The people and government are always at odds with each other, and yet depend upon each other in order to make life better for everyone. A government's only income is taken from its people, and the people's only protection from war and invasion is provided by a centralized power. The only reason either can exist is by depending on the other.

Anarchists don't recognize the need for guardians (military, government), and communists don't recognize the need for merchants and private life. Socialists and libertarians fall somewhere in the middle, one desiring that centralized control be a large part of private life, and the other demanding that rulers stay as far from private life as possible. Almost everyone seems not to realize that the two will always be necessary, and somehow focus only on the faults of others' ideologies if taken to its logical extreme. Each faction is morally repulsed by the other, and I think that is because each abides by a different and opposite set of moral values. The morality of a merchant-trader is opposite the morality of a warrior, who views moral actions to include deference to authority, respect for hierarchy, honor, duty, and so on, and correctly views the use of a centralized, command and control organization as the best way to wage war.

A private citizen who engages in private production and trade holds a very different view of what is right and wrong. An honest businessman regards moral men as peaceful; he avoids violence and prefers to come to mutual agreements. He accepts outsiders and is tolerant of those different than him, he is honest in his business dealings, thrifty, efficient, creative. His morality is that of Ben Franklin, which in many ways is opposite the morality of a stereotypical warrior; a Samurai, for example. One welcomes violence, knows that deception and coercion are keys to success in battle, and defers to his superiors at all costs. The other shuns violence, knows that honesty is the foundation of success in business, and directs his own actions, considering other men his equals; none are entitled to dictate his actions.

Anarchists desire that all men live in peace by distributing power equally to all individuals, which will necessarily fail when men (peacefully) accumulate military power (perhaps also a religious following) and begin taking property by force from neighbors (who lack armies to defend themselves). A world without government control of territory is only possible if no man desires to take by force from another.

Libertarians recognize the need for rulers, but have a very specific and limited idea of their legitimate responsibilities and powers (generally military, police, courts). Libertarians regard government as a protector only of its citizens' freedom; their right to contract with each other as they see fit.

Communists believe that it is the duty of the ruler to both protect the people from violence, and also to direct the lives of individuals as if part of a military operation; something that never fails to enslave the people in the same way that a general commands and controls the actions of his troops.

I personally feel that the only necessary and legitimate role of government is in defense-based military functions. I feel that policing, laws and arbitration of disputes is easily handled by private merchants and privately-owned cities. The only thing that cannot be handled by individuals is their collective defense. Someone must be trusted with enough power to defend the nation.

I feel that rulers, in accepting the duty to defend, are trusted to avoid meddling in private affairs, to avoid abusing their great power by turning it against the people they have sworn to protect; a ruler's responsibility is only to defend against violent outsiders. Unfortunately, history has shown that the personalities of protectors and warriors are not often amenable to the idea that the most effective methods for protecting the innocent against an attacking army (with centralized control and physical force) are very different from the most effective methods for improving the lives of impoverished, sick, weak, elderly and disabled citizens.

A ruler's tendency is to use the same planning the coercion necessary for war in a futile effort to improve the lives of his people by force, forgetting that all of his weaponry and all of the comforts of life, all of the nation's medical technology and doctors' training, are provided by businessmen -- individuals engaged in private trade and production. A ruler and his army depend on the people they protect, and the merchants and producers dependent on the army just the same. It is and will be a necessary partnership until the day arrives when no man among us desires to coerce another by force. Until then we might pause to consider that the business of defense carries a different morality and methodology, and that its function is best kept separated from the morality and methodology of private life.

When the two join forces and borrow from each other we get corruption. A police officer, sworn to protect and defend innocent people, cannot be permitted to consider it moral to accept payments in exchange for the power he wields. A military leader cannot allow himself to be paid to wage war upon the request of the merchants who make the machinery of war. Similarly, private businessmen cannot permit themselves to engage in violence and coercion, cannot negotiate by force without devolving into gang-wars and mafia assassinations. Business people depend on honesty and trust; governments on violence and force. Each has its place, but trouble is always around the corner when those entrusted with power sell it to the highest bidder, or those trusted to avoid violence engage in physical coercion.

I read an article today in support of full government-audits of the Fed, as per the suggestions of various conservative and libertarian thinkers.

It's always amusing to see people who generally believe in "fighting for lower taxes, less government and freedom" make arguments in favor of more government intrusions into private business.

An audit of a private business is no more the answer to this problem than auditing the American Medical Association. The problem isn't that government isn't involved enough in the business of currency production; the problem is that they are already so involved that they gave them a monopoly in 1913.

Remove that monopoly! Don't improve it by making the Fed a true government capture. Does anyone really think it's best if the government itself runs the central bank?

Jesus.

Buffett has spoken in the past about the benefits of a death tax, and has said that he thinks the death tax should be 100%. It just so happens that a 100% death tax would be one of the most profitable changes in American law for Mr. Buffett.

Berkshire Hathaway owns owns six life insurance companies. Life insurance companies make a good portion of their income by helping wealthy people shelter their income from the death tax. They can do this because insurance payouts are not considered part of an estate and are paid tax-free to heirs. So Buffett's job is to accept a wealthy man's money and agree to pay it all back to his family upon his death, for a fee.

Buffett also profits from a high death tax by purchasing family businesses at fire-sale prices upon the death of the owner. If the family must pay a 55% death tax on the estate, based on the value of the business, they become desperate to sell (the taxes must be paid within one year of death) and Buffett is right there waiting.

So far he has purchased many companies because of the death tax, including: Star Furniture, Borsheim, Ben Bridge Jewelers, U.S. Liability, NetJets, R.C. Wiley, Flight Safety and Nebraska Furniture Mart.

So the bigger the death tax, the richer Buffett becomes; benefiting from the front end (before death) and the backend for those who fail to pay his companies the appropriate protection money. Either way, a rich business owner needs Mr. Buffett's help, and the bigger the death tax becomes, the easier it becomes for the Oracle of Omaha to rape and pillage the innocent families of dead men.

Perhaps we should take comfort in knowing that he isn't alone; life insurers spend about $10 million per month lobbying in favor of the death tax.

QUESTION: Do you think the economic organization we call capitalism is conducive to the human intuitions of fairness and reciprocity that you outline?

STEVEN PINKER: Probably not – these intuitions are probably tuned to face-to-face, tit-for-tat exchanges, not the complex web of highly indirect transactions that make up a market economy. People seem to have a sense, for example, that interest is inherently exploitative (since you don’t get anything tangible for the interest payments), as are markups by middlemen (since they seem to be parasites), even though economies cannot function without them. The result has been economically ruinous policies such as the prohibition of interest, and recurring episodes of discrimination, expulsion, and genocides against middleman minorities such as the overseas Chinese in Indonesia, the Indians in Africa, and the Jews in Europe. I suspect that you meant the question as an indictment of market economies, but my answer is an indictment of human intuition! I think people should all take economics courses to understand how economies really function and get over the simplistic intuitions that evolution gave us.

QUESTION: Do you think that within this economic system the tendency to dominate and exploit weaker peoples will always be a logical corollarly — “imperialism is the highest stage of capitalism” etc…

STEVEN PINKER: History shows us that the tendency to dominate and exploit is far greater with communism than with capitalism (at least the democratic capitalism of Europe and the US). The reason, I think, is that people only contribute altruistically to the good of others if they perceive them to be kin or close community. Otherwise you either have to motivate them by profit (capitalism) or by coercion (communism). As bad as the profit motive may seem, it’s much better than the Gulag, the killing fields, and the “cultural revolution.”

Read the full interview here

We hear a lot about inflation, and mostly hear about the Fed or government being responsible for the dollar's decline in value over the years. This is a bit strange, and muddles a lot of conversations about the economy and the Fed. In my view there are three distinct, separate causes for inflation; good, bad, and "natural," inflation.

1. "Bad" inflation occurs when bankers "cheat" and print up new notes out of thin air. This is the only cause of inflation recognized by most conservative or libertarian economists, like Milton Friedman or Thomas Sowell. They consider inflation to be always and only a "monetary phenomenon," where the cause of inflation is always an excess supply of currency, relative to existing goods and services. In their view, the only way to inflate a currency is to use the printing press excessively, of which governments have historically been very fond.

This type of inflation is certainly possible, but is unlikely with the system that we have in the United States.  New dollars, created by the Fed, are used to purchase assets that are held by the Fed. At some point in the future, they will be resold on the open market. In order for those new dollars to be permanently inflationary, the currency must be deemed worthless.  A central bank that buys a brick of gold with new money harms no one if it sells the brick for the same money at a later date. It only temporarily lowers the value of existing dollars until it sells the gold. The only way to truly steal by printing money is by issuing a brand new currency, or by never selling the gold back to the market. As long as the Fed's assets are resold to the open market, no harm is done. The only effect is a temporary change in the value of currency.

Think of it this way. Imagine the Fed prints up endless amounts of money and purchases literally every asset on earth. It would hold all assets on earth, and the people would hold paper money. Now imagine it sells all of the assets back to the people, on the open market, and burns the dollars it receives. Are we not right back where we started? Has anyone been harmed? No, the only way they can hurt anyone is in buying up all the assets and then declaring the money held by citizens to be worthless.

2. "Good" inflation is a bit more complex. To understand this it is helpful to imagine that we are using a commodity as money, as was done in the past.  Imagine that we are still today using pigs as our medium of exchange, store of value, and unit of account. Everyone prices goods in "pounds" of pig flesh. Further imagine that many people are holding huge amounts of preserved pig-meat in their mattresses and basements for a rainy day. What would happen if suddenly, all of the hoarded meat were offered in trade on the open market?

The value of pig-meat would fall as its supply rises (relative to other goods). This would be an inflation of the pig-meat commodity-money, but has this inflation harmed anyone? No, the inflation of pig-money only makes it easier to acquire pig-meat, which most people enjoy consuming! The world becomes wealthier as the meat flies out of basements and onto the open market. Suddenly, it is ridiculously easy to eat bacon. The only people who do not benefit from the explosion of meat-money are those who do not consume pig-flesh. To them, the only use for pig-meat is as money (exchange, storage, accounting). They are pretty pissed off when everyone begins liquidating their pig-meat on the open market, because the value of the meat in their basement falls in value.

So this type of inflation is good for everyone except those who don't consume pig-meat. In the modern world, the only people that "consume" US dollars are those who use them to pay down bank loans, denominated in US dollars. When a bank accepts dollars in payment on a bank loan, the dollars are destroyed; removed from circulation in the same way that a slab of bacon is removed by a hungry citizen. Today, when people are encouraged to spend what they have saved, everyone with a bank loan finds that it is easier to repay his loan, just as people would find it easier to eat pork. This idea won't sit well with anyone who does not consider modern money to hold real value to people who are obligated to "consume" it by repaying bank loans.

(If this is you, you may want to take a quick three-part journey, beginning with The Curious Nature of Ownership. Next, you'll want to read What is Wealth? And finally you may end with Banking: A Picture Book. I don't expect a full realization from these essays, but it may be enough for you to at least consider a new viewpoint regarding the reason modern "fiat" currencies hold value.)

The reality is that most people don't hold very much wealth as paper money. Most people hold it in some type of investment, which is a bit like loaning out slabs of bacon to your neighbor, who uses them as furniture. If suddenly, because of some act of the Fed, congress or God, you are moved to liquidate your bacon holdings (spend money), you would remove the furniture from your neighbor's house, and move it somewhere else that looked better. Perhaps you'd trade it for a new car. This act would help the man with cars and hurt the neighbor with whom you had previously invested that pig-money. The net result is likely a lot of movement and very little productive action.

This is the type of intervention that is praised by some, because it creates a lot of economic activity, and bemoaned by others, because it encourages people to move assets from productive use (neighbor's furniture) to another, perhaps questionable use as a new car. It creates what they view as "malinvestements," that will later cause bigger bubbles, and bigger crashes, than would normally occur.

3. "Natural" inflation occurs when everyone is so rich they demand more in trade to do work. It’s easier to hire a poor man to clean your bathroom; Bill Gates might want $50 million per hour to do it, if he agrees at all. When everyone in the market is becoming richer and richer, labor prices naturally rise, and assets that involve a lot of local labor rise in price. As everyone accumulates more and more wealth through productive action and trade, they become less and less willing to do boring or difficult or dangerous tasks in exchange for money. The only way to avoid the price of unskilled labor rising is to introduce new workers, either through immigration or young adults entering the workforce, but even the children entering the workforce will be less willing to work because they will have been raised by richer families, and over time immigrants will require more and more in trade as they too become wealthier.

So in this way, whatever component of an asset that requires a human being to labor to produce it will become more and more expensive over time. Today, it requires an entire bedroom full of electronic equipment to motivate a minimum-wage earning teenager to work a summer job. Fifty years ago, the same labor would have produced a lot less.

In my view it is quite silly to talk about inflation as if there is always an immediately identifiable cause, or to assume that a change in the value of dollars is always a bad thing for our quality of life. As I briefly outlined above, inflation is almost never harmful unless a new currency is issued, or unless the Fed never sells its assets back to the open market. Higher inflation might be annoying, and might make it harder to do business because the future is uncertain, but it certainly doesn't always "steal" from anyone, per se, and it certainly is not "always and only" a monetary phenomenon.

If it weren’t for Darwin, the Galápagos Islands might have remained in obscurity with their wealth of odd, indigenous, and fearless wildlife. His evolutionary theories helped land the archipelago on the tourist map, but the great scientist missed out on one of the most stunning landscapes of the Galápagos: its underwater realms. The islands, 600 miles (966 kilometers) from the coast of Ecuador, receive both warm and cold currents, with the Antarctic upswelling, sending a smorgasbord of marine nutrients, attracting a gold mine of marine life.

Here divers see penguins next to tropical reef fish, families of sea lions, and the rare red-lipped batfish in the hundreds. Most divers come, however, to see the preponderance of megafauna. During prime viewing season (July to October), divers swim with hundreds of scalloped hammerhead sharks and spot dozens of bus-size whale sharks. (And yes, they're both harmless.) Live-aboard boats are the best mode of transportation, and the Galápagos Aggressor is one of the few that offers both dives and land-based stops. In the morning, passengers spot blue-footed boobies and prehistoric-looking tortoises on these remote islands; by afternoon, they Zen out amid a panoply of sharks, their jagged bodies silhouetted against the glowing blue of the sea beyond.

The Galápagos Aggressor offers seven-night live-aboard boat trips that stop for land visits on three islands and dives off five islands (from $4,495 per person; aggressor.com).

Hawaiians know that riding the ocean requires the rare combination of calm, confidence, and utter respect for the power of the sea. That's how the best surfers in the world ride down the face of waves that, every now and then, reach 40 feet (12 meters) at the mother of big-wave breaks: Waimea Bay (pictured) on the North Shore of Oahu. It's warmer and more predictable than other breaks of its size, which makes it a favorite among pro surfers. But it also forms a perfect stadium for aspirants looking for a glimpse of some of the world's biggest rides.

Surfing was born on these shores, and many of its biggest competitions, like the Triple Crown, still feature here, which is why Oahu is perhaps the one place where surfers of all levels pilgrimage. It has breaks of every shape and size and offshore winds that create perfectly shaped and unusually long rides. Local surfer Bryan Suratt, whose family has ridden these swells for four generations, coaches such greats as Andy Irons but also offers lessons for all levels. Suratt's laid-back aloha vibe helps even first timers feel the high that every surfer, at one point, feels: a humble gratitude for the timeless power of the ocean.

Sunset Suratt Surf School offers surf lessons on many of Oahu's North Shore breaks ($100 for two hours, including equipment; www.sunsetsurattsurfschool.com).

 

Sweden makes an ideal adventure-racing venue for many reasons, chief of which is its preponderance of summer daylight. For racers tackling Explore Sweden in July, that translates to nearly 24 hours of nonstop action that can stretch as long as 670 miles (1,078 kilometers) and take between four and seven days. Though Sweden's terrain is mellower than that of other locales, the race attracts a flock of strong international teams, who, in the last six years, have transformed it into something rare: a world-class competition open to anyone.
What levels the playing field is that racers never know what to expect. Each year, the race organizers get creative, coming up with a new route and a new set of activities. In 2010, racers traveled 520 miles (837 kilometers) from Norway's high peaks, down through Sweden's river valleys, and to the Baltic coast, trekking,mountaineering, kayaking, mountain biking, and rappelling along the way. Past races have taken participants canoeing, sailing, and what the Swedes call "coasteering," or traveling sections of dramatic coastline by any human-powered means, such as swimming, paddling, and climbing. The diversity ensures that those who complete all disciplines and limp across the finish line after days of nonstop movement will have some serious bragging rights.
Explore Sweden is open to any four-person team willing to pony up the $3,500 entry fee (www.exploresweden.se).