State of Innovation

Patents and Innovation Economics

The Flawed Private Property Argument Against Immigration

One of the arguments being bandied about for limiting or stopping immigration is based the idea that all the people in the U.S. have some sort of collective property rights in the land.  As property owners we can decide who we allow on our land and it is the job of government to protect our property rights.

This argument shows a flawed understanding of property rights.  You obtain property rights in something because you made it productive or created it.  Of course you can also trade your rights in something you created for currency and then contract to buy something else, thus obtaining property rights in the item.  Your rights in say land are limited by the activity you undertook to obtain those rights.  For instance, if you farmed the land and say put a house on it, then you have a right to continue those activities and ones reasonably related to them.  However, this does mean that your property rights extend to the center of the earth or up infinitely into space.  It also does not mean you can put a huge pigsty on the edge your land next to your neighbor’s house.  Note this was/is true under common law, no need for regulatory law or home owners’ associations.

Similarly your property rights in land cannot be used to make someone a prisoner, that would be a contradiction of the whole idea of rights.  Natural rights are based on the foundation of self-ownership or self-sovereignty.

Is man a sovereign individual who owns his person, his mind, his life and its products – or is he the property of the tribe …[1]

Capitalism: The Unknown Ideal, What is Capitalism, p 10.

Locke also based natural rights on self-ownership or self-sovereignty.  These ideas are not axioms but derived from observation and logic.[2]  Since you own yourself, you own those things you create, however the limits of your property rights are determined by what you created (made productive) and some practical legal implications.  Similarly, self-ownership means that you can travel freely.  If that was not the case then someone could control where you went, which means you do not own yourself.  In other words that means you a prisoner or a slave.  The logical opposite of the freedom to travel, is imprisonment. 

StatueofLibertyAre these rights in conflict?  No.  Property rights cannot be used to imprison someone or to keep two free people who want to meet or trade from doing so.  There have been cases in which a person sold a land locked plot without an easement.  The courts have uniformly ruled that there was an implied easement, because otherwise land would be an island or a prison and the sale of the land would have to be considered fraudulent.  The sale of the land implies being able to use and access the land.  This idea was incorporated into Homestead Act.  Public roads or thoroughfares were built into the structure of the Homestead Act.  This concept of freedom to travel is also incorporated into the idea of navigable rivers and the freedom of the seas, which the U.S. and British navies have fought to preserve for over 300 years.

Public thoroughfares are controlled by the government.  The government does not own these public thoroughfares, but it does police them.  The only right that people relinquish to a proper government is the right to use retaliatory force.  This is true in both Rand and Locke.  This means that a proper government cannot initiate force against anyone.  Public thoroughfares are by definition public and can be used by anyone and a proper government cannot stop, question, ask for papers, etc., of anyone unless they are suspected of crime and crossing a border is not crime under a proper government.  To undertake any of these actions is to initiate force.  This principle is part of the US constitution in the fourth and first amendments.

Many people want to scream, “but what about the gulch in Atlas Shrugged”.  First of all, the gulch is private property and that private property did not limit anyone’s ability to travel freely.  Second, the people in the gulch were at war.  Remember that Ragnar Danneskjöld had openly attacked the ships of the nations of the world.  Every person in the gulch took the oath which put them at war with the governments of the world, just as surely as signing the Declaration of Independence.  Ragnar and the people in the gulch did not initiate force against anyone.  For anyone to compare the government of the United States to the gulch is repulsive.  The U.S. government initiates force against its people all the time, from the NSA spying on everyone, to stealing the work of innocent people, to profiting off of civil asset forfeiture, to its theft of peoples’ property rights in land through wetlands and other legislation.  It is also absurd to suggest that the U.S. is at war with every other country in the world.  No armies are crossing our border.  The terrorists are not mounting a war against.  The biggest damage inflicted by all the terrorist attacks on the U.S. by foreigners is their ability to get us to ignore the values that created the U.S.  This damage is infinitely worse than all the damage they have caused including 9-11.

There is a principled solution to the immigration problem and that involves eliminating all welfare (including Social Security and Medicare overtime), ending the war on drugs, and eliminating the income tax system.  The standard retort is that is not practical.  This sort of argument philosophically is the argument of a pragmatist.  The goal of a pragmatist argument is to suggest principles are impractical.  As Hank Rearden told the Wet Nurse “try pouting a ton of steel without rigid principles.”  Do we ever say the principles of physics get in the way of building an MRI machine or a computer or an airplane?  The only person who would make such a statement is a charlatan or a lunatic, but somehow this is considered a reasonable position in the realm of politics and ethics.

Despite this the pragmatist whines that you could never get any of these solutions passed in today’s political environment, so we have to abandon our principles they proclaim.  Really?  Given the scandals surrounding the IRS and the clear case that it is a political agency designed to punish political enemies, it should be easy to make a principled, politically popular stand against the income tax.  This is really a no brainer and the fact that it is not one of the main topics of the republican primaries shows that most people in the GOP have no interest in freedom/capitalism.  There is already a wide spread national movement to legalize marijuana.  It is a political no brainer to tap into this and make it part of a program to eliminate the war or drugs including eliminating the FDA, which has also become politically unpopular.  That just leaves the need to eliminate welfare.  No it cannot be done overnight, but with Obama corporate welfare, the anti-federal reserve movement, the anti-bank bailout movement, it should be easy to make a politically popular case that all welfare is counter-productive or worse.  For instance, it is easy to show that if welfare were really about helping people then we would have eliminated poverty (financial) a long time ago.  Tying these ideas in with the fact that welfare provides a perverse incentive for foreigners to come here and not work, should be an easy political position to sell.

The fact is that the anti-immigration position is a political loser in any national election.  The people who support this position are in a minority as Ed Hudgins convincingly explains in his book The Republican Party’s Civil War.  Even the pragmatic argument against immigration and free travel fails by its own perverted standards.

The pragmatist argument is not really about being practical it is used to hide a collectivist or xenophobic agenda.  Anyone who continues to push a border wall, or a national ID card, or any other limits on the immigration and travel of people across the US border can no longer pretend they are freedom.



[1] Rand in other places states that Rights are based on the right to life.  She necessarily had to mean the right your own life, to be consistent with inalienable rights.  It is clear that she was not opposed to the idea of self-ownership and did not see this inconsistent with the idea of natural rights.  It is also easier to understand natural rights from a self-ownership point of view than a right to (your own) life.

[2] It is beyond the scope of this paper to explain the derivation of natural rights by Locke and Rand.

September 20, 2015 Posted by | Blog | 6 Comments

Response to The Economist on Patents

Marshall Phelps wrote an excellent response in Forbes to an anti-patent editorial by The Economist.  The article is entitled Do Patents Really Promote Innovation? A Response To The Economist.  He provides overwhelming evidence that patents are the driver of new technologies.  I and others have shown that the reason the industrial revolution occurred when and where it did was because of the introduction of the first practical patent systems, i.e., property rights for inventions.  The article also points out that the most inventive countries are those with the strongest patent systems and these countries also have the greatest technology dispersion.  The article also points out that the patent system encourages the dissemination of information about technologies, which has been shown empirically and logically.  It is time the anti-patent crowd admit that their position is a matter of faith, not econgrowth.smalllogic an evidence.

I have one beef with the article when it says you cannot prove that patents lead to more inventions and you cannot prove a free market (with patents) leads to economic growth.  Both of these have been shown empirically and the causal connection is clear.  Property rights ensure that the creator benefits from their creation.  People have to work to live and when the product of their work is stolen from them, they cannot be as productive.  For more see my book Source of Economic Growth and my talk at Atlas Summit 2015.

September 18, 2015 Posted by | -Economics, Innovation, News, Patents | , , | Leave a comment

Capital in Disequilibrium: The Austrians’ Answer to New Growth Theory

This book, Capital in Disequilibrium: The Role of Capital in a Changing World by Peter Lewen, is supposed to be Austrian Economics’ answer to “new growth theory”, which recognizes that new human knowledge is the most important component to economic growth.  As opposed to the “old” ideas on growth which claimed economic growth was the result of increases in land, labor, or capital.  Old school growth theories focus primarily on increases in capital.  Perhaps the two biggest figures in new growth theory are Robert Solow and Paul Romer.  Robert Solow won the Nobel Prize in economics for his econometric study showing that technological change was the key driver in the US economy.  Sadly he then said technological change was not part of the study of economics, it was like background radiation and beyond our control.  Paul Romer takes over from Solow by making technological change part of the study and policy recommendation of economics.

humeThis book suffers from many of the same problems other economists who have explored new growth theory have had.  They attempt to graft the findings of new growth theory onto their preconceived ideas about economics.  For example, Robert Solow is a Keynesian so he has attempted to just tweak Keynesian ideas to fit this new information, instead of understanding that this new information required a whole new look at and approach to economics.  Paul Romer is what I would call a “mathematical Keynesian” and is also trying to fit a square peg into a round hole.

This book attempts to take the finding s of new growth theory and meld them into Austrian Business Cycle Theory (ABCT).[1]  ABCT claims that economic growth is the result of increases in capital/savings.  There is no evidence that increases in savings or capital in anyway result in economic growth and plenty of evidence to the contrary.[2]  Pasting some of the ideas of new growth theory onto ABCT neither solves the problems with ABCT nor adds anything to new growth theory.

The author’s ideas on scientific and technical knowledge come from Karl Popper, who has argued that knowledge is impossible.  This is not surprising as it is consistent with Hayek’s ideas of cultural evolution, which argues that reason is limited and it is conceit to suggest that anyone can use reason to determine a correct societal structure.  Both Hayek and the author are fans of David Hume (See Lewin’s youtube “Peter Lewin on Austrian Capital Theory – Part 1”).  David Hume you will remember said causality was an illusion and brought us the “is ought” problem in ethics.  In other words, Hume attacked the very basis of reason, logic, and ethics.  Hume is part of the Scottish Enlightenment, which elevated emotions above reason.  The Scottish Enlightenment underpins all of Austrian Economics.  The other philosophical tradition behind the Austrians is philosopher Franz Brentano who raised the psychology of the person to a primary.

It is not surprising then that the author concludes “The superior performance of capitalist economies cannot be logically ‘proved.’”  Under the author’s ‘implications for policy’ section we get this,

“It involves not only, or primarily, the addition of existing capital equipment but rather the introduction of progressively more technically advance equipment, the production of which is made possible by an institutional environment in which the discovery of such technical advances is encouraged.”

Interestingly enough the author never explains what encourages technological advances and he never even mentions property rights for inventions, i.e., patents.  Even Solow and Romer realize that they cannot ignore patents, however contrived their arguments are for dismissing them.

One of the reasons the author ignores patents is that he emphasizes what he calls “tacit knowledge.”  Tacit knowledge is something we know but cannot prove or of which we are not conscious.  This is perfectly consistent with the Austrian ideas that reason is limited or ineffectual.  As a result, he talks a lot about innovation and never mentions inventors.  He talks about organizations, but never individuals.  He talks a lot about production and ignores invention.  Austrians like to scream they are capitalist or free market, but they are certainly not pro-individualistic.  This is not surprising as this would require a commitment to the power of the individual mind to understand the world.  The author further reveals his collectivist ideas when emphasizes that the knowledge that is important to the economy is “social knowledge.”  The Austrians are collectivists.  They believe central planning interrupts the functioning of the process of gaining “social knowledge.”

This book does not contribute anything to new growth theory.  The only reason to read this book is to better understand the underlying principles of Austrian Economics, which are not pro-reason, pro-individual, or pro-capitalism (The economic system that occurs when the government protects individual rights.)

[1] A Graphical Introduction to the Austrian Business Cycle Theory, Gaurav Mehra,, accessed 9/8/15

[2] [This] technique has been applied to virtually every economy in the world and a common finding is that observed levels of economic growth cannot be explained simply by changes in the stock of capital in the economy or population and labor force growth rates. Hence, technological progress plays a key role in the economic growth of nations, or the lack of it.


September 9, 2015 Posted by | -Economics, Innovation, philosophy | , , , , , , , | 3 Comments

Praxeology: An Intellectual Train Wreck

One of the foremost economists in Austrian Economics is Ludwig Von Mises.  One of his major contributions was praxeology, which is  is the deductive study of human action.  I have been trying to better understand praxeology.  I have consulted numerous websites, papers, and videos on point.  Most of them either ramble on saying nothing or they spend all their time attacking logical positivists or others.  I decided to review a paper from the Mises website and a video on point.  Together I thought these were the best sources on slightly different points of praxeology.  The video was a lecture by Dr. Walter Block who is the Harold E. Wirth Eminent Scholar Chair in Economics and Professor of Economics at Loyola University New Orleans and Senior Fellow with the Ludwig von Mises Institute.  Below are statements from the paper (1-4) and the video (5-12), with  my comments below.  Note that my criticism of praxeology and Austrian Economics is not an endorsement of any other school of economics including classical, neo-classical, Keynesian, monetarists, etc.  The fact that I am critical of praxeology does not make me or mean I am a logical positivist.   Also my critique is not to suggest that there are no valid points made by Austrian Economics.


econgrowth.small1) “Praxeology rests on the fundamental axiom that individual human beings act, that is, on the primordial fact that individuals engage in conscious actions toward chosen goals.”[1]  “Let us note that praxeology does not assume that a person’s choice of values or goals is wise or proper . . . “[2]

How can you tell the difference between non-goal directed action and goal directed action, if you cannot say what goals should be pursued or will be pursued?  If the goals are random or allowed to be random, how can you be sure the actions are not random?  The answer is that there is no difference between non-goal directed action and goal directed action where the goals are random.  This is part of the value subjectivism of Austrian Economics.

What is the goal directed action of a person committing suicide?  Or a vandal?  Or a teenager on a joy ride?

The human action axiom is meaningless when it is impossible to judge the goal.


2) “Apart from the fact that these conclusions cannot be “tested” by historical or statistical means, there is no need to test them since their truth has already been established. Historical fact enters into these conclusions only by determining which branch of the theory is applicable in any particular case.”[3]

This means that praxeology is a branch of Philosophical Rationalism.  Descartes created a system of physics just by thinking about the world.  It was internally consistent.  In other words it was just like praxeology and it did not describe the world and could not be used to predict or understand how something would work.

3) “Mathematical logic is appropriate to physics.”  But not to economics.  “In physics the axioms and therefore the deductions are in themselves purely formal and only acquire meaning “operationally” insofar as they can explain and predict given facts.”[4]

There are no axioms in physics.  Physics is a science and science starts with observations, not axioms.


4) “That Austrian School economics rests firmly from the beginning on an analysis of the fact of individual subjective values and choices.”[5]

Note that the paper says “individual subjective choices”, which means that the word subjective here is not that each person makes their own choices.  It means that there is no rational way to evaluate people’s choices.  This subjectivism is why all major figures in Austrian Economics do not think that natural rights exist.  They do not believe that ethics can be based on reason.


5) Economics is pure logic – no need to verify in the real world.

That would make economics a branch of mathematics (logic), not a science.  (Also see the video


6) While economics is based on pure logic, the lecturer argues it is science.

Dr. Block does not know what the definition of a science is.  Actually, I do not think Mises made this mistake of confusing math/logic with science.


7) Total profits equal zero in the economy is an axiomatic (theorem) tendency according to the professor.

If this were true we would still be living in the Malthusian Trap.  The definition of zero profit in the economy would mean that on average people are living on the edge of starvation.  Profit means that you produce enough to have a surplus.  But this does not have to bother Dr. Brock, because economics is not an empirical science, which is an oxymoron.

It appears the professor was attempting to summarize the zero profit theorem, which is based on perfect competition.  Perfect competition is a flawed concept that denies property rights, something it has in common with Austrian Economics.  I discuss the many flaws of perfect competition in my book Source of Economic Growth and also in my lecture at the Atlas Summit 2015.

If what the Austrians are trying to say is “in a technologically stagnant economy the total profits tend to zero.”  Then that is true and I discuss this in my book Source of Economic Growth.  The reason for this is the second law of thermodynamics (entropy).  It is also probably true in a technologically stagnant market, profits tend to zero for firms in the market.


8) The Zero Profit theorem cannot be falsified.

That is the meaning of non-empirical, but what is amazing is that he says this straight up and I showed above that in fact the theorem as he states it is in fact incorrect.


9) You don’t test that a triangle has 180 degrees?

Yes you do.  Obviously Block is not familiar with the book flatland.  In fact there is an experiment in astronomy that is doing exactly this.  See


10) Block is using econometric modeling.  Econometrics assumes that economics is empirical.  Block is correct to criticize logical positivism, but logical positivism is not a correct philosophy of science.  (Also see the video


11) Trade – both parties expect to profit by a trade is an axiom/theorem of praxeology according to Block.

While this is true, it violates the zero profit tendency.


12) Inputs to the economy are land, labor, capital, and entrepreneurs.

How are entrepreneurs a separate input?  Are not entrepreneurs just a combination of people and capital, at least in Austrian Economics?

The additional input and the only input of importance is human knowledge and when we are talking about economics that means inventions.



I only commented on the first 15 minutes or so of the video.  There were other errors, but explaining them would take too long.  Of course there were many valid points.

The bottom line is that praxeology is not a science and to the extent that Austrian Economics is based on praxeology it is not a science.  Block points out that there are sort of two schools of Austrian Economics and the other one is based on Hayek’s ideas.  Hayek rejected praxeology and his somewhat equivalent theory is his theory of Cultural Evolution, for more see the video Hayek: Friend or Foe of Reason, Liberty and Capitalism?  Cultural Evolution is an inherently collectivist that is based on the idea that reason is limited or totally ineffectual.  It is not a science either, since it rejects the use of reason.  No matter which branch of Austrian Economics that you investigate it is not a science.  The result is that it makes numerous errors, which I have detailed elsewhere, but include an improper definition of property rights, an improper definition of capitalism, the false model of the Austrian Business Cycle, and others.

Austrian Economics is not the only school of economics that is not a science.   However, if economics is to ever advance it has to be a science based on the nature of man and understanding that  his unique tool of survival is his ability to reason.  In my book the Source of Economic Growth I lay out the principles for a school of economics that is a science, that is consistent with Objectivism, and is consistent with Natural Rights.









September 8, 2015 Posted by | -Economics, philosophy | , , , | 14 Comments

Source of Economic Growth: The talk and the Book

Dale B. Halling’s new book Source of Economic Growth is now available.  This book examines the two most important questions in economics: 1) What is the source of real per capita economic growth, and 2) What caused the industrial revolution? The industrial revolution is important, because it is the first time any large group of people escape subsistence living (Malthusian Trap) and their incomes start to grow. By examining these econgrowth.smallquestions, the book devises a science of economics that is consistent with natural rights, the founding of the United States, and is tied to the biological reality of life.

Mr. Halling gave a related talk at Atlas Summit 2015 entitled The Source of Economic Growth.  No school of economic thought is consistent with Objectivism, which is why Ayn Rand, in the very first sentences of “Capitalism: The Unknown Ideal”, said “This book is not a treatise on economics. It is a collection of essays on the moral aspects of capitalism.” Patent attorney and novelist Dale Halling proposes a science of economics that is consistent with Rand’s philosophy. The path to that understanding of economics results from examining the source of real per capita increases in wealth, which puts man’s mind at the center of economics. No other school of economics puts emphasis on man’s mind, which is one reason why Rand had a tenuous relationship with even free market economists.

September 1, 2015 Posted by | -Economics, -Philosophy, News | , , , , | Leave a comment