David Henderson

Ethics in Finance and Foreign Policy


David R. Henderson, research fellow with the Hoover Institution and author of “The Wartime Economist” for Antiwar.com, discusses his article “The Libertarian Case against the War in Afghanistan,” the efficacy of using ethical reasoning in foreign policy arguments, the inconsistent U.S. extradition policies regarding Luis Posada Carriles and Osama bin Laden, the exaggerations of systemic risk used to justify bailouts, the limited short-term risk of inflation and why a fractional reserve banking system could continue to exist without a central bank.

MP3 here. (41:40)

David R. Henderson is a research fellow with the Hoover Institution and an associate professor of economics in the Graduate School of Business and Public Policy at the Naval Postgraduate School. He is the author of The Joy of Freedom: An Economist’s Odyssey. His latest book is The Concise Encyclopedia of Economics.

16 thoughts on “David Henderson”

  1. Henderson says inflation is not even at 10% per year, but is it really that low? Consumer Price Index – which is used to calculate inflation – is apparently a flawed indicator. (CPI includes rent but not price of a house, for example, and therefore understates inflation)

  2. Also, the issue is not whether the Federal Reserve is private or public, or even fractional reserve banking, the question is who should profit from the creation of the NATIONAL currency. I have no problem if Citibank wants to print up their own private currency which reads ‘citibank’ on the front and try to convince people to use it as a medium of exchange. But that’s not what happens. When Citibank creates money, it reads THE UNITED STATES OF AMERICA on it, and it’s the same money I’m expected to pay taxes and tolls in. Bankers have no right to profit from the creation of the NATIONAL currency, all citizens should profit more or less equally from the creation of our collective currency. Either that, or I should be allowed to set up a bank with one dollar of reserves and lend out $10, what does it take to start up a bank these days, $600,000 or something? I suppose that’s pocket change to you libertarian types, but not all of us have access to that kind of money. I agree that counterfeiting is good work if you can get it.

  3. Scott,

    It is rational, and therefore the best they can do, for voters to remain ignorant. There’s no such thing as the “good of the people clashing with politician’s self-interest” inasmuch as *everyone* is motivated by self-interest.

    The more interesting point is that you obviously don’t think that it’s in your self-interest to remain ignorant, given the time you spend discussing political matters here.

    Does that mean that: (a) you think that rational ignorance is actually mistaken as a model; (b) you’re mistaken in what you take to be rational behavior; © you misunderstand the rational ignorance model and think it only applies to the “sheeple”?

  4. Benjamin makes a good point: “When Citibank creates money, it reads THE UNITED STATES OF AMERICA on it, and it’s the same money I’m expected to pay taxes and tolls in. Bankers have no right to profit from the creation of the NATIONAL currency, all citizens should profit more or less equally from the creation of our collective currency.”

    Indeed. These (supposedly) anti-state, government-hating libertarians refuse to see that the creation and maintenance of abstract social fictions like “money” and “private ownership” are TOTALLY dependent on violent enforcement by government and the state. People who have lots of money and property are THE primary and heaviest dependents on government and state. And in a self-governing nation, why should the people allow their government to be used to enforce a system which condemns most people to powerlessness or destitution, for the benefit of a tiny few?

    But the libertarians want to pretend that they don’t need the government and don’t owe society anything. Were it not for government, there would literally be no such thing as “ownership” or “money”. There would be nothing but immediate, brute possession of a thing, whether a wallet or a house, which could be seized from you at any moment, by anyone person – or cooperating group of persons – strong enough to snatch them from you.

  5. Lawrence: libertariansim is a deeply incoherent load of hogwash, a delusional prettying up of ordinary conservatism.

    The happy-talk bromides of libertarianism tend to find favor with financially comfortable and selfish people who ordinarily would simply be conservatives, but who find themselves nonconforming in some way – maybe they’re gay, or they smoke pot, or they made their money selling porn.

  6. Always the same — name calling, but no evidence. As I’ve long said (in modification of a shorter bit): “If you’re not a liberal by age 18, you have no heart; if not a conservative by 25, you have no brain; if you’re not a libertarian by age 30, you have no integrity.”

  7. I think libertarianism could be a truly powerful, unifying, liberating and revolutionary doctrine, if only libertarians would realize that the right to property is based on and follows from the right to life. If you’re not alive, you can’t own any property, get it? Hence, it is morally justifiable to redistribute wealth from the wealthy to those who could reasonably be expected to die without it. That means it’s morally justifiable, nay, required, to tax those who have much and use it to provide shelter for people sleeping under bridges, food for those going hungry and medical care for the sick who can’t afford treatment. I heard Ron Paul say the other day that health care isn’t a right, it’s a demand. Easy for a rich old white doctor to say I suppose, he and his family will always have it. Well if it’s a demand, I say demand it, because you can tell the level of civilization in a society by how it treats its least fortunate. But anyways, this is all meaningless squabbles when our government does whatever it wants and steals our money for pointless wars & bankers.

  8. Lawrence,

    Don’t hold your breath waiting for Myron to engage in a substantive debate. His MO is to utter empty platitudes and election slogans. When he gets questioned on the details, he immediately resorts to name-calling. Ask for specifics and he disappears, only to resurface in another thread to start the song and dance all over again.

    Myron is like Oakland: there is no there there.

  9. Benjamin:
    You really need to think out your statements. The theft of one person’s production by another really doesn’t work too well in the long run because it discourages people from taking the trouble to work as hard as they would otherwise. Further, platitudes (unproven) aside, your suggestion doesn’t rise to a philosophical level. Any moral system has to hold true in all times and places — just as scientific laws must do the same if they are to be treated as such. That is why there are no “rights” to anything other than to be left unmolested when it comes to relations between people. Claims that it is a “right” to have 3 squares a day are absurd in far too many situations to list here; consequently, they have no meaning. The only rights between people (and many of us in the libertarian movement even question this!) are the right to remain unmolested — a status that can obtain in all places and at all times as an achievable end. I would suggest reading the opening sections on natural law and the nonagression axiom in Murray Rothbard’s “For a New Liberty” to school up on why this approach to “rights” is more cogent. I don’t know about you, Benjamin, but I know lots of people who went to school with me who never “earned their keep” so to say when it came time to crack the books. I have no doubt that many of them may now be sleeping under bridges — which is the natural result of the undeniable selfishness of those who are “too good” to work in ways that other people are willing to pay for. In other words, I’d take a second look at what got some of those people under the bridges. I’m not denying that a bad turn can send many of us — including me — to such places, but the blame-game gets very old, and a guarantee of a “right” to X, Y, and Z is also a guarantee that those who are lazy and too self-centered to do what people are willing to pay them for will continue to mushroom in greater numbers. Only with private and totally voluntary (as opposed to coerced) charities is there a “governor” on the “slacker factor” that guaranteed “rights” to things are guaranteed to produce. This really is all too self evident — despite all of the name calling you made use of. So knock it off and grow up, OK?

  10. “to do what people are willing to pay them for”

    Money is not created by people, but rather by banking corporations, as a libertarian you should know that. So making money really involves doing what banking corporations are willing to pay for, since they are the ultimate originators of all money.

    Understanding this really is the source of the dilemma and a false left/right divide in my opinion. As I said above, if banking corporations wish to create their own private currencies with the name of their corporation on the tokens and convince private citizens to use them of their own free will as a medium of exchange, then more power to them.

    But if they want to create a currency which belongs to every citizen and reads “The United States of America” on it, then every citizen has a right to the profits created by this method.

    And yes, taxing the profits of banking could create enough money to feed the hungry, house the homeless, and care for the sick who are unable to care for themselves.

    And no, taxing banking is not coercive, because:
    1. all of the profits of creating the *national* currency belong to the citizenry in the first place, because it’s OUR currency, and
    2. corporations are not people and cannot be coerced; only people have rights. You might have a right to associate in a corporation and rights as an individual within that association, but that association itself has no rights, especially if it’s applied to the citizenry for a charter.

    And I really don’t understand this fetishization many libertarians have with living on the dole. It’s true that some people will ‘cheat the system’ and live on the dole when they could support themselves, but ultimately it’s very hard for a man to meet women, have self-esteem or feel satisfied with life while living in a government provided cement box and eating surplus cheese. Personally I’d rather see a few people cheating the system than a few people dying of hypothermia under bridges. And no, I don’t think living in government housing with other derelicts will become the new fashion and snowball out of control.

    If the oppressive law enforcement and military bureaucracies we have in the U.S. were seriously curtailed, a decent social safety net could be provided without taxing individuals, but taxing the creation of U.S. money. Don’t tell me it couldn’t happen, it’s basically what Pennsylvania did before the Revolution; the government issued loans directly to citizens and then used the interest for public works like roads and bridges. The Pennsylvaniers got roads and bridges without any taxes, and lower interest rates than the private banks offered. Pretty neat, huh?

  11. Benjamin says: “…starving man does have a right to steal a loaf of bread to feed himself or his family.”

    Indeed. Libertarians subscribe to a dishonest form of social Darwinism. About the kindest thing you can say about libertarians is that mostly they seem to have genuinely deceived themselves and are not just faking it.

    Honest social Darwinism is simply the notion that might makes right – or more precisely: there is no “right”; there is only might. Anybody who gets anything he or she wants or needs by any means, whether by getting people to pay him money for stuff, by lobbying the government for stuff, or by knocking people over the head and taking their stuff, is simply exercising power in any of its various forms. If they succeed, they will survive and prosper, and to the extent that these survival traits and behaviors are heritable or socially transmissible, they will be perpetuated. And that’s neither good nor bad; it’s simply what happens.

    Libertarian dishonesty is founded on two primary falsities: a false division between “government” and “nature”; and a false division between government and money-based economies – even though government is entirely contained within nature and therefore as natural as anything else, and even though money-based economics is entirely a superphenomenon of government, wholly dependent on and contained within it.

    Thus, libertarians think that the exchange of money within an economy with certain rules defining artificial social constructs like “currency” and “property rights” constitutes “nature” – even though it is entirely contingent on a vast system of police and courts of law, among other things. “Government” is the opposite of “nature” and stands outside of it. When the government demands sacrifices of those who prosper in the economic game which is defined, maintained, and entirely made possible by the government, it is interfering with the sacred workings of “nature”, preventing the “fittest” from reaping fully their just rewards. Furthermore, unlike the honest social Darwinists, the libertarians dress up this preordained outcome as being morally desirable – *actually* good: their own maximum prosperity, based on success in a particular game with particular rules created and violently enforced by a certain kind of government, is really morally better than any other arrangement, and should be meekly accepted by everybody else.

    The starving man must say, “Well, I know that if I cooperated with large numbers of others, we might be able to compel a change in this governmental economic setup, the better to serve our needs, but I know that exercising political power like that would be cheating against the will of Nature, so I certainly won’t do anything like that! Anyway, it would be nice if you’d help me, but if you won’t, then I’ll just accept that and go die, and be happy that this ‘natural’ economic setup has properly weeded me out!”

  12. What I find interesting and deceitful is that in Myron’s long diatribe (3 above) about banks (and I can’t say I like banks either as they are a creation of the state) is that it does not even address my argument. Furthermore, he did not mention banks even once in the text to which I referred except in the last line. He spoke only about robbing a rich white doctor, not a bank. So even basic honesty is missing with Myron. Further, there would be no war profiteers and wasted cash on horrible wars if the government were not given the right to tax. So unless Myron can guarantee that taxes will not ever be used for mass murder, even his flawed argument in favor of theft for the sake of poverty is undermined. Further, he trivializes the toxic effect of living on the dole. A visit to any neighborhood that has been blighted by the welfare programs (which guarantee the creation of toxic families) of the 1960s and beyond as well as the disruption and urban warfare and mayhem and inter-generational poverty of mind and spirit that are its inevitable results, undoes his desire to trivialize the effect of his programs. It is always white, guilt-ridden people who have the means to move into neighborhoods untroubled by their social policies who continue to commend these errors. They don’t have to live with them.
    More and more I suspect that — after seeing such comments on antiwar.com — that the Democrats and their fellow statists on the left would gladly support more of the mass murder of war if only they could have their chance to increase the number of bone-headed welfare programs available. It’s the Faustian bargain they pretend nobody else can see them making. They fail to realize that the theft they advocate is only the XXXth step on the road to war and other forms of coercion. Their lack of consistency condemns them as hypocrites.

  13. I’m not a Marxist, but Marx predicted that the final economic revolution would happen when automation (increases in productivity) made labor increasingly unneccessary for the maintainance and increase of capital.

    In ordinary language, finished goods are wealth, and there are already factiories in Japan where the only human workers are there to fix the robots when they (occasionally) break, and thanks to the exponential growth of computing power, soon trucks will be able to drive themselves (and if we don’t find it too creepy) robots nurses will be able to deliver a baby better than Ron Paul himself.

    In a market where humans are only marginally required for the production of real wealth (finished goods) as well as for many services, the question is who’s going to own the robots. If we stick with capitalism, the answer is those who own lots of stock in the corporations. It’s an old arguments, but what’s changing is that unlike in the Fordist period of capitalism, relatively few people will earn (livable) wages, (except as servants of large scale stock holders), only stock holders will be able to afford the goods produced by the near-fully automated means of production. Everyone else can either work for those people, or work in a subsistence manner without access to the modern economy.

    We had a system like that before, and it was called feudalism. Like I said, I’m not a Marxist, but I think Marx’s insight that automation will seperate the mass of humanity from access to the true wealth-creating engines is exactly what’s playing out now. It’s why China is the only country which is industrializing and why social inequality and poverty continue to increase world-wide.

    All political structures are based on the underlying economies, and our economy is changing quickly, thanks to the exponential growth of computing power. Remember I wrote this when someone invents the truck that drives itself better than a human could and a million truck drivers are laid off in a year.

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