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Archive for October, 2013


George Reisman: Are Objectivist Economists Consistent with Rand?

It is my contention that classical economics is not completely consistent with Ayn Rand’s Objectivist philosophy and even economists who are Objectivists have failed to provide an economic theory that is consistent with her ideas.  For instance, George Reisman is one of the well known economists associated with Objectivism and Professor Emeritus of Economics at Pepperdine University.  In his book Capitalism on page 40 he states:

Patents … derive their market value from the fact that they make it possible for the intellectual creators of new and additional wealth to benefit from their contributions by temporarily limiting the increase in wealth that their intellectual contributions bring about.

Now how does Dr. Reisman square his ideas with Rand on this subject?  Dr. Reisman later states that patents increase the supply of goods, so he appears to be somewhat inconsistent.  But on page 449 he states:

Intangible assets (patents) no more constitute capital than they constitute wealth.

Dr. Reisman does define wealth in Chapter 2 as material goods made by man.  So it is consistent with his definition, but how does he square this with Rand who states in Galt’s speech:

He cannot obtain his food without knowledge of food and of the way to obtain it. He cannot dig a ditch––or build a cyclotron––without a knowledge of his aim and the means to achieve it. To remain alive, he must think.”  Rand 1992, p. 1012.

An example might be useful.  Joe is a builder and knows how to make concrete but is not presently making concrete.  Is he wealthier than Jim who is a builder, in essentially the same position as Joe, but Jim does not know how to make (or get) concrete?  Clearly Joe is wealthier.  I think Reisman’s definition of wealth is flawed.

I also think it is inconsistent with Ayn Rand, who in Capitalism the Unknown Ideal, states:

Patents and copyrights are the legal implementation of the base of all property rights: a man’s right to the product of his mind.[1]

Is the value of a building worth more in a country with property rights or one without property rights?  In the property rights country, the owner can collateralize his property, he can obtain income from his property without having to hire thugs to enforce his rights, he can justify investing in improvements in this building.  In both cases there is the same material good, but the value is totally different.  Property rights are wealth, their contribution to wealth is secondary to the underlying asset, i.e., the building or the invention.

My main problem with classical economics or Austrian economics is they have not built a system around the fact that man’s main tool of survival is his mind.  That is the source of his wealth and the only source of real per capita increases in income/wealth.


[1] Rand, Ayn, Capitalism: The Unknown Ideal, Signet, New York, 1967, p. 130.

 
Innovation Act of 2013

Virginia republican Bob Goodlatte has introduced the Innovation Act of 2013 that is touted as dealing with the problem of Patent Mythical Creatures.  Goodlatte was a big supporter of the America Invents (not) Act, which was suppose to solve all the problems in patent law and was just passed in 2011.  The Innovation Act of 2013 has six main parts and is supported (written?) by the Electronic Frontier Foundation, a group dedicated to eliminating intellectual property rights.  The Bill would require special rules for Pleadings and Fee Shifting in patent cases.  If these are good ideas, then why should they only apply to patent cases?  This Bill is not law, it is protection racket for large corporations, the same corporations that shoved the America Invents Act down our throat two years ago.  They said the AIA would be the key to reviving America’s technology industry, but the AIA has failed to deliver on its promise.  Now they want us to believe that giving them carte blanche to infringe other people’s patents will result in a surge of new technologies.  If they were serious about stimulating the development of new technologies and our economy they would start by repealing SOX and Dodd Frank; repealing the AIA; reinstating the CAFC’s objective rule of non-obviousness; repealing publication of patent applications; and require that patent applications pendency time be reduced to less than 1 year.

 

This bill will do nothing to support inventors, it is just a big company protection act.

 

 
Pendulum of Justice Reviewed By Steve Moore of Bookpleasures.com

Steve Moore ex-scientist and author six sci-fi thrillers reviewed Pendulum of Justice  for Book Pleasure.com.  Here is part of what he had to say:

Like all good thrillers, this one leaves you breathless but also makes you think, “Could this really happen?” After you remember things that go on in the real world, your answer will probably be a resounding “Yes!” And that’s the scary part. As I was reading, my mind kept going back to The Fugitive—the movie, not the TV series. There Harrison’s Ford character probably generates more sympathy than Hank, but the latter protagonist is perhaps more realistic. But for all lovers of a good thriller revolving around a nefarious conspiracy, this book is required reading.

For the full review click here.  SPOILER ALERT – but be aware that the review gives away part of the plot.

 
What is economic growth?

What is economic growth?  We all think we know the answer to this question.  It’s when GDP (Gross Domestic Product) is growing or positive, would be a typical answer.  That is an abstract answer for most of us.  We tend to focus more on the likely results of a growing economy, such as there are more high paying, high quality jobs; you are more likely to receive a raise above the inflation rate; you are more likely to have more money in your bank account; your access to education, health care, quality of food, etc. generally increase.  But if population growth is 5% and GDP growth is only 2% then none of these good things happen.  What we are interested in is real per capita increases in wealth.

              But what is wealth?  Is it the number of digits in your bank account, how many dollars you have in your pocket, how many dollars your 401K is worth?  The people in Venezuela have seen a huge increase in the number of digits in their bank accounts, and the number of dollars (Bolivars) in their pockets have increased, however they are getting poorer.  So did the people in the Weirmar Republic in the early 1920s, many of whom were billionaires (in Marks).  Wealth cannot be confused with the amount of currency (Dollars, Bolivars, Marks) one has.

Using currencies to denote wealth often causes confusion.  Let’s look at some examples separate from currency.  Image a farmer, we’ll call him Tony.  Tony has two cows, a dirt house with a thatch roof and no running water or electricity.  A year later Tony has ten cows and running water.  Clearly Tony is now wealthier than he was a year ago.  In fact, the quantity of livestock one owns has been a traditional indicator of wealth in many societies.  Wealth means having more of the things necessary to sustain one’s life.  But people in the US and the West are not like Tony, most of these people have more than they could possible need to sustain their life –right?  Actually, no.  A rational person, let’s call him Randy, does not just worry about whether they have enough food for today.  Randy’s a fisherman and just because he catches enough fish to feed his family today, does not mean he should stop fishing.  What if the fish are not biting tomorrow?  What if there is a storm tomorrow and he cannot fish?  What if his boat needs repairs and he cannot fish for a week?  Because Randy is rational he keeps fishing even after he has caught enough fish to feed his family that day, if there are fish to be caught and the day is not over.

But the average American, call him Sam, is not like Tony or Randy.  Sam has so much to eat he is overweight.  He is wealthy beyond the wildest dreams of Tony or Randy.  He lives in a nice house, has running water, electricity, three televisions, five cell phones, why should Sam care about being wealthier?  Well what if Sam gets sick and can’t work, what if he loses his job, what if his car breaks down, what if his child gets accepted to Harvard?  Only the uber wealthy have enough wealth to meet all their needs for the rest of their lives.  When you consider that a prolonged hospital stay can cost over million dollars, it would require a net worth in today’s economy of around ten million dollars or more.  All except the uber wealthy have a rational desire for economic growth (i.e., increasing wealth) and even the uber wealthy benefit from the new technologies and opportunities provided by economic growth.

 
Praise for Pendulum of Justice

Hines and Bigham’s Literary Trysta blog devoted to book reviews and author interviews by a couple of authors just reviewed Pendulum of Justice.  Here is what they had to say

WOW! I feel like I just watched a movie in my head

Pendulum of Justice has fourteen five out of five star reviews.  Thank you for your support.

 

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