Hans-Hermann Hoppe on the Long-Term Capital Effects of Taxation

From The Economics and Ethics of Private Property

Taxation is a coercive, non-contractual transfer of definite physical assets (nowadays mostly, but not exclusively money), and the value embodied in them, from a person or group of persons who first held these assets and who could have derived an income from further holding them, to another, who now possesses them and now derives an income from so doing. How did these assets come into the hands of their original owners? Ruling out that this was the outcome of another previous act of taxation, and noting that only those assets can be taxed that have not yet been consumed or whose value has not yet been exhausted through acts of consumption (a tax-gatherer does not take away another man’s garbage but rather his still valuable assets!), three and only three possibilities exist: They come into one’s possession either by one’s having perceived certain nature-given goods as scarce and having actively brought them into one’s possession before anyone else had seen and done so; by having produced them by means of one’s labor out of such previously appropriated goods; or through voluntary, contractual acquisition from a previous appropriator or producer. Only through these types of activities is one capable of acquiring and increasing valuable—and hence taxable—assets. Acts of original appropriation turn something which no one had previously perceived as a possible source of income into an income-providing asset; acts of production are by their very nature aimed at the transformation of a less valuable asset into a more valuable one; and every contractual exchange concerns the change and redirection of specific assets from the hands of those who value their possession less to those who value them more.

From this it follows that any form of taxation implies a reduction of income a person can expect to receive from original appropriation, from production, or from contracting. Since these activities require the employment of scarce means—at least time and the use of one’s body—which could be used for consumption and/or leisure, the opportunity cost of performing them is raised. The marginal utility of appropriating, producing, and contracting is decreased, and the marginal utility of consumption and leisure increased. Accordingly, there will be a tendency to shift out of the former roles and into the latter ones.

Thus, by coercively transferring valuable, not yet consumed assets from their producers (in the wider sense of the term including appropriators and contractors) to people who have not produced them, taxation reduces producers’ present income and their presently possible level of consumption. Moreover, it reduces the present incentive for future production of valuable assets and thereby also lowers future income and the future level of available consumption. Taxation is not just a punishment of consumption without any effect on productive efforts; it is also an assault on production as the only means of providing for and possibly increasing future income and consumption expenditure. By lowering the present value associated with future-directed, value-productive efforts, taxation raises the effective rate of time preference, i.e., the rate of originary interest and, accordingly, leads to a shortening of the period of production and provision and so exerts an inexorable influence of pushing mankind into the direction of an existence of living from hand to mouth. Just increase taxation enough, and you will have mankind reduced to the level of barbaric animal beasts.

Hans-Hermann Hoppe. The Economics and Ethics of Private Property (Kindle Locations 438-463). Ludwig von Mises Institute. Kindle Edition.


Quote from Guido Hulsmann’s Mises Biography

Guido Hulsmann’s massive biography of Ludwig von Mises, entitled “Mises: The Last Knight of Liberalism” is a real gem. Liberalism in the title, of course, refers to the Old Liberalism, or classical liberalism, (pre-American Progressivist/socialist “liberalism.”) which taught the freedom of the individual against statism and political power– and more importantly at a historical level, developed the economic case for free trade and the market system.

The following was pulled from the very beginning of the Preface.  I enjoyed it because it succinctly captures the difficult political context in which Mises developed his socio-economic thought.  The end of the quote makes mention of Mises’ audacious stance on epistemology, which was quite unacceptable during his time with the rise of logical positivism.  And today too, embracing logic to the extent Mises had done is considered “old fashioned” and un-“scientific.”41v+FKNfYyL._SX322_BO1,204,203,200_

In the summer of 1940, with Hitler’s troops moving through France to encircle Switzerland, Ludwig von Mises sat beside his wife Margit on a bus filled with Jews fleeing Europe. To avoid capture, the bus driver took back roads through the French country- side, stopping to ask locals if the Germans had been spotted ahead—reversing and finding alternative routes if they had been.

Mises was two months shy of his fifty-ninth birthday. He was on the invaders’ list of wanted men. Two years earlier, they had ransacked his Vienna apartment, confiscating his records, and freezing his assets. Mises then hoped to be safe in Geneva. Now nowhere in Europe seemed safe. Not only was he a prominent intellectual of Jewish descent; he was widely known to be an arch- enemy of National Socialism and of every other form of socialism. Some called him “the last knight of liberalism.”

He had personally steered Austria away from Bolshevism, saved his country from the level of hyperinflation that destroyed inter- war Germany, and convinced a generation of young socialist intellectuals to embrace the market. Now he was a political refugee headed for a foreign continent.

The couple arrived in the United States with barely any money and no prospects for income. Mises’s former students and disciples had found prestigious positions in British and American universities (often with his help), but Mises himself was considered an anachronism. In an age of growing government and central planning, he was a defender of private property and an opponent of all government intervention in the economy. Perhaps worst of all, he was a proponent of verbal logic and realism in the beginning heyday of positivism and mathematical modeling.


Only Individuals Can Be Victims

Crimes are those actions which have as their victims actual individual human beings. There is no abstract “crime against society” as the Progressives want you to think; nor is there a “crime against the state” as fascists want you to think. Rather, a crime is something which actually aggresses the person or property of another individual specific.

In this way, actual justice has to do with crimes and there is no such thing as “social justice,” much to the disdain of the socialists, left-libertarians, progressive Christians, and so on. Any crime which, say, aggresses hundreds of people is a “crime against many individuals,” not a “social crime.” Society has no rights, for society is not a thing in itself. We must speak in terms of the individual, lest collectivism creep in unannounced.

With this understanding, we also eradicate the guilt-manipulative thinking of modern Progressives who seek to make certain classes of people feel bad for the treatment of other classes of people, decades or even centuries in the past. Individuals today, of course, are not responsible for the treatment of victims in the past. The state is attracted to deviations from the true nature of criminality and justice because, besides its own systematic deviation from the nature of justice, it also understands that it can leverage for its own power the class conflict created by distortions in justice theory.


Ugh, Doolittle.

Curt Doolittle is the worst. Primarily because he owns Propertarianism.com, but is the worst propertarian I’ve ever come across (for the record, I love the word propertarian, and wish it hadn’t taken the domain– humph!). If it wasn’t for that, I would ignore him completely. He has profoundly and impressively misunderstood nearly everyone in the Austro-libertarian movement and holds himself out to be the Great Corrector of their mistakes, the crusader who has learned somewhat from them, but purified them of their own irrationalities.

Besides this, his writing is unclear and vague. He uses big words in a cringeworthy manner and I’ve rarely been able to truly understand what he is trying to get across. Unfortunately, when I do, I realize just how awful his “contributions” are. If you want to gouge your eyes out, read his “basic concepts” page. If you want to simply pound your head into the desk, read his pieces on the mistakes of Rothbard, Hoppe, and Mises. Apparently, he’s got tips and strategies for a full-fledged revolution. Spare me.

He writes recently:

“Praxeology is a method of testing rational choice and moral reciprocity in economic propositions when people are possessed of information heavily weighted by prices, and when they are rational actors, working from simple stacks of priorities.

Then he counters Mises (or at least the straw man of Mises), with this:

“People act irrationally because of a set of cognitive biases and fragmentary information.”

What. The. Heck.


1). has nothing to do with testing, much less testing choices and whatever moral reciprocity means;

2) has nothing to do with morals, much less morals that are allegedly “in” economic propositions;

3) is actually a science in which economics is a subset, that is, it doesn’t test economic propositions;

4) is not bound by situations where people are “possessed of information weighted by prices” (whatever that means), but rather observes that men make choices and face tradeoffs in a world of scarce resources;

5) teaches that humans are always rational in the sense that they employ certain means to achieve chosen ends (he is assuming that Mises is saying that men always act logically— which means he never read Mises).

In short, one rarely comes across someone who so obviously and magnificently misunderstands such a simple concept as praxeology. In one sentence, we have the understanding of a third grader who criticizes Mises’ deficient understanding of things without himself understanding Mises 101.


Jim Grant Smashes an Apologist for Negative Interest Rates

What a zinger. Jim Grant obliterates Ken Rogoff’s lousy case for negative interest rates. Grant writes of Rogeff:

As for the campaign for zero cash in the service of negative interest rates, Mr. Rogoff’s brief is best seen not as detached scientific analysis but as a kind of left-wing crotchet. Strip away the technical pretense and what you have is politics. The author wants the government to control your money. It’s as simple as that.

Here’s another great quote:

A positive integer would almost seem inherent in the idea of interest. When most of us want something, we want it now. And if we don’t have the money to buy it now, we borrow. “Present goods are, as a rule, worth more than future goods of like kind and number,” posited the eminent 19th-century Austrian theorist Eugen von Böhm-Bawerk. He called this behavioral truism the core of his theory of interest.

Interest rates are prices. They impart information. They tell a business person whether or not to undertake a certain capital investment. They measure financial risk. They translate the value of future cash flows into present-day dollars. Manipulate those prices—as central banks the world over compulsively do—and you distort information, therefore perception and judgment.


Alex Epstein Obliterates George Clooney

Alex Epstein, who wrote this book (which I need to read– as this post reminded me), issued a response to the following George Clooney statement on climate change:

Well it’s just a stupid argument. If you have 99 percent of doctors who tell you ‘you are sick’ and 1 percent that says ‘you’re fine,’ you probably want to hang out with, check it up with the 99. You know what I mean? The idea that we ignore that we are in some way involved in climate change is ridiculous. What’s the worst thing that happens? We clean up the earth a little bit?

The Moral Case for Fossil Fuels, Written by Alex Epstein

Epstein writes:

I am something close to terrified about Clooney’s comment: “What’s the worst thing that happens? We clean up the earth a little bit?”

Clooney is talking about the idea that we should “do something about climate change.” For Clooney’s environmentalist allies, that typically translates into: globally outlaw 80-95 percent of future fossil fuel use and force us to try to subsist on expensive, unreliable solar and wind energy.

And again:

For someone who understands that affordable energy is a life and death issue, this does not translate into “clean up the earth a little bit,” it translates into “making life on earth hellish for billions.” It would mean that the 1.4 billion people around the world who lack electricity—and thus have a life expectancy of 48—would not be lifted out of poverty, but would be joined by billions more.

It would mean a far dirtier environment—only high-energy, highly-developed countries have clean environments. And it would mean a far more dangerous climate. While Clooney makes time to publicly declare his solidarity with the victims, he should take some time to think about what would have actually protected them: industrial development powered by affordable, reliable energy.