, no matter how primitive, in the form of spears and houses, and a division of labor, no matter how embryonic.
Christopher Knight, the so-called Hermit of North Pond, was one of those who abandoned society. He dropped out of his life and lived alone in the woods of Maine for more than 25 years. But even he was still dependent on civilization, as he regularly stole what he needed to survive. He did not abandon civilization, as he still needed to steal its products; he simply abandoned contributing to civilization, making him a criminal.
A majority of people likely have little understanding of the concepts of capitalism and self-ownership, and in the right context, some will find it acceptable to initiate aggression against others and violate their right to property and self-ownership. And yet capitalism and human civilization continue to survive. Their survival is not down to the intellectual understanding of the average person, but rather their self-interested reason. Beneficiaries of civilization may pay lip service to not needing others or to being fine with the initiation of aggression, but they still transact with others consensually for the vast majority of their lives. They still rely on modern technological devices only possible through a sophisticated division of labor. Even criminals and supporters of governments who claim their aggression is justified still rely for their survival on the products of the division of labor, peaceful exchange, and global capitalism. The world’s weapons are not produced by the most belligerent and least peaceful people; they are produced by low-time-preference capitalists who invest their wealth for decades in extensive capital infrastructure, innovative engineers motivated by capitalists’ salaries, and supply chains that incorporate the labor of millions worldwide. Relieved of the hypocrisy of using the fruits of civilization to fight civilization, the strongest and most belligerent uncivilized human, like the strongest most belligerent animal, stands no chance against any adult or child capable of pulling the trigger of a gun produced by capitalist civilization.
While modern intellectuals and authors may write elaborate treatises on the problems of civilization and human society, they nonetheless continue to offer their thoughts from the confines of civilized offices and classrooms in civilized societies, through books printed by a global division of labor and transmitted globally to readers through the cooperation of countless businesses and workers. Nobody is ever forced to stay in civilization; and yet, all the people who complain about it are unable to separate from it.
But perhaps the most decisive argument for civilization and property rights is also derived from analyzing human action—specifically, the act of arguing itself. The person looking for an argument for civilization is an acting human, looking to reason with another human. The mere fact of engaging in argument and seeking another opinion is a recognition of the other person’s sovereign right to their body and property. If you, dear reader, have made it to a point in your life where you have managed to pick up this book—a book written, produced, printed, and distributed by countless people worldwide in a sophisticated division of labor, using highly advanced capital goods—you are taking part in a capitalist economic order, to which you contribute and from which you benefit. The mere fact that you can indulge in the act of arguing about such topics is itself a rejection of the barbarian savagery of yielding to all our base instincts and a manifestation of rational behavior. Rather than merely acting from a basic animalistic urge to attack enemies and take what is theirs, you are looking for a rational basis for supporting civilization. You have a conception of right and wrong, and so you accept that you cannot simply impose your will on the world. You acknowledge that other people have a right to their mind and thoughts, and you are seeking arguments to discuss with them to inform how you act with them.
For one thing, no one could possibly propose anything, and no one could become convinced of any proposition by argumentative means, if a person’s right to make exclusive use of his physical body were not already presupposed. It is this recognition of each other’s mutually exclusive control over one’s own body which explains the distinctive character of propositional exchanges that, while one may disagree about what has been said, it is still possible to agree at least on the fact that there is disagreement. It is also obvious that such a property right to one’s own body must be said to be justified a priori, for anyone who tried to justify any norm whatsoever would already have to presuppose the exclusive right of control over his body as a valid norm simply in order to say, “I propose such and such.” Anyone disputing such a right would become caught up in a practical contradiction since arguing so would already imply acceptance of the very norm which he was disputing.
Indeed, when writing this book, it was very difficult to separate value-free economic analysis from making the case for free markets and individual sovereignty and non-aggression as the basis for civilized life. The economic arguments for individual freedom are practically inseparable from the case for civilization. The mere fact of engaging in writing a book already implies an acceptance of the right of others to determine their own thoughts.
A corollary to Hoppe’s argumentation ethics is that any objection to property rights and the division of labor can only be considered if expressed without resorting to any of the fruits of the division of labor and property rights. Any argument against property rights written in a book, or spoken on TV or the internet, must rely on a very elaborate civilizational structure only possible through property rights and the division of labor. Therefore, it is fair to say that all arguments against property rights and civilization are invalid if communicated in any way other than violent grunting. The violent grunting “argument” is nothing new to civilized people. Violent grunting animals have been a permanent feature of nature, pestering human civilization since
its inception, but also forcing it to adapt and evolve. These savages may inflict damage and material and human losses, but they are no match for the intelligent humans armed by self-restraint and collaboration under the civilized division of labor. Violent animals, both human and nonhuman, will likely continue to initiate aggression against civilized humans—but civilization will continue to rout them. Violent animals cannot overpower the weapons available to a member of civilization, which are produced through the cooperation of extremely large networks of highly productive workers and accumulated capital.
Finding fault with the concept of self-ownership and capitalist division of labor and civilization is not an argument. It is a glorified return to monkeys flinging their own feces at each other—merely a reversion to nonhuman animal life. The problem with being an opponent of capitalism is that you cannot do anything against capitalism that is any more complex than slinging your feces without becoming a capitalist. Any weapon more complex than your own feces requires delayed gratification and capital accumulation. Any weapon beyond what you can make with your bare hands requires participation in the global division of labor. The opponents of capitalism destroy their own ability to produce, specialize, and innovate, making themselves weaker and less impactful. Capitalist civilization continues to win because its opponents either fling their feces powerlessly at it, or engage in it to try to fight it, effectively supporting it and pushing it forward.
The Fiat Slavery Alternative to Civilization
Recorded human history contains many periods of civilizational rise and fall, but it is fair to argue that the overall trend has been the advancement of civilization. This is seen in the increase in worker productivity over time, the increase in energy consumption over the centuries, and the declining cost of energy. It is also seen in the technological advancement of the capital goods humans enjoy. And it is seen in the long-term trend of declining interest rates. Time preference is the determinant of interest rates, and as interest rates decline in the long term, as was discussed in Chapter 13, a decline in time preference has driven this process. But this civilizational process has not been a plain-sailing, linear improvement. Natural disasters, wars, and societal collapse have caused living standards to decline for long periods of time. The global market order of the Roman Empire allowed a high degree of specialization and higher productivity, but the Empire’s collapse reversed this, and the ancient world’s population splintered into smaller markets and experienced lower productivity for centuries. More recently, it can be argued that the last century has witnessed a reversal in the process of civilization and a rise in global time preference. Hoppe explains:
In fact, a tendency toward falling interest rates characterizes mankind’s suprasecular trend of development. Minimum interest rates on ‘normal safe loans’ were around 16 percent at the beginning of Greek financial history in the sixth century B.C., and fell to 6 percent during the Hellenistic period. In Rome, minimum interest rates fell from more than 8 percent during the earliest period of the Republic to 4 percent during the first century of the Empire. In thirteenth-century Europe, the lowest interest rates on “safe” loans were 8 percent. In the fourteenth century they came down to about 5 percent. In the fifteenth century they fell to 4 percent. In the seventeenth century they went down to 3 percent. And at the end of the nineteenth century minimum interest rates had further declined to less than 2.5 percent.
From 1815 onward, throughout Europe and the Western World minimum interest rates steadily declined to a historic low of well below 3 percent on the average at the turn of the century. With the onset of the democraticrepublican age, this earlier tendency came to a halt and seems to have changed direction, revealing twentieth-century Europe and the U.S. as declining civilizations. An inspection of the lowest decennial average interest rates for Britain, France, the Netherlands, Belgium, Germany, Sweden, Switzerland, and the U.S., for instance, shows that during the entire postWorld War I era interest rates in Europe were never as low as or lower than they had been during the second half of the nineteenth century. Only in the U.S., in the 1950s, did interest rates ever fall below late nineteenthcentury rates. Yet this was only a short-lived phenomenon, and even then U.S. interest rates were not lower than they had been in Britain during the second half of the nineteenth century. Instead, twentieth-century rates were significantly higher than nineteenth century rates universally, and if anything they have exhibited a rising tendency.
The First World War was a pivotal moment for humanity, as it can be viewed as the moment human civilizational progress began to stall and reverse. The mass death and destruction of the twentieth century were unprecedented on a historical scale, and it was arguably facilitated by the destruction of free-market money that was replaced with government debt—essentially a loyalty reward scheme for entities whose raison d’etre is the initiation of violence. Beyond just leading to an increase in violence, the destruction of money has been slowly rotting the global monetary market order and human civilization itself, compromising every method of economizing humans employ, as discussed in detail in the chapters of this book. The rest of this section applies the analysis of my second book, The Fiat Standard, to the economizing actions and extended market order discussed in this book.
By destroying the ability of individuals to save for the future, fiat money takes away the incentive to delay gratification, reduces the creation of capital, and undermines the basic starting point of economic development and civilization. Rather than have the security of money to brace for future uncertainty, fiat makes humans become debt slaves of their government’s banking cartels. As discussed in The Fiat Standard:
Holders of present fiat tokens, whether in cash or bank accounts, are constantly subject to having the value of these tokens diluted by lenders who can create new present tokens by issuing credit based on future receipts of fiat tokens. It therefore makes the most sense for individuals, corporations, and governments not to hold positive balances, as they will be devalued through inflation, but to borrow. Users with negative balances, i.e., those in debt, lack security and risk catastrophic loss. Financial security, in the sense of having a stable amount of liquid wealth saved for the future, is no longer available in the current system. You will either witness the dissipation of your wealth through inflation, or you will borrow and live in the insecurity of losing your collateral if you miss a few payments. Fiat has effectively destroyed savings as a financial instrument, with enormously negative consequences.
With savings compromised and with the government financially emboldened to provide for more of a person’s needs, the incentive to invest in a family is compromised, and the effects on society have been disastrous. Beyond the catastrophic impact on savings, the suspension of the gold standard violates the fundamental basis of civilized society: natural law. It blatantly breaks the contract between the state and money holders to redeem for gold their paper gold receipts and bank account balances. The government protects the banks that renege on their promises and redefines the law to allow them, and itself, to continue to engage in inflation through the issuance of credit. This contract involves every single member of the capitalist economy. They all have to use money to engage in the extended order of the market. When money is debased, everything is debased. When the government—which ostensibly markets itself as the enforcer of contracts and upholder of justice—breaks such a powerful contract, citizens will inevitably follow suit, becoming less trustworthy and more dishonest, thus undermining the basis of civilized society. When the contract of money is broken, every member of the capitalist economy concludes that the rule of law does not apply to all, and society shifts from attempting to adhere to natural law to trying to exploit it for personal gain. Fiat allows the state to finance itself more and more, which results in the monopolization of the defense and law industries, and their corruption away from meeting society’s needs toward protecting an unproductive, parasitic ruling regime from the people they claim to serve.
By allowing for loose money creation away from the free-market choice of hard money, fiat money destroys the monetary order of society, causing business cycles and destroying capital, as has been extremely common in the century of central banking. It further destroys the banking system, either through hyperinflation in extreme cases, or by turning it from an essential institution of the capitalist economy to a protected monopoly for speculative gambling. Gambling profits accrue to the government and banking cartel, and losses are borne by society at large.
Fiat money further undermines the capitalist economic system by distorting its essential driving process: economic calculation. As the value of money stops being determined on the market through supply and demand, economic calculation for entrepreneurs becomes an error-strewn process. As can be seen today, capital markets become little more than a reaction to monetary commissars’ edicts. When the bureau setting U.S. interest rates decides to lower interest rates, all assets rise in value—only to fall when interest rates rise. Economic calculation of a business’ profits and losses becomes entirely secondary, and capital allocation becomes an exercise in monetary policy tea leaf parsing instead. Entrepreneurship and innovation take a backseat to the fiat monetary casino’s overlords’ dictates.
Fiat also destroys money as a market good. We no longer have a money in the sense of a generalized medium of exchange with high salability across time and space, as was the case with gold before World War I. A hodgepodge of different assets now replaces the one monetary medium, defeating the point of money and returning the world to a system of partial barter, where different forms of money are traded for one another, and different forms of money are held for different salability considerations. The U.S. dollar is the most salable asset across space, thanks to the U.S. Federal Reserve’s monopoly over the global banking system. Other national currencies are more salable within the confines of their local central banks’ monetary plantations. Salability across time, and the ability to hold value over time, are much more complicated. Bonds, gold, real estate, art, stocks, and an endless kaleidoscope of assets compete for this worldwide, distorting their markets.
With economic calculation based on the ever-shifting quicksand of centrally planned national currencies optimized for government theft of the population, economic calculation of the benefits of trade becomes heavily distorted, and the uncertainty that arises discourages people from partaking in mutually beneficial exchange. International exchange rate oscillations can destroy a profitable business or undeservedly reward unprofitable businesses. The global foreign exchange market processes transactions worth many multiples of the global GDP, as people must acquire foreign currencies to buy goods from abroad. Local and international trade are also compromised by fiat money. As prices rise, people are constantly forced to substitute the goods they desire with inferior substitutes, and government uses its inflation privilege to finance pseudoscientists to manufacture propaganda science that argues that replacing meat with soy, bugs, and industrial sludge is better for human health.
In The Fiat Standard, I make the case for why fiat inflation is undermining technological progress and our ability to increase our consumption and utilization of energy sources to meet our needs. Inflation at once devalues the savings and earnings of citizens, taking away from them the ability to spend on modern energy sources. It also allows their government to spend limitlessly on propaganda to try to distract citizens from their declining living standards by blaming it on a slew of ridiculous bogeymen, the most recent of which is the insane notion that carbon dioxide—an atmospheric gas essential to all living things and existing in the tiny concentration of 0.042% in the atmosphere—is ruining Earth’s weather and causing apocalyptic damage to society. The only way to fix this supposed apocalypse, conveniently and coincidentally enough, is for people to forsake the essential energy technologies that have made our modern life possible: hydrocarbons. The same energy sources whose prices are very sensitive to inflation because of their importance. Fiat also allows governments to spend incomprehensibly large amounts of resources on the insane quest to generate enough power from preindustrial energy sources to power modern industrialized society. Hundreds of trillions have been spent over the past decades, and the only thing the green energy mafia has to show for it is a continuous increase in the price and a decrease in the availability of reliable and essential energy sources.
Fiat money has also allowed for the corruption of scientific knowledge and educational institutions. Rather than continue to accumulate knowledge and advance technologically, universities have been transformed into inflation propaganda and elaborate apologia. The Fiat Standard discusses the corruption of economics, nutrition, and climate science as examples, but the rot is likely more widespread. There is perhaps nothing as symbolic of the degeneration of the modern academy, as well as the moral rot that fraudulent, coercive money imposes on society, than the fact that the most venerated and important economist of the twentieth century was a self-described “immoralist” who engaged in recreational child slave trafficking, as documented in The Bitcoin Standard. In Keynes’ own words:
We entirely repudiated a personal liability on us to obey general rules. We claimed the right to judge every individual case on its merits, and the wisdom to do so successfully. This was a very important part of our faith, violently and aggressively held, and for the outer world it was our most obvious and dangerous characteristic. We repudiated entirely customary morals, conventions and traditional wisdom. We were, that is to say, in the strict sense of the term, immoralists. The consequences of being found out had, of course, to be considered for what they were worth. But we recognized no moral obligation on us, no inner sanction, to conform or to obey. Before heaven we claimed to be our own judge in our own case.
With morality becoming a bad word and a criminal immoralist elevated to genius scholar, the moral foundation for a civilized society is unraveling. One cannot understand the drivel that passes for the mainstream economic scholarship today, which consists of little more than transparent justifications for government violations of natural rights, without reference to the immoral character of its most important idol. Not only is the institution of property rights itself constantly transgressed by the government in the form of inflation and taxation, but humans’ property in our own time is violated through the coercive banning of the prime technology for the preservation of the economic value produced by our time: money. We must constantly work harder, longer, and in increasing uncertainty about the future to make up for the theft of the fruits of our time’s labor within the capitalist market order. The breakdown of the family, along with the increase in crime in major cities, are but symptoms of the deepening malaise of a global economy that is consuming its millennia-old capital in a process of decivilization.
Money is the lifeblood of an economic system, the sine qua non of economic calculation and coordination. By taking it from the realm of consensual interaction and placing it in the hands of a violent monopoly, the entire edifice of civilization is undermined and shaken. It is easy to become despondent about the fate of human civilization, but it is too soon to lose hope in the ingenuity of humans, their technologies, or a capitalist creative process that has survived millennia and defeated many enemies.
The Triumph of Reason
History suggests that a lot of people who come across civilization cannot preserve it for long. Beneficiaries of capitalism are born into comparative affluence: They have extended periods of childhood and adolescence, in the sense of not needing to work to provide for themselves for extended periods of their lives. With the products of industrial capitalism at their disposal, families are able to provide for their children until adulthood and sometimes beyond. It becomes entirely feasible for members of capitalist societies to not perform any productive work before they are in their twenties and thirties. With such detachment from the realities of economic production, delusional anti-civilizational ideas and superstitions can easily take hold in the minds of citizens, eliminating the low-time-preference, cooperative, and capitalistic mentality required for the extended order of economic production. Can these ideas derail civilization?
Yet, the sustainability and continuation of civilization arise from the superior organizational efficiency of capitalist economic calculation, the enormous benefits of voluntary specialization, and the incessant creativity of humans. In physical war, as in all avenues of human action, the enemies of capitalism are always at a disadvantage because of their inability to organize the production and mobilization of resources in the same way capitalism can. The absence of prices and calculation also cripples their innovation, while the incentive for innovation is stymied by the limitations on profit. They cannot access a division of labor as large and productive as the largest market in the world, the world market.
You can think of the capitalist free-market economy as a very powerful machine because, in many ways, it is. All the privately owned machines and capital deployed in the process of production are acting together in one economic system: the extended order of the free-market economy. The ability to deploy billions of machines worldwide in production processes, all interrelated and interdependent, allows us to achieve much higher levels of productivity than any alternative. The extent to which humans rise above mere day-to-day survival and are able to engage in economic trade is determined by the extent to which they employ the machines of the capitalist market system in their lives. These machines carry an enormous advantage to anyone who engages in economic calculation. Productive humans who make these machines will find ways to get away from the fanatics, Luddites, and parasites who want to destroy them.
But the current enemy of capitalism is different from the Luddites of the early Industrial Revolution, the Soviet bogeyman of the twentieth century, and various other dysfunctional socialist totalitarian regimes. In contrast to explicit external enemies, the threat facing modern capitalism is internal, illicit, and seemingly inextricable. As the world economy has become increasingly globalized and integrated, it has become increasingly centralized around the U.S. dollar and the Federal Reserve System. Almost the entire world economy uses the U.S. dollar or currencies of central banks that hold the U.S. dollar in reserve. The vast majority of national banking systems use the U.S. dollar as well as the Federal Reserve’s international clearance system. This means the vast majority of participants in the global market system witness the value of their money declining in order to finance U.S. government spending and the fiat banking cartel. But as inefficient, wasteful, and downright criminal as this system is, it manages to continue because its enemies are unable to tap into an alternative market economy anywhere near as large. For all of its problems, the fiat monetary system is still superior to autarky and isolation from the world economy. Violent monopoly over the money supply allows central governments to commandeer a large portion of the gains of capitalist free markets, thus benefiting from its superior productive capacity, using its gains to tighten its control on all facets of economic life, and ultimately strangling the capitalist civilization on which it depends. Capitalism has proven adept at fighting external enemies—but how can it fare against an internal parasite that controls the heart whose beat regulates its lifeblood? To survive, capitalism needs to invent and deploy an entirely independent and alternative heart to the one infested by parasites. This is a seemingly impossible task, but human reason might just be up for it. The entire process of civilization is based on the systematic application of reason to human action, and the more monetary central planning becomes a problem for civilization, the more the market provides incentives for solutions to this problem.
Capitalist economic calculation is at the root of technological innovation. What enables a technology to succeed and gain widespread adoption is its economics—its ability to offer users a positive economic return on employing it. Capitalism is a never-ending bounty program for innovations that solve problems for people. The larger a problem becomes, the larger the costs it inflicts on society, the more powerful the signals for finding a solution, and the larger the reward for its resolution. As the problems of the world’s decrepit monetary system become more obvious, the most advanced technologies, engineers, and entrepreneurs will increasingly be drawn to tackling these problems. Capitalism weaponizes human reason in the service of innovations that benefit humanity, and it rewards it to the extent it succeeds. If fiat allows governments to capture the beating heart of civilization, capitalism is the brain fighting back by incentivizing reason to find a solution to this problem.
Technology is the sum of tools humanity has devised to confront the problems facing civilization. The human mind remains the last bastion of freedom, and the most advanced technology free humans can produce is software, if measured in terms of its productivity. Information in the form of letters and numbers, when conveyed in the correct way, can cause many machines worldwide to perform large amounts of work and thus create economic value for their owners. Machines perform the work of hundreds of men, but software moves thousands and millions of machines. All over the world, more and more economic production is coming to depend on software. Productivity in industry and software continues to grow, but it is hampered by the absence of a free monetary market to allow for accurate economic calculation to inform the decisions of capital owners worldwide. At a time when global information can move instantly, money continues to operate through a massively inefficient system manipulated to benefit its operators. As software is invading most of the industries of the world, and serving as a control for the world’s industrial machinery, it appears inevitable it will invade and conquer the monetary market, particularly with the current violent and destructive incumbent fiat technology.
The software alternative to fiat central banking is bitcoin, a decentralized peer-to-peer payment network that uses its own native token, whose supply is capped. The significance of bitcoin lies in two main properties. First, bitcoin offers the only working alternative to central banking for the transfer of money across international borders. Second, bitcoin’s supply is strictly capped, meaning there is no way to devalue the existing supply to the benefit of any entity. By offering everyone in the world the ability to save in a form of money that cannot be debased, bitcoin can stop the constant process of rising time preference. By giving everyone the ability to send and receive money internationally without resorting to their monopoly central bank, bitcoin allows everyone to partake in the global division of labor. It is precisely the central planning of these two markets—money and international transfers—that lies at the heart of the problem of global capitalism. The historical importance of bitcoin is that it is a technological solution to the problem of central banking, offering a technologically and infinitely more compelling alternative that obsoletes central banking.
In the same way, human reason moved us from using slaves to horses to cars to sophisticated supersonic jets—and moved us from using human messengers to carrier pigeons to paper mail to email to video calls—it is now moving us away from relying on monopoly central banks to reliable open-source software. Humans have reason, and it is reason that has taken us out of the caves and allowed us to conquer our environment, tame the wildest beasts, and live longer and better. The current parasitic governmental banking monopoly is just another in the long list of challenges human reason has faced, and bitcoin may prove to be the device our reason concocts for conquering it. With transparent rules available for anyone in the world to audit, and with a system built entirely on verification rather than authority, bitcoin gives the entire world a monetary market commodity that works without needing coercive political authority. It allows us to make peaceful non-aggression the basis of human economic interaction, bringing the productivity of the market system to the monetary realm, reversing the violent high time preference statist fiat detour of the last century. If it can unleash human civilization from the clasp of the state’s fiat claws, bitcoin will be remembered as our age’s most significant civilizational achievement.