World News

Over the past two weeks, Poland and the Baltic states have all closed their borders to most Russians seeking to cross the border, especially those traveling on tourist visas. The ban on Russian travelers (so far) does not restrict Russians entering Poland the Baltics from other Schengen Area countries. As of last Saturday, however, Finland is also moving toward a ban on Russian travelers and is going further in that it is seeking to restrict even Russians who have visas from elsewhere in Europe. 

The ban in Poland and the Baltic states was perhaps predictable in that those EU member states have long hinted at closing the border to travelers on the justification that too many Russians allegedly support the Russian state’s invasion of eastern Ukraine. 

The issue of border closures is especially sensitive now that there are reports that “thousands” of young men are fleeing Russia to avoid conscription. Reports suggest that many are fleeing to Turkey, but many others have tried escaping to the EU, some via the far northern border that connects to Norway. The wave of wartime emigration appears to have accelerated in recent weeks as the Russian state announced a “partial mobilization” leading to calls for more extensive use of conscription in Russia. 

[Related: “Ukraine’s Regime Is Now Kidnapping Fathers for Military ‘Service’” by Ryan McMaken]

As a result, French diplomat Gérard Araud sought to encourage the Russian emigres seeking to avoid the military draft, tweeting last week that “Helping the men who want to flee from being mobilised would be a humanitarian and military [sic] good decision.”

For their part, however, at least some Baltic politicians are having none of it and appear to be pursuing what might be described as a punitive border policy. Latvia’s foreign affairs minister, for example, is seeking to bar potential Russian immigrants because they did not oppose Moscow early enough to satisfy Baltic politicians. Meanwhile, Estonian Prime Minister Kaja Kallas insisted that all Russians are personally responsible for the war in Ukraine. Not surprisingly then, representatives of the Baltic states were quick to declare that Russian conscientious objectors are not to be granted asylum status.

The situation helps to highlight two important issues related to conscription. The first is that granting asylum to people fleeing conscription is the humanitarian thing to do. The second is that it’s a good thing conscripts at least have the option of fleeing across borders to escape the military draft. This is just one of the many benefits of global political decentralization. Even very large and powerful states ultimately face limits on their power at the frontiers.

Conscription Is a Violation of Human Rights —i.e., Property Rights

Araud is right when he says it would be a good thing to help those “who want to flee from being mobilised.” “Mobilised,” is just a euphemism here, however. Forced military service is nothing less than kidnapping and temporary enslavement. For those who die as a result, of course, conscription amounts to a death sentence. Moreover, the act of fleeing conscription has a long tradition. This is why states often also attach draconian punishments to the act of “desertion” or failing to show up for forced military service. 

Thus, many human beings have long sought ways to escape this fate, and we can find a multitude of examples.

For example, Russia itself—under Catherine the Great—offered asylum from the military draft when the regime invited Europeans to settle in Russia. It was mostly Germans who responded, and who became what are now known as Volga Germans. 

[Read More: “America Has Long Been a Haven for Draft Dodgers from Foreign Lands” by Ryan McMaken]

Many families fleeing military service also emigrated to the Americas, and many millions of Americans are descended from so-called “draft dodgers” fleeing regimes in German states, the Ottoman Empire, Austria-Hungary, and Eastern Europe. 

Americans themselves have a long and glorious history of draft avoidance. During the American Civil War, for example, many Americans fled abroad. As one historian puts it: “[m]en possessed of robust health suddenly discovered some terrible ailment and had to seek treatment in a different climate. Canada at once became a Mecca for such invalids.”

[Read More: “The Heroic Draft Dodgers of the American Civil War,” by Ryan McMaken]

Those who opposed the draft in this period also did not shy away from using violence to do so. Both men and women were known to physically attack draft agents, seize the agents’ lists of names, and destroy them. 

In all this, of course, those avoiding forced military service were morally justified in doing so. These acts are simply acts of self-defense. 

Thus, when foreign polities offer refuge to these men, they perform a humanitarian act. For the most part, however, states have often been reluctant to define the avoidance of military service as a qualification for asylum. The reasoning for this should be obvious: most states want the continued option of impose their own military draft, so to define foreign conscription in general as a human rights violation would suggest that conscription is morally illegitimate. Clearly, most state regimes don’t want to admit this. Those fleeing conscription nonetheless fit the common definition of refugee which is a displaced person unwilling to return to the country of origin due to a “fear of persecution.” 

Nationalist sentiment can be a factor here as well. It is likely that at least one reason politicians from the Baltic states and Poland are reluctant to accept Russians fleeing conscription is that many voters in these countries simply don’t like Russians and don’t want them there. It’s an understandable sentiment given the historical context, but it doesn’t change the fact that, in principle, those fleeing forced military service are indeed refugees. 

The Benefits of Global Decentralization 

We are fortunate to live in a world where no single state has managed to impose a one-world government. Were that the case, those fleeing government coercion would have no options for escape. A two-state world wouldn’t be much better either, as is shown in the fact that the EU overall is already moving in the direction of barring Russian emigres.

Fortunately, however, the world has hundreds of independent polities. Indeed, Rinkēvičs summed up the situation when he justified Latvia’s closure to Russians on the grounds that “There are … plenty of countries outside [the] EU to go.” He’s right, and fortunately, there are many places in the world beyond the reach of the EU. These places are often harder for Russians to reach, but at least these countries exist independent of the whims of the regimes in both Russia and the EU.

Unfortunately, though, emigration is generally a costly solution. Fleeing one’s home nation with uncertain prospects for a legal return imposes a high cost, indeed. This is always made worse when one is a resident of a very large state where relocation separating from friends and family by hundreds, if not thousands, of miles. Potential Russian emigres also face additional costs if they only speak Russian. Only three countries outside Russia have Russian as an official language. The Russian state has managed to gain a near-monopoly over the Russophone world. 

As imperfect as it is, however, the option of exit is an important limit on the power of states to violate natural rights through conscription, and for many refugees it may indeed be a viable option. 

Joe Biden says the pandemic is over in an attempt to get a few more votes. But the administration certainly isn’t acting like the “pandemic is over” in terms of actual policy.

Original Article: “The Pandemic Is “Over,” but the Feds Aren’t Giving Up Their Emergency Powers”

This Audio Mises Wire is generously sponsored by Christopher Condon. 

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There is no doubt that Joe Biden’s student loan forgiveness plan will help the people it is intended to help at everyone else’s expense, as critics correctly point out. The bigger issue is that it does absolutely nothing to lower the costs associated with higher education.

Imagine you accidently shoot yourself in the foot with a nail gun. Enduring incredible pain, you drive to the hospital. Now imagine that the doctor, seeing you in this terrible pain, gives you a prescription for Percocet with infinite refills but does not remove the nail!

Months go by and the pain keeps getting worse, and now you are on the street, looking for heroin. You overdose, but luckily your friend is nearby and he calls the doctor, who arrives on the scene just in time to save you with a shot of Narcan. You tell him that the pain in your foot is getting worse. Thinking of nothing else he can possibly do, he doubles your dosage of Percocet.

In this analogy, Biden is the doctor and the student loan forgiveness plan is the shot of Narcan. According to the Education Data Initiative, the average cost of college tuition, fees, and room and board for a full academic year in 2022 is $35,551. According to the National Center for Education Statistics, the figure for 1980 was $2,809. Even after adjusting for inflation, the increase in the cost of a college education is still over 230 percent. What explains this?

In 1965, the federal government began securing student loans under the Higher Education Act. In 1993, the federal government began lending to students directly. Now, in 2022, outstanding student loan debt sits at $1.748 trillion, with nearly all student loans coming from the federal government.

In 1960, 7.7 percent of the US population over the age of twenty-five had graduated college, and by 2021, that measure had grown to 37.9 percent. Some may try and point to this increase in the demand for higher education, influenced by the abundance of lax and easy loans, as an explanation for the exponential rise in college costs. After all, the law of supply states that, other things held constant, suppliers will only supply more of a good at higher prices. However, other things have not held constant. The federal government has been ready and willing to loan more to meet every single increase in price.

Since 1965, universities have been sheltered from market forces. Because student loans will continually increase to meet the rising costs, universities have no incentive to compete based on price. In fact, they have every incentive to keep raising prices because this hasn’t resulted in lower attendance.

With less regard for costs and pricing, schools feel pressured to compete for students by other means, adding things such as indoor swimming pools, lazy rivers, rock-climbing walls, and unions for students of every marginal identity, as well as creating nonsensical administrative roles like diversity officers and a dean of diversity for every department, all of which increase costs.

Grade inflation, the phenomenon of awarding progressively higher grades over time by lowering academic rigor, has perhaps been the most insidious way to compete. No young person wants to take out thousands a semester in debt for courses they can’t pass, and being cash cows, no college wants to lose prospective students or have them fail out because their courses are too difficult. In 1960, only about 15 percent of grades awarded were As. By 2012, As had grown to 45 percent of all letter grades awarded.

It was after the Higher Education Act of 1965 that the first modern pseudodisciplines appeared in the university. In the early 1970s, the first courses in women’s studies were offered in universities. As it became easier to be admitted to and to finance college, schools felt pressure to offer paths of study for people with varying interests and varying intellectual ability. Absent government loans, cultural Marxism courses would be too impractical to exist.

Because loans are so easy to obtain in such large amounts, young people are less encouraged to make responsible decisions. For example, attending a community college for their general education requirements and later commuting to their nearest university. Or curbing their interest in Marxism and pursuing a two-year technical degree instead. To their credit, many borrowers chose these more practical options, given that Biden’s loan forgiveness is estimated to eliminate the debt of one-third of borrowers.

All of this has diminished the real value of degrees by creating a giant college bubble. The bachelor’s degree is the new high school diploma, and we aren’t any smarter for it. Generally, the more abundant a good becomes, the lower its price should be. Government loans are the cause of exorbitant college costs. Without them, the abundance and lower value of degrees would be reflected in their price.

The exponential rise in the cost of a college education simply would not have been possible without government student loans. It is the definition of moral hazard in the extreme. The government doesn’t need to worry about profit and loss. It doesn’t need to worry about going out of business, because it is bankrolled by the taxpayers in perpetuity. The opposite is true of private lenders in a free market. They would have to consider many things, like SAT scores and high school performance. They might even want the student to take an IQ test. But most importantly, they would need to know what the student is going to study. A premed or engineering student would be a far greater prospect for a loan than a gender studies major. The federal government considers nothing because it doesn’t care how much of our money is wasted.

At the thought of facing the real world, every eighteen-year-old is filled with existential dread. It is understandable that they would like to avoid it for four more years. But it is morally outrageous to ask their peers who went straight into the workforce to pay for it.

The solutions to student loan debt and the costs of higher education are simple, obvious, and one and the same. The federal government must stop offering student loans and allow borrowers to file for bankruptcy. Economists have known this for a long time. Unfortunately, this harsh reality is so politically unpopular that both the public and their representatives are in complete denial of it. Instead of recognizing the trend and correcting their missteps, they have stepped further in the wrong direction at every moment of decision and continue to do so.

The sad, but hopeful, truth is that with modern technology, the vast majority of higher education could be offered at lower costs than ever before. Many world-class professors post their lectures to YouTube. Working people with intellectual interests buy products from the Great Courses to listen to throughout their day. Interactive educational systems like MyMathLab, by Pearson, make learning calculus easier than learning one-on-one with a professor. If the government would get out of the student loan business, market forces would be restored to higher education. The result could be glorious.

So-called recession and recovery are false metrics. The falsity comes from focusing on the total earned by all people, not the total earned on average by a given individual.

If in total, people earn one percent more, but in total, the population is two percent more, then on average a given individual earns one percent less. On average, a given individual is in a recession if the total earnings per person are decreasing. On average, a given individual is in a recovery only if the total earnings per person are increasing.

The false metrics of so-called recession and recovery push individuals’ expectations lower. With expectations lower, government people can more easily claim to have made us beat these expectations. (“Don’t believe what you see around you, believe what we tell you.”) This helps enable government people to continue to mess with our earnings and mess with us.

A genuine measure of economic performance would be the real net voluntary value-added per capita:

• Real to roughly correct for inflation, so inflation doesn’t make earnings seem larger when purchasing power isn’t larger.
• Net to correct for increasing debt and for capital equipment consumption, so debt-fueled spending doesn’t make earnings seem larger, and so wearing out of capital equipment doesn’t make earnings seem larger.
• Voluntary to focus on the earnings that individuals spend or save themselves, so the earnings that governments take and spend for their cronies don’t make earnings sound larger.
• Per capita to correct for population changes, so in migration of less productive people doesn’t make earnings seem larger.

So then this mouthful—real net voluntary value-added per capita—is, on average, roughly the real value that’s added by a given individual and that’s controlled by that individual. In short, this is roughly, on average, people’s genuine, personally useful earnings.

Note that these measured earnings don’t count all the value added, but are only lower-bound minimums. The actual value added is higher. From the start, every customer values essentially every product he purchases more highly than the price he pays. Over time, every customer also ends up 7learning more about a product’s attributes as he uses the product, and on average ends up valuing the product even-more highly. And every customer fully benefits from innovations only sometime after they’re first created, once the innovations get used in as many products as will benefit from the innovations.

And although all such unrecorded added value goes unquantified, qualitatively it’s plausible to expect that the total of such unrecorded added value will tend to decrease when the added value decreases, will tend to remain constant when the added value remains constant, and will tend to increase when the added value increases.

After all, economic growth always reflects change. Change always is driven by opportunities. Opportunities largely are seized by innovating. And innovations cost customers less than they’re worth to customers.

When people earn more, individuals on average get wealthier. When people earn less, individuals on average get poorer.

For people to earn more, individuals have to add more value in each of their roles:

• Individuals acting as investors have to choose to place more of their money at risk up front in order to generate returns in the future.
• Individuals acting as producers have to choose to direct more resources to projects that will be at risk upfront in order to earn profits in the future.
• Individual workers have to prepare themselves to succeed in these projects and in the resulting production, and have to succeed in these projects and in this production. They have to earn more.
• Individuals acting as customers have to choose sooner or later to buy more products.

Each such action of individuals takes adequate information, skill, and effort. This information is limited, these skills are limited, and these efforts can only be supplied at limited rates. As a result, these efforts have to extend over consequential durations of time. True recovery takes time.

There are no shortcuts to taking the required actions, and to having these efforts extend over consequential durations of time. Learning curves are real. After all, if everyone already knew what to do to add more value and already had the capital equipment in place to add more value, then everyone would already be adding more value. In this case, wealth would chiefly be increasing only incrementally due to saving, not substantially also due to significantly adapting and reconfiguring.

Government officials lack information comparable to what individuals as a whole possess. Government people also lack skills comparable to what individuals as a whole will have. Government people have fewer resources and less time than individuals as a whole have.

Even if government people had comparable information, resources, and time, government people would lack the right to substitute their wishes for individuals’ wishes. Individuals are sovereign over their own actions. Government people are not sovereign over individuals’ actions.

These circumstance hold true now, and these circumstances will hold true for all time. In these circumstances, government people can do only one thing that will help individuals get wealthier: get themselves out of individuals’ ways, and get their colleagues out of individuals’ ways.

Borrowing and spending doesn’t increase wealth. Adding value increases wealth.

Increasing wealth requires letting less-economic producers fail, letting more-economic producers use more resources, letting people move to where they will add more value, letting people add more value, and letting people choose to buy products that they value more.

All together, increasing wealth takes less government, and increasing wealth takes time. The less government, the less time it takes to increase wealth, and the greater the rate that wealth increases.

At a White House summit tomorrow, President Joe Biden will repeat his proclamation of a goal to end hunger in America by 2030. In 1969, President Richard Nixon promised to end hunger at a similar White House summit. The vast expansion of federal food assistance after Nixon’s pledge failed to end the problem, but that won’t deter Biden from claiming that new federal handouts will end hunger.

Between the Nixon and the Biden eras, there was another pledge on hunger that has almost vanished into the memory hole. In 2008, presidential candidate Barack Obama promised to end child hunger by 2015. Unfortunately, policy makers and pundits learned nothing from the disastrous policies that Obama followed in a futile attempt to reach that goal.

Obama vastly expanded federal school feeding programs with the Healthy, Hunger-Free Kids Act of 2010. Thanks to that law, all schools with 40 percent low-income students were entitled to offer free federally subsidized breakfasts and lunches to all students. Similar programs have sharply expanded free meals for schoolkids since the start of the covid pandemic.

But for almost fifty years, the Government Accountability Office (GAO) has lambasted the federal school lunch program for its high fat and poor nutrient content. A University of Michigan study published in 2010 found that students who regularly ate school lunches were 29 percent more likely to be overweight and that consumption of school lunches was the strongest single predictor of childhood obesity.

The failure of school lunches to improve diets did not deter the Obama administration from launching a messianic campaign to foist free breakfasts on millions of additional children. First Lady Michelle Obama, who spearheaded the effort, declared in 2010 that because children’s nutrition is so important, “we can’t just leave it up to the parents.”

But schools offered “carb loading” more appropriate for marathon runners than for schoolchildren. Donuts, pastries, apple juice, and other high-sugar foods had starring roles in school breakfast menus across the nation. Some school officials scorned parents who protested schools feeding their kid a second breakfast (after they’ve eaten at home) and deluging them with sugary junk.

How bad was the federally subsidized fare? The US Department of Agriculture’s 2012 School Nutrition Dietary Assessment Study found that the typical school breakfast included almost the entire maximum recommended daily intake of sugar and fat. The number of calories from solid fats and added sugars in the average elementary school lunch “was 15 percent above the maximum recommended for the entire day.” Any young child who ate both a school breakfast and lunch would far exceed the recommended daily thresholds for sugar—even before consuming any snacks or dinner.

To massively expand the program, the Obama administration rewarded schools that encourage all children to eat free breakfasts in the classroom. But breakfast in the classroom programs “may contribute to excess calorie intake,” according to a 2013 American Journal of Public Health analysis. A 2015 National Bureau of Economic Research report found that providing breakfast in the classroom more than doubled “the likelihood of eating two breakfasts.” That report also found no improvement in daily nutrient intake from expanded school breakfast programs. According to a 2016 Journal of the Academy of Nutrition and Dietetics study:

Receiving school breakfasts more than doubled the odds of becoming obese for children from families below the federal poverty line compared with children of similar socioeconomic backgrounds who did not regularly receive school breakfasts.

Though politicians promised to reform the program, school meals continue subverting healthy eating habits. A 2014 analysis by the Johns Hopkins Bloomberg School of Public Health noted that the USDA’s “new requirements do not limit the amount of added sugar in school meals” and may “be perpetuating eating habits linked to obesity, diabetes and other diet-related diseases.” Homer Simpson is still the patron saint of school breakfasts. Online menus show that schools continue tossing kids donuts for breakfast.

A 2021 analysis published in the Nutrients journal found that almost all school systems exceeded the dietary guidelines for sugar in breakfasts. Among the most sugar-laden foods routinely given to children were sweetened cereal, flavored milk, toaster pastries, cookies, cakes, and cinnamon buns. The Center for Science in the Public Interest recently derided public schools for relying on Lucky Charms, Marshmallow Mateys cereal, and Rich’s Chocolate Chip and Cinnamon Ultimate Breakfast Rounds. It is a federal crime for food manufacturers to sell products without nutritional labeling. But the USDA does not require schools to disclose to parents how much sugar is being given to their kids.

The Obama administration tacitly presumed that low-income children were suffering severe food shortages. Yet, as a 2012 commentary in the Journal of the American Medical Association noted, “seven times as many [low-income] children are obese as are underweight.” But that wasn’t going to be a problem because Ms. Obama launched her “Let’s Move” campaign in 2010 to “solv[e] the problem of childhood obesity in a generation.” She proclaimed a goal of reducing the percentage of overweight and obese children by 2.5 percent by 2015. She was speedily awarded sainthood for her lofty aspirations.

Despite glowing press coverage for the “Let’s Move” campaign, even more children are super-sizing nowadays. The percentage of overweight youth rose from 14.9 percent in 2009–10 to 16.6 percent in 2015–16, while the percentage of obese youth rose from 16.9 percent to 18.5 percent, according to the Centers for Disease Control and Prevention. The New York Times noted in 2020 that reports that the child obesity problem had stabilized were “an illusion. If anything, things have gotten worse.”

Unfortunately, politicians can reap applause for fighting hunger regardless of the collateral damage that federal food programs inflict. “Government feeds best” has been a disastrous recipe for American children. But don’t expect the Biden administration to recognize the dietary carnage that Uncle Sam has sown for decades.

Conservatives have missed the point that it is not students particularly that are at fault for the student loan crises, but the entire bureaucratic economic-political system.

Original Article: “Seeing the Student Loan Crisis as a Form of Boom and Bust”

This Audio Mises Wire is generously sponsored by Christopher Condon. 

[Chapter 2 of Per Bylund’s new book How to Think about the Economy: A Primer.]

Like other sciences and fields of study, economics is a body of theory. Theory is a collection of explanations that allows us to understand something. Economic theory allows us to understand how an economy works. It explains the workings of the economy as a whole so that we can understand the meaning, impact, origins, and evolution of economic phenomena.

For theory to be reliable and useful, it must provide a coherent picture. If it doesn’t, then some of its explanations are contradictory. Contradictions are a sign that something is wrong. So, the body of a theory must be logically stringent and must make up a consistent whole. This means it must be consistent with the basic assumptions on which it rests—it must be true to first principles.

But it is not enough to produce a consistent whole based on first principles if those principles are themselves flawed. After all, it is possible to produce an internally consistent theory based on faulty assumptions. Such systems can appear very convincing because they are consistent, but they still fail to provide real understanding because every explanation hinges on something that is not true and is perhaps not even reasonable. You would not want to cross a bridge designed by an engineer who believes paper is stronger than iron. It doesn’t matter how accurate the math used is or how sophisticated the design—the assumption is wrong and therefore the bridge is not reliable. It cannot hold the expected weight even if all the calculations are accurate. The same is true with economic theory: it must be built on solid principles and reliable assumptions.

Consequently, for a theory to properly explain how the world works, it must be internally consistent and based on true assumptions. A theory cannot meet only one of those criteria and still provide us with real understanding of the world; it must meet both.

The Starting Point

Economics is based in the concept of human action as purposeful behavior. What this means is that when people act, they try to achieve something. It does not mean that they are always accurate or do the “right thing” (whatever that is). But it means the reason they try to achieve it is that they value the expected outcome in some way. What they value, why they value it, and whether it is reasonable or rational to do so is irrelevant. Such things lie beyond the scope of economic theory. What matters is that their action is motivated by the expected outcome.

It may appear strange that economics does not deal with why people value some things but not others. But it does not. People’s dreams, fantasies, and imaginations only have economic relevance if they are acted upon. After all, if you have a dream that you do not act on, you are not making it happen. It remains but a dream. The dream itself makes no difference in the world; merely wishing does not make it real.

So, action is a rather logical starting point for studying social reality. Acting is how we make changes to the world.

Unpacking Human Action

Recognizing action for what it is—purposeful behavior—is surprisingly powerful. It provides us with insights about human affairs far beyond what most people think possible. In fact, the economist Ludwig von Mises showed that economic theory can be derived from this simple concept.

Lets  look at the types of things we can learn about the world simply from elaborating on what human action means. We have already pointed out that actions are taken for some purpose that makes sense to the actor. We know that actions are directed toward attaining something—some outcome—that the actor considers beneficial. In other words, actions are intended to achieve something the actor personally values.

Because actors are trying to achieve something, it follows that they have not already attained it and take actions in order to become better off than they already are. Consequently, we conclude that there are things actors want that they do not have but they think they can attain by taking an action that they believe would make them better off. In other words, actions are fundamentally causal: we act because we believe that we can bring about a specific change.

We also conclude that actors think their action is the best or only way to attain the outcome. Why else would they undertake the action? That they have not already done so suggests that they either were unaware of the possibility, lacked the means to act on it, or ranked other ends higher. All of these suggest scarcity—that there are insufficient means to satisfy all the wants held—and that the actor makes choices. That the actor must choose implies that he or she must make tradeoffs. In other words, the actor economizes.

We can also conclude that human action is in fact always individual action motivated by some personally valued end and taken toward that end. Other individuals may have the same outcome in mind, and to be feasible an action might require collaboration, but this does not change the fact that each person acts. People may choose to act in concert, but those are individual choices. The group itself does not act. That four people collaborate to lift and move a piano does not mean that the group lifted the piano but that the four people coordinated their individual efforts toward that common end. In other words, economics is methodologically individualist.

Things like business firms, groups, and governments exist and have a real effect on how people act. But we cannot understand how without also recognizing that the people in firms, groups, and governments act. By recognizing this, we understand that actors within groups may have goals that contradict the group’s stated goals and therefore there are tensions and some people may act in ways that undermine the group’s stated goals. This would not be possible had we assumed that the group itself acts.

The Genius of the Action Axiom

Economics uses logical reasoning to uncover the processes that make up the economy and it recognizes that the motivation for action is personal—that value is subjective. Value subjectivity allows economists to formulate a realistic and reliable theory that explains prices as a result of personal valuations on the margin. Because individuals choose between actions, they must rank their options. They do so subjectively, based on the anticipated value that they expect the action’s outcome will provide them.

We never value things in themselves, but for the satisfaction we think they can provide us. A glass of water in the desert is probably more satisfying than a glass of water while loafing on the couch at home. Why? Because we value things by the satisfaction they can give us in the situation we are in. When loafing on the couch, the greatest satisfaction we can get from a glass of water is not nearly as high as when trying to stay hydrated and alive in a desert. And the more we have of something, the lesser the satisfaction of using another one. In fact, each unit of something is valued at the satisfaction we can get out of the last (marginal) unit. So in any situation, if we have three glasses of water, we value each of them less than if we had only two. But more than if we had had four. Because the value to us of any one glass is the satisfaction it contributes—the lowest and marginal value. That’s why we act differently depending on how many we have of something and how important those things are to us—what satisfactions we expect to get from them.

In other words, action connects the subjective valuations that are in our heads—our rankings of the possible outcomes of our actions—with the things that exist outside our minds. Action is the bridge between personal valuations, which cannot be measured and outcomes in the real world. By understanding action as the starting point of economic reasoning, the fact that value is subjective poses no problem for understanding the production of goods and services and other economic phenomena. We do not have to know what or why people value, only that they do. And that they act accordingly.

All economic phenomena—resource allocations, market prices, business cycles—are outcomes of human actions, which we know are always purposeful and economizing. The task for economics is therefore to understand the economy and everything it entails from the perspective of the ultimate cause: action.

While people from poor countries seek to live in places like the USA because of its stable institutions and welfare state, could migration of people from stable countries to less-developed ones make those countries better off?

Original Article: “The Other Immigration Question: Should People from Wealthy Countries Migrate to Poorer Ones?”

This Audio Mises Wire is generously sponsored by Christopher Condon. 

As the citizens of the European Union and the United Kingdom are increasingly struggling to make ends meet due to record levels of inflation, and as the winter draws closer, a serious cost of living crisis is set to spiral out of control. Skyrocketing energy costs, combined with galloping prices for food and other essential goods and services are bound to erase whatever was left of the “middle class.”

Households that were once comfortable, and even had some savings aside, have been placed under severe financial duress already during the summer, and, unfortunately, the worst is yet to come. In what has been dubbed the “eat or heat” crisis, we can expect to see the situation deteriorate even further in the coming months, a development that could have critical and far-reaching implications beyond economics.

For those with unfailing memories and an attention span befitting an adult, it will not be hard to recall the assurances of politicians and central bank officials at the end of last year, that inflation was “transitory” and that anyone who said otherwise was a politically motivated alarmist. As is abundantly evident today, and has been for months, all these statements were entirely wrong; a “mistake” made either through sheer ignorance and professional incompetence, or through malicious intent and professional mendacity.

Either way, the result was the same. The public was misled, and they believed all the self-congratulatory messages about how the actions of central planners of all kinds “defeated covid,” “avoided a recession” and were getting us all “back on track to economic growth and prosperity.” So, they trusted their rulers and very few anticipated what was just around the corner; even fewer successfully prepared for it. In fact, even today, most citizens still fail to realize that it was these actions that brought them to the untenable financial position they find themselves now.

And thus, once consumer prices started picking up in earnest and consistently, most households were at a loss as to how to respond and whom to blame. Most governments reacted the same way. They directed public anger elsewhere, pointing the finger at Russia and blaming Vladimir Putin for the out-of-control increases in food prices and soaring electricity costs.

And as for “practical” solutions to the problem, with the benchmark European gas price having exploded over 550 percent over the past twelve months, central planners came up with a series of absurd policies, ranging from the inane to the comical. From imposing temperature limits on public buildings and swimming pools, to encouraging male workers to come to work without a tie in the summer months. The most counterproductive of all approaches, of course, was the one most European states adopted: giving cash to citizens to pay their bills. In other words, politicians have been trying to keep their favorability ratings up by making a problem worse, which is hardly surprising.

Still, the problem stubbornly remained and eventually got worse. In August, eurozone inflation hit another record high at 9.1 percent, with no sign of abating and projections growing more and more confident that it will surpass 10 percent in the coming months. In the UK, the situation is even more dire, with Goldman Sachs warning that it could exceed 22 percent in January. And the most worrying part of it all is that these record price jumps are only the tip of the iceberg. They are calculated using extremely biased and inaccurate formulae, heavily skewed to underestimate real inflation, the financial pain people actually feel on their daily lives. The reality on the ground is much worse.

In Germany, where inflation climbed to a forty-year high of 8.8 percent in August, nearly three million children now live in poverty, a number that soared since last spring, according to children’s charity Arche. As its founder, Bernd Siggelkow, pointed out, in Europe’s economic powerhouse, “more and more people are coming to us, asking for support. It seems that nobody will do anything until a child dies of hunger in Germany.”

In Italy, more and more bars and restaurants are putting their gas and electricity bills on public display, to show customers the stress they have been under, and the choices they are facing between hiking their own prices or going out of business. In Greece, where inflation now stands at a twenty-nine-year high, rent has climbed to levels that already threaten many families with homelessness. Having seen a surge in longer-term tourists with a lot of covid money to spend on longer vacations, apartments in Athens have become unaffordable for locals. The government handouts to low-income Greeks have only made the situation worse, triggering bidding wars that fuel the rent rises.

As for what comes next, one can only imagine how dire these pressures can become once winter sets in. The energy crisis is set to escalate massively, not only because of the expected increase in demand, but also because of further supply disruptions. While it didn’t create the problem, the Ukraine-Russia conflict certainly exaggerated it, and now Europe finds itself in a very unenviable position.

Serious concerns are on the rise that Russia’s Gazprom, which routinely shuts down the Nord Stream 1 pipeline for maintenance reasons, might simply not open it up again one day. Whether this is a credible threat or not is really beside the point, as the fear alone has proven to be more than enough to wreak havoc with the markets and send volatility to record highs.

Also, efforts to restart long-demonized nuclear power plants have been largely insufficient. After years of cutting funds and attempting a premature transition to “green energy,” which couldn’t begin to cover the needs of the population, politicians are slowly recognizing that power plants don’t have “on/off” switches one can simply flick when they realize they made a mistake.

Businesses already have been warned they might have to halt operations in the winter because of expected shortages and households are already making daily sacrifices in food and other necessities to be able to afford heating over the coming months. These pressures appear primed to translate to political and social tensions. As we can see already from the UK leadership race, the main topic of public interest is the cost-of-living crisis.

For the rational long-term investor and saver, all these developments must be taken into consideration. The writing is on the wall and at least in this case, nobody can say they were caught by surprise when we see a steep deterioration in the short and medium term. For physical precious metals holders, this is a particularly important moment. Building up one’s position and using the present price levels in gold and silver as a rare buying opportunity is bound to prove immeasurably beneficial as we keep going down this spiral.