Power & Market
The Bill of Rights was finally ratified on December 15, 1791. Most of the new Constitution of 1787 was devoted to raising taxes, centralizing government, and destroying self-rule in the independent states.
The Bill of Rights, however, was a bright spot in an otherwise unhelpful and unnecessary document.
From 2015's article "The Bill of Rights: The Only Good Part of the Constitution":
Patrick Henry and the Anti-Federalists pointed out — correctly — that the US already had proven it had sufficient means to deal with European powers, and that in the bloody history of states, the true threat to freedom lay not in there being too much freedom, as the Federalists claimed, but in the overweening power of centralized states.
Virtually no one believed that a new constitution was necessary to secure what they had earlier called their "English Liberties," including freedom of speech, a right to due process, jury trials, and more. Those freedoms were already assumed to be assured to all non-slaves. Those freedoms had been won in the Revolution. The people didn't need a more powerful Congress to protect them. If their freedoms were threatened, the people could rely on highly-democratic (for the time) state legislatures and a decentralized militia system.
But, in the end, the Federalists won out after they promised to adopt a Bill of Rights to limit the power of Congress. As we know, though, the Bill of Rights began to break down immediately, and it was only a matter of time until the Alien and Sedition Acts, Jefferson's embargo, and other even worse crimes perpetrated on the states and the people.
It was the Constitution of 1787, after all, that strengthened the institution of slavery, set the stage for the fugitive slave acts, and made provision for the criminal prosecution of those who attempted to help set escaped slaves free.
That's what sort of "pro-freedom" document the Constitution was and is.
What the Constitutions Should Have Said
The Bill of Rights would never have been necessary, however, if so much power had not been granted to the central government by the constitution of 1787 in the first place
Indeed, the earlier constitution of 1777 (the so-called Articles of Confederation) had itself been too detailed and powerful.
After all, the whole idea of a national constitution had always been sold on really just two premises: 1) It would assist in national defense and 2) it would facilitate trade among the member states.
In other words, it should never have been anything more than a customs union and a mutual defense agreement.
So, in the service of sound political science, I have composed a new constitution for us:
Article 1. The United States shall meet every two years in Congress assembled to negotiate terms for the maintenance of a union of independent states. There shall be no duties or taxes imposed on trade among the states or the people therein. The states, in Congress assembled shall set the standards for membership in the United States and provide provision for member withdrawal and the conditions for receiving the benefits of mutual defense as a member of the Union.
Nothing more is necessary or prudent. Independent states enter into mutual defense agreements quite frequently, without surrendering their independence, and trade agreements are a quite mundane affair in the history of states.
Any appeal to "patriotism" or lofty ideas of "America" or the fanciful notion that people in Arizona are the countrymen of people in New York has no backing in the day to day realities of living. Never in history was there a group of 320 million people spread across four million square miles who were part of the same community and who shared the same experiences, interests, or even the same economic ties.
In reality, the people of Colorado, for example, have more in common with the people of Saskatchewan — in terms of economic interests, culture, and history — than with the people of Georgia or Delaware of Pennsylvania. People only believe the residents of the US states make up "one people" because they were told as much by their third grade teachers. Actual experience tells us otherwise.
Those who demanded the Bill of Rights had attempted to preserve this idea of government on a human scale: government that reflects the realities of daily life, human relationships, and the necessity of free commerce — rather than the ideological fantasies of nation builders. Even to this day, the idea that the minutiae of life and commerce should be governed by a group of millionaires sitting in luxury 2,000 miles away is repugnant to the the reasonable mind. In preventing this, the Bill of Rights has largely failed, although things most certainly could have been worse.
The Trump administration recently announced it was considering a partial reversal of the Obama administration's designation of new national monument lands in Utah. The lands in question were already federal lands, but Obama's move heightened restrictions on the usage of the land, and lessened the likelihood the lands would ever be transferred to state control.
Trump's announcement brought overreactions from many, some of whom implied that the Trump administration was somehow privatizing the land. This is not at all the case, and there's little reason to believe that the federal lands in questions will stop being federal lands any time soon. See: "Trump's Action on Federal Lands is Not Privatization."
The Blaze called me for some additional comments:
“There seems to be an overreaction, from both sides, in looking at this as a major change,” [McMaken] said.
From the start, McMaken was irked by the misconception that the issue was being framed as a situation in which public lands were being privatized. Mainstream media organizations “acted as if this was a situation in which public lands were going to be sold off into private hands, and that’s not the case,” McMaken said...
“There’s an assumption among many Americans people in Eastern states that it’s either federal land or it’s private land,” McMaken said. “But when you look at a lot of these Western states, they have lots of state parks and if you poll the local population, what you’re gonna find out is that people love their public land.”
McMaken added: “It’s not a situation where land is being de-federalized. It was federal land, and it’s going to continue being federal land.
“There is a common misconception that federal lands are the only type of public lands,” McMaken said. “This, of course, is not the case. Even if the Trump administration were to turn some federal lands into state lands, the state legislatures in those states would then face enormous pressure from voters to keep those lands as public lands for the use of residents. It is by no means a safe assumption that any lands that cease to be federal lands will become privatized.”
Congratulations to former Mises Research Fellow Karl-Friedrich Israel for successfully defending his thesis at the University of Angers in France.
Dr. Israel's academic research has largely focused on monetary policy, monetary theory, and the history of macroeconomics.
At AERC in 2016, he presented a fascinating paper on the history of econometrics and how the concept has changed over the years. In it he highlights that the originator of the term, Pawel Ciompa, considered it a way of illustrating accounting, as a opposed to a means of developing economic theory. The paper can be read on the University of Angers website.
Dr. Israel has also written several articles for the Mises Wire, including:
He has joined Jeff Deist twice on Mises Weekends:
The Summer 2017 issue of the QJAE is now online. (Here are the full archives.)
Justice in the Marketplace in Early Modern Spain: Saravia, Villalón, and the Religious Origins of Economic Analysisby Michael Thomas D’Emic. Reviewed by Eric Clifford Graf
The Man Who Knew: The Life and Times of Alan Greenspan by Sebastian Mallaby. Reviewed by David Gordon
The International Monetary System and the Theory of Monetary Systems by Pascal Salin. Reviewed by Carmen Elena Dorobăț
The Theory of Money and Credit, Ludwig von Mises's 1953 treatise on monetary theory, is now available as a free audiobook narrated by Jim Vann.
In a step-by-step manner, Mises presents the case for sound money with no inflation, and presents the beginnings of a full-scale business cycle theory.
Politifact delivered a “pants on fire” slam to Fox News on Friday because one of its commentators asserted that the Federal Bureau of Investigation “has become America's secret police.” The FBI has legions of new champions nowadays among liberals and Democrats who hope that its probes will end Donald Trump’s presidency. This is a stunning reversal that may have J. Edgar Hoover spinning in his grave.
In order to boost the credibility of the FBI’s investigations of the Trump team, much of the media is whitewashing the bureau’s entire history. But the FBI has been out of control almost since its birth.
The skyrocketing price of Bitcoin has dominated the financial news for the past few weeks, and the usual suspects are queuing up to offer predictions about its continued rise or inevitable fall. Yet it’s not all good news for fans of the cryptocurrency: in a notable decision, the digital distribution platform Steam has announced that it will no longer be accepting payment in Bitcoin.
In the grand scheme of things, Steam’s new policy will likely have little impact on the use or price of Bitcoin as such. Rather, the decision is significant because it highlights an underlying economic question about the future of the cryptocurrency. Specifically, Steam’s example shows that despite an enormous gain in market value, Bitcoin still has a long way to go before it becomes money.
Money is conventionally defined as a generally accepted medium of exchange, the key part of this definition being “generally accepted.” In order to be adopted on such a large scale, a medium of exchange must fulfil certain basic criteria, the most important of which is that it must be capable of serving as a tool for economic calculation. Entrepreneurs must be able to use a means of payment to compare the costs and benefits of different production plans, and this in turn requires a degree of stability in the value of money. Of course, money’s value is never constant: but it must be dependable. The inability of entrepreneurs to calculate is one reason why extreme price inflation creates widespread social havoc—planning production becomes difficult if not impossible.
One of Mises’s original contributions to monetary theory was the emphasis he placed on money’s role as a medium of exchange. Many others had identified this basic function before Mises, of course, but his approach is distinct in the way it argues that the role of medium of exchange is central, and that money’s other functions—as a unit of account, for example—are derived from it. Money is primarily a means of facilitating peaceful social cooperation, and in this sense is an indispensable part of any advanced division of labor as well as of economic calculation.
This brings us back to Bitcoin. At the moment, Bitcoin is still a minority means of payment, and Steam’s decision helps to illustrate why: Bitcoin does not at the moment satisfy the calculation criterion. As the Steam Team notes:
Historically, the value of Bitcoin has been volatile, but the degree of volatility has become extreme in the last few months, losing as much as 25% in value over a period of days. This creates a problem for customers trying to purchase games with Bitcoin. When checking out on Steam, a customer will transfer x amount of Bitcoin for the cost of the game, plus y amount of Bitcoin to cover the transaction fee charged by the Bitcoin network. The value of Bitcoin is only guaranteed for a certain period of time so if the transaction doesn’t complete within that window of time, then the amount of Bitcoin needed to cover the transaction can change. The amount it can change has been increasing recently to a point where it can be significantly different.
The unpredictable changes in the value of Bitcoin mean that it is now extremely difficult for consumers or producers to gauge the true cost of their transactions, or to make an educated judgment about the best time to buy or sell. Increasing transaction fees for paying in Bitcoin further complicate the issue, especially in regard to relatively small purchases (a major concern for Steam).
At the moment, commentators seem intent on convincing each other of their predictive powers regarding Bitcoin’s price, and everyone wants to be on “right side of financial history.” The vital question though is not around what price Bitcoin will ultimately settle, but if and when it will settle at all, especially compared to its competitors. For the time being, however, the extreme changes in Bitcoin’s price mean that although it might be a good investment, it will not soon become money.
Steam’s decision thus nicely underlines a point that Mises was fond of repeating: entrepreneurs and others who are involved in practical economic affairs often know more about prices and what they mean for the economy than the pundits watching from the wings.