Essays on Liberty

Summary 

The birth of modern government system began with two simple principles: one is government is to protect one citizen from being abused by another citizen. Two is government is to protect itself from abusing citizens. The first principle requires that government sets up laws to protect property rights of all citizens. The second principle requires that government assigns limited roles to itself and there be clear laws specifying that the government cannot do specific actions such as taxes on this or that. That is government should be small. As a matter of fact, the war for independence began with the British government charged too high tax on American colony. 

Current U.S governments are far from being small and more principles, in addition to the simple two, are implicitly included. Medicaid, Medicare, Social Security, those social programs are added to the government spending, which eventually requires higher and higher taxation.

"Paul wants some of Peter's property. For moral as well as legal reasons, Paul is unable personally to accomplish this desire. Paul therefore persuades government to tax Peter in order to provide funds with which the government pays Paul a 'subsidy'. Paul now has what he wanted. His conscience is clear and he has proceeded 'according to law."

Does it change the situation if it is the government that persuades Paul to vote them in exchange for the subsidy?

Set your principles first, then degree. 

Who should read it

This book is a collection of essays by freedom lovers, some may call it libertarian or classical liberal (because it is the original sense of liberty in its creation). For Cambodians, and other people from developing countries, I believe it is crucial to understand the concept of liberty.  Because liberty refers to the freedom you would get from the rule of law, it is far from what most people in developing countries misunderstand. Currently, governments in developed countries differ in  degree of their belief in the principles of liberty. More and more taxes are imposed on citizens.

It is a good beginning for those who are interested in the principle of the rule of law, democratic government and free market economy. Those who are familiar with example of minimum wages, labor union rigor in socialist countries in Europe may find these essays disturbing. Keynesian economists, as prominent as Paul Krugman and Joseph Stiglitz, may find these essays archaic. 

Authors: Henry Hazlitt, James Madison, Ludwig Ludwig von Mises, et al.
Publisher: Foundation for Economic Education, July 3, 2013.
My rating: 4.5/5

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New Ideas from Dead Economists

I fully concur with Einstein that smart people can make difficult topic easy to understand for laymen. In this sense, Todd Buchholz is a smart economist. His being a smart and insightful economist is clearly manifested in this book.

Who can and should read this book.

This is book is for those who have finished Introduction to Economics or just know or heard about the demand and supply theory. Laymen can also capture his ideas but not without contemplation. It is not more difficult than economic topics you have read in various newspaper or magazine. 

Students nowadays may take the theory of free trade for granted. Decades ago, it was a highly debatable subject. Hundreds of years ago, most people were against it. Lets not look too far away. During World War I and II, why superpowers spent tremendous amount of money and lives to invade other countries for natural resources and markets, the things that can be accessed easily today through free trades? This is a prime example of the new idea left behind by many dead economists who were philosophically alone in their time.

The encouragement of multi-corporation, international trades, WTO, World Bank, IMF, ADB you name it, are no more accomplishments than those of economists. Stimulus package, Quantitative Easing especially in the United States, Three-Arrow Policies of Shinzo Abe, Japanese Prime Minister, and one currency in EU are those of economists, although those ideas are against each other. Perhaps these differences in policies interest students of economics more if you try to know which school of thought you are in.

If you happen to have curiosities or questions similar to these, this book would be best for you.

A bit of the book

It explains theories, findings, imperfections etc. of the economists in the past as well as today. Ideas are very powerful, more powerful than ones can perceive. As Keynes put it at the end of his most famous book The General Theory:

“The ideas of economists and political philosophers, both when they are right and when they are wrong are more powerful than is commonly understood. Indeed, the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.”

The Conundrum 

This book presents you many theories in economics. Nevertheless, theories conflict in every disciplines. There are opposing schools of thoughts. Nobel Prize in Economics committee, for instance, tend to give the Prize to opposing recipients in the topic they deal with. In this book, the author does not or cannot opine what school of thought is right or explains the world more correctly. For those who need an answer to biggest debate in economics, Keynesianism vs. Non-Keynesianism, this book is not sufficient. ( I would suggest The Clash of the Century).

The book will make you more curious about economics, although my rating is only 4/5. Why not give it a try...

Author: Todd G. Buchholz, with foreword by Martin Feldstein.
Publisher: Plume, newest edition (April 6, 2007)

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Why Nations Fail

You may wonder why Cambodia, among other poor countries, fail to develop. Why we are poor and other are rich? You have answers, of course. You may point to the fact that we had wars, thus no human capital i.e. no knowledgeable persons who know how to develop the country. Some would point to the fact that we are born lazy, i.e. our culture does not induce hard working like Vietnamese culture or Japanese culture. Of course, very few would point to the fact that Cambodia does not have natural resource as we have too many including the sea. So what make us poor? Some would argue that we do not have a good leader. How to have a good leader then? Can another good leaders come and continue to be good after a good leader is dead of old age? In this book, Daron Acemoglu & James Robinson deal comprehensively with these theories. 

Summary

A country fails to grow not because it does not have natural resources. Case study, Japan. 

A country fails to develop not because of culture. Case study South Korea versus North Korea. 

A country does not grow not because of the lack of human capital. Knowledge can be bought these days. Case study, Japan and other countries (Cambodia as well before the France took over the country) bought Western technology and knowledge and even fought with the West like Japan did against Russia. 

A country fails because it does not have an inclusive institution. Rather, it has extractive institution. That is it has a system where growth, or wealth,  is extracted to a group of people from another group of people. A typical example is when a country has a government which taxes their citizens (of course every government lives by money from tax) and provide no or little service in return. The government does not protect the property rights of its citizens, for instance. 

Conundrums

Theories in this book are mostly in direct contrast to those in The Wealth and Poverty of Nations. If you want to dig deeper into this debate, the latter is a good start. In economics, Acemoglu along with other prominent economists such as Douglas North are categorized as institutional economists. They tend to favor institutions as a cause of growths.

In this book, by emphasizing that institutions, i.e. the systems, make a country rich or poor, the authors do know shed lights on how those systems can be made. If you were the United States who imposed system on Japan after WWII, this book is best for you, except you cannot be one. This book is also best for policy makers of aid organizations such as Jica, USAID, AusAid etc. For politicians, especially opposition politicians in a dictatorship countries this book only brings hopelessness. I suggest another book From Dictatorship to Democracy.

I hope you would read the book, republished in 2012, after this review. My rating is 5/5.

Authors: Daron Acemoglu, James Robinson.
Publisher: Crown Business; 1 edition (March 20, 2012)

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That Which is Seen, and That Which is Not Seen

When you study a subject for so long, whether it is mathematics, physics, economics, psychology, you tend to lose tract with the reality you see every day. Among many pieces of works of Frederic Bastiat, this piece of work is so brilliant that I can say it allows people who are new to economics to understand the principle of economics firmly.

Economists today use the expression Opportunity Cost to express the cost of time that you may spend on something else. For example, you may say going to a free conference is free but actually it is not because the opportunity cost is that you can do something else and you lose the opportunity to do so when you choose to go to the conference. Thus, it is not free. The author Henry Hazlitt of Economics in One Lesson wrote his worldly famous book basing on this simple concept, very simple that some Nobel laureates in economics tend to miss. 

I can say NO economist would disagree with this concept. Actually no one would (tell me if you meet one!) It is self-evident to say that ones must consider both seen and unseen consequences. Seen ones are easy to see because it is seen (hint: tautology is there). The unseen may be less focused. Economists take pride in themselves to focus on the unseen in results of any policy.

The example of this simple concept draws in plenty of disagreements. For instance, the example of Broken Window. Keynesian would consider it as an opportunity to create jobs, but Bastiat did not. From small to big interventions, I believe you would find this essay very fun to read, and it may change your way of seeing the world.

My rating for this book is 4.5/5.

The Conundrum

Economists divide time into two: short-run and long-run. Some economists agree with Bastiat as a long-run model in economics but disagree with it in the short-run model. For instance, in the short-run where prices are not responding to changes in supply and/or demand, the Broken Window concept is useful to push for economic growth. Thus, governments need to initiate spending on even seemingly useless projects.

The Foundation for Economics Education, for instance, reserves its rights and publish it for free to the public. What is not free, the opportunity cost (quick application!), is your time to read it.

Author: M. Frederic Bastiat.
Publisher: CreateSpace Independent Publishing Platform (August 7, 2013) [this one is not free even in financial terms!]

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