Gujarat’s Prohibition.

I have been schooling in the state of Gujarat in India for the last four years. It is one of the few places in India that still has a prohibition on consuming liquor. If you are wondering whether liquor is available contrary to established laws then yes – it is available and it is no secret. Historically, the ban was in place before India's independence and has continued to stay in place in an attempt to uphold the "values" of Mahatma Gandhi's. The man also wanted to ban beef and whatnot.

After consuming illicit liquor, about 136 people had died last month in the State's capital city. Critics have zeroed the cause of death to the prohibition imposed by the State. The prohibition outlaws the manufacture and sale of liquor in the State. Those who cannot afford the smuggled liquor fall back on illicit liquor which is literally speaking – the highway to hell. Smuggles don't face competition on a free market and as a consequence don't face bankruptcy. Competition absent, they have little or no thought for their reputation when they end up killing people with adulterated liquor. Most people who would have otherwise provided quality booze disappear because smuggling liquor is illegal and even face a death penalty for bootlegging. At least two commissions, one headed by Justice M N Miabhoy and another later by Justice A A Dave had said that prohibition has not worked well.

Undeterred, the ministers are coming up with twisted arguments to still keep the prohibition. For instance, the Ministers have stated repeatedly that deaths by illicit liquor have occurred in other parts of the country and are not exclusive to Gujarat. However, this does not provide any indication as to why the deaths happened in the first place. I think most people consume illicit liquor in other parts of the country for the same reason they consume it in Gujarat where there is a prohibition. In the case of Gujarat, it is smuggled liquor and in the case of the rest of the country its taxed liquor. In most cases, the taxes imposed on liquor are prohibitively high for the purpose of "constructive social change" or whatnot resulting in the fact that not many can afford safe liquor and end up drinking illicit liquor which is available for a cheaper price.

I think the minister's observation that people elsewhere [not living under prohibition] are also dying from consuming illicit liquor has profound significance – just not in the way he would like us see. The prohibition in Gujarat forces people to consume adulterated liquor if they wish to have a drink by eliminating competition while taxes in other States force people to resort to adulterated liquor which would not have been the case in the absence of taxes. In both the cases, the principle that the government shouldn't dictate the way I choose to live my life is conceded. The only real difference between both the cases is that of measurement or of how much intrusion by the government is acceptable.

The question debated is not whether the government should violate both the rights of the seller and the buyer by making it impossible for them to agree to a certain price but what is being debated is how to curb the deaths by illicit liquor while ignoring the cause that led to the deaths itself: government intervention. Without the prohibition and the taxes, buyers would be left free to buy safe liquor provided by sellers. If the seller sold adulterated stuff, he would be held liable and charged accordingly in a Court of law. Cheaper prices means buyers would have more money left to invest or spend elsewhere entailing more jobs and more wealth for all.

Any of this doesn't mean that one should associate themselves with alcoholics and their likes in a free society. To the contrary, one is free not to associate with or not finance their booze. But when the government steps in enacting laws prohibiting trade in liquor – the field is left open for all sorts of twisted individuals to sell illicit liquor without any regard to reputation of their product nor to human life.

The only real alternative to death is the path of freedom. The path where people are left free to think and then act accordingly to one's highest judgment. Man doesn't live by means fangs, claws or the legs of a cheetah. His sole means of survival is thought followed up by action. The government can choose to ban the liberty to think and act on it but it cannot choose to escape the consequences of its policies. Man is man and if one ignores the requirements of human life then death necessarily follows.

The bizarre airlines “bailout”.

There have been a series of bizarre events over the past few days in the Indian domestic airline sector. What triggered it off though was not. The government owned airline, Air India which was facing dire losses asked the government for a bailout for about Rs 20,000 crores. The government was aware of the losses and the finance ministry made it mandatory for all government officials to fly Air India while travelling on work, on both domestic and international sectors. A couple of days later the airlines popped the big question – "Could we get some of that booty you stashed away from the taxpayers?" The aviation minister, Praful Patel went to the extent of saying that a government bailout was on the cards for Air India with the only condition being that the government would only dole out a fraction of the requested amount.

Watching this trend, the domestic private airlines jumped in and apparently asked to be bailed out with the ultimatum that if the government failed to bail them out – all services were slated tp be terminated on August 18^th or worse – even indefinitely if the government refused. Barely a day after the airline chiefs announced that they wouldn't fly on August 18, Delhi based low-cost carrier Indigo withdrew from the industrial action. The government flatly refused to yield and even cut Air India's bailout "which was on the cards" and the other airlines gave in.

In my opinion, the airlines demand does not even constitute a bailout in the first place. Responding to a question in an interview Ajay Singh, Director, Spice Jet said,

"Let me just clarify. You said when introduced the story that the airlines were looking for a bailout. The airlines are not looking for a bailout. Essentially, what the airlines are saying is that let us create an environment for aviation in which the cost of aviation in India is comparable to the cost of aviation anywhere in the world. Today, airlines in India are paying 60-70% higher tariff on aviation turbine fuel (ATF). Sales tax is averaging 26-30% and we are requesting that this sales tax be put in a level of which is sustainable and which is comparative to any other airline in any other part of the world. Similarly, airport charges landing and parking fees are very high. There is a new ground handling policy, which increases the cost of aviation further. We believe that we should be in terms of cost put at the same level as airlines in other parts of the world."

The private airlines are not asking for a positive – i.e. a sum of money from the government but on the other hand are asking for a negative – to cut back breaking taxes which are making it impossible for the aviation industry to stay in business. Praful Patel, Minister of State for Civil Aviation said, "The government understands the difficulties of the sector and also would see whichever way we can be of help. We understand aviation is very important to the economic development of the country but to say we will cause inconvenience to the passengers and to the people, I think, that is not acceptable." If the government really understands the difficulties of the sector and would like to be of service, why don't they simply roll back all the crushing taxes they have enacted in the first place?

The answer to that would most likely be that government needs the revenue from taxes to fund all the programs that they would enact in favor of the "public good". Even speaking only in terms of free market economics and "public good", one could point out that taxes have the seen and the unseen effects as illustrated by Frédéric Bastiat in the Broken Window fallacy. Were the money from the airlines not snatched away then they could have more money to spend on building their business which would result in creation of more jobs, cheaper air fares and more "public good" than any government program could ever attain. If anyone ever doubted the efficacy of freedom in a market, one simply has to look at India before and after 1991 – and what's more, all the fruits were a result of only partial freedom that was allowed to seep in.

But the good as the minister puts is that the individuals in the airlines industry should self-sacrificially work themselves and run a business that is hardly profitable but what's "unacceptable" in the whole matter is that they may "cause inconvenience to the passengers and to the people". Mr. Minister, could we please ask how do you expect any good if you pursue policies that are contrary to man's life such as the initiation of force against private individuals who decide to sell their product at a particular price? What is "unacceptable" then is for people to ask the question: "What's in it for me?" As long as the airline industry is willing to slave away, devoid of any profit to their own selves, for the general public – they are moral and good and to the extent that they would like benefit from their own actions, they are immoral or at best amoral. I think this is the root cause that is literally plaguing mankind on earth. All welfare programs that are eating away the freedoms of individuals eventually justify themselves that they are noble because the beneficiary of one's actions is somebody else.

If the airlines are to stand a chance the next time around, it is the principled stand against such arbitrary power they must take. They should do precisely what they are omitting to do now – assert that the governments function is to protect individual rights from agencies that initiate force which includes the government also. If the principle is conceded that the government may initate force and collect taxes – the question then is only how much should it tax or take away. How much of taxation is permissible is only a measurement with the principle conceded. They should not employ pragmatism by conceding that such taxes are great in theory but impractical in reality. It is not merely the "non-initiation of force principle" that they should invoke but also assert that being moral consists of acting in a fashion that promotes man's life and that anything that thwarts it is evil – and deserved to be condemned to be so. As Leonard Peikoff puts it his famous essay, "Health Care is not a Right",

"This is not a case of noble in theory but a failure in practice; it is a case of vicious in theory and therefore a disaster in practice. I want to focus on the moral issue at stake. So long as people believe that socialized medicine is a noble plan, there is no way to fight it. You cannot stop a noble plan—not if it really is noble. The only way you can defeat it is to unmask it—to show that it is the very opposite of noble. Then at least you have a fighting chance."

Desert Island Scenarios – A Great Tool In My Bag.

In my experience, I have generally found that people take a point much better when put in the context of a desert island – and I think with good reason. It is hard for anybody in my generation not to think of the hardships Tom Hanks went through in the movie Cast Away to light a fire upon the mention of a desert island. A desert island example asserts the primacy of existence view and keeps the listener anchored to reality. The listener understands that the cars and supermarkets he takes for granted in a division of labor of society will not pop out of the sky on a desert island. The islander has to take the necessary goal-directed action for him to survive. As Ayn Rand once said, "Reality confronts man with a great many "musts," but all of them are conditional; the formula of realistic necessity is: "You must, if " and the "if" stands for man's choice."

For instance, say ten people were deserted instead of just Tom Hanks, the rules established amongst men will that of a laissez faire system that does not hinder progress in any fashion. It would most likely be a government established by well intentioned men demarcating freedom whenever disputes arise trying to charter out a better course for survival.A good government. Is that an oxymoron? It's what Glenn Woiceshyn wrote in his excellent post, "What is a good government?" He takes the example of a desert island and logically gets to the fact that capitalism is the only moral and practical system on earth. Here's an excerpt:

"Imagine escaping alone from a tyrannical country and becoming shipwrecked on a desert island. All you have are some fruit and vegetable seeds in your pocket. You are young and intelligent, but without special skills.

To stay alive, you must obtain food and fresh water, and maintain a fire for warmth and cooking, which initially consumes all your time. You soon figure out how to produce your basic survival needs more efficiently -- by constructing fish traps, farming tools, an irrigation system -- thus allowing you to accumulate "savings," which buys you time and affords you insurance against unforseen setbacks, such as storms, injuries, illness.
With the time saved, you discover how to produce other goods, such as clothes, tools, a shelter, furniture, etc., for enhancing your life. You enjoy inventing new technology to increase your production, but find yourself quite limited, not to mention lonely, on your own.
Hurray! Others become shipwrecked. Each person, rather than produce all his own needs himself, focuses on producing one item efficiently, then trades his surplus production at the market for the produced goods of others.
You marvel at the production efficiency of the "division of labour," and the corresponding enhancement of everyone's life, especially when you now have tools, engines, machines, electricity, etc., to enhance production. Consequently, life is more safe, secure, comfortable and enjoyable.

You had specialized in petroleum production but some clever upstart competes with you and produces oil much more efficiently; so you switch to farming. You tell yourself that your desire to produce oil isn't a rational reason to despise or block someone's superior ability. Such reactions would not be in your rational self-interest, let alone anyone else's.

Many more become shipwrecked and specialize in various productive endeavors, thus yielding a greater quantity, variety and quality of goods and services on the market. "Immigration is good," you conclude.""

Arguments ranging from immigration to the gold standard could be made in this fashion. The reason, I think, why such examples work well is because it scales down the issues of the world to a personal level. It cancels out all the hype, popular myth and idiocy and asks the listener to think for himself. I mean the fact that movements like antitrust and environmentalism are incompatible with human life doesn't take very long to understand when there is nobody's blood to suck in the form of taxes or grants. One could then proceed to tell the listener that in fundamental terms, the relationship of a man with reality does not change – in a desert island or in a division of labor society.

I also suspect that crow epistemology is at work here. A desert island example greatly reduces the amount of perceptual data one requires in making a rational decision by scaling it down to the personal level. One has to deal with a relatively few number of concretes and is thus, easier to see through things clearly. Instead of bearing in mind a lot of details, if one wishes to communicate in essentials, I think desert island examples do an excellent job.

Explaining Inflation.

I just found an awesome video by Paul Mckeever explaining what inflation is all about in his series "Understanding Money And Banking". Its pretty rare to have things this simplified.



Be sure to watch the whole series!

Obama Controls CEO Pay -- If You Are Stimulated.

When the government disregards the wall of separation between State and economy, things fuck up. That is cause and effect. One would have to live to with that. Obama disagrees, as usual.

An excerpt:

President Barack Obama on Wednesday imposed a salary cap of $500,000 for top executives at companies that receive large amounts of bailout money, saying that some executives were being "rewarded for failure," in part with taxpayer-subsidized money.

"We all need to take responsibility," the president said as he prompted Congress once again to act on his economic stimulus program and repeated his comments that some Wall Street executives had shown "the height of irresponsibility."

"We don't begrudge anybody for achieving success, and we believe that success should be rewarded," he said. "But what gets people upset - and rightfully so - are executives being rewarded for failure, especially when those rewards are subsidized by U.S. taxpayers."

The President thinks top executives should not be rewarded for failure. Fair enough. What the heck then is the stimulus package doing there in the first place? More importantly, this fallacy of thinking of wealth as something static is very destructive. For instance, if a mother was sitting at the dining table with five children and ready to cut the cake in front of her, each kid would wish that his brother would get a smaller piece which would leave more for him. It is out of a common pot, in this case a common cake, that the benefit is ultimately distributed from. This is the governments' method which completely divorcing effort from reward leads us straight to the tragedy of the commons. The notion that wealth merely needs to be distributed is patently false. Wealth like, the cake or any other thing should be first created before it distributed. Thus, if anybody has more of wealth, then he has deserved it by producing an equivalent amount of value worth trading for. This is justice. However, in the governments view, it is the exact opposite of justice that prevails -- where the best among many are overlooked, or even worse neglected. When Obama said, "But what gets people upset - and rightfully so - are executives being rewarded for failure, especially when those rewards are subsidized by U.S. taxpayers." It is time to ask the question why should the taxpayers pay for the mistakes for private companies? If they deserve to fail in the market selling an inferior product, just why should an innocent tax payer have to bear the brunt of it? In a proper private company, the shareholders decide how much an executive or if he should be paid at all. But how can the government think the pay is "too much". How the heck do they know what is "too much" and what is "too little". I mean, when is there no mechanism to fix salaries based on market pressures, any arbitrary salary will do. Its like wanting to swim in the water without getting into the swimming pool!

Even if Obama is well-intentioned, the result will acheive its exact opposite. For instance, if the stimulus package is designed to protect the "major" companies from competition; save people from unemployment and retain the business a tailor or another proffessional would have existed had the person not been unemployed. Still the package would still fail. Henry Hazlitt in his book, "Economics in one Lesson" teaches that its important to look long range than the range of the moment effects. Supposing Obama actually did save the workforce, it would not change the fact that taxpayers paid for those workers to stay in employment. If they would have saved that extra tax money they gave away, they would spend it on something else that they dont have today. This makes way for employment in other sectors and new industries. No new job is created by the stimulus package, but all we are left with is an unfit subsidized company which is unable to conquer the market, but still is in business.

This is what Obama chooses to call "basic common sense", then it is the perversion of justice; innocent tax payers paying for the mistakes of private companies. When the government starts financing a private company with the taxpayers money, it goes without saying -- anything goes, especially causes that the government is propagandizing -- like CEO pay.

Underwriters Laboratories.

Here is another example of how the free market works better by protecting individual rights. The scientists at the Underwriters Laboratory are a bunch of guys who perform a quality check on a product before it reaches the market. The quality test is done at the expense of the manufacture himself. This is another example why capitalism provides more safety to the buyer. Although in a free market, there would be no laws making it compulsory for manufactures to undergo product certification -- most manufacturers would still prefer the quality check for two reasons -- market competition and expensive lawsuits.

Any argument for capitalism should propose to outlaw the costly, inefficient government agencies which make it mandatory for manufacturers to undergo quality checks under government beauracrats. Such independent product certification will also be more reliable as they face bankruptcy and expensive lawsuits if they get it wrong. We should rid ourselves of the statist mess we put in place.

More on this here

[HT -- Noodlefood]

For THE MAN -- Peter Schiff

HT -- Noodlefood

The American Dream -- As Possible As It's True.

Capitalism has been vindicated -- yet again. A fascinating new memoir, Scratch Beginnings, tells the story of Adam Shepard who finished grad school and went to check if the American Dream could ever really come true.

He went to Charleston, South Carolina, with a sleeping bag, a change of clothes, $25, and a made-up tale of woe. He spent the first two months in a homeless shelter while he worked as a day laborer. He later found a permanent position with a moving company, which gave him a stable income. This allowed Shepard to buy a (very) used pickup truck, rent and furnish an apartment with a coworker, and start saving. During this time, he was on a strict budget, buying clothes at Goodwill and lunching on peanut butter crackers and Vienna sausages. In ten months, he had saved up over $5000.

Adam planned his experiment in college when he read Barbara Ehrenreich’s Nickel and Dimed, which argued that only government intervention and aid could help alleviate poverty. It didnt make any sense to Shepard, and what better way to test it than a first hand experience. Seeing is believing, right.

Shepard had also met many people during those times whom he found relentlessly fascinating. He explained the differences between his approach and Ehrenreich’s in a recent interview -- “She wrote about how tough and depressing poverty is. Really? Tough and depressing? Of course it is! I wanted to believe that there were people living in these tumultuous circumstances who weren’t living the life of cyclical misery that Ehrenreich was writing about,” he said. “The economics side of Ehrenreich’s story didn’t make sense to me from the beginning and she never proved her point. To me, anyway. She lived in a hotel, ate out, didn’t look for ways to really save money.”

Although critics are quick to point out the fact that he could not have pulled it off without government help, they slip not on not just one, but on two counts. As Evan Sparks points out, that "everyone Shepard encountered at the shelter and in the bad neighborhood he later lived in was already using the same services. It wasn’t the public services that lifted Shepard out of destitution—it was his own initiative. Indeed, if spending money on government services were the best way to cure poverty, it would no longer be a problem." It makes sense -- tomorrow will be determined, not by any cosmic overseer, but by the actions one chooses to take today.

Secondly, the critics also take the liberty of assuming the fact that there will be no charitable organizations in a capitalist society. If one were ever in doubt the question, one only has to compare the plight of a beggar in Africa and in the streets of New York. Nothing more is necessary to make the point any clearer.

Although any social system cannot guarantee rationality, it can, reward rationality and punish irrationality. All that there is to realize is that a person works better when he takes the responsibility of his own life. No amount of "big" money or "big" government can change that. Not if A is A.

Freedom Or Public Good - Deciding The Evaluative Primary.

Noah Stahl presents an article in The Undercurrent titled ‘Enforcing “Constructive Behavioral Change”’ talking of a raging debate between a group of college Presidents and several other groups, among them are also the Mothers Against Drunk Driving on deciding whether the drinking age should be lowered to 18, the legally recognized age of adulthood. They argue that “twenty-one is not working” because it has “not resulted in significant constructive behavioral change among our students.” Both sides agree on the fact that reduced drinking is good and both sides are debating whose empirical study has the correct findings. Noah Stahl writes,


“Leave aside for now the factual claims of either side and consider the nature of the debate itself. On one side is a group arguing that current laws do not “work”, citing only empirical studies as evidence for their position. On the other side is a group arguing that current laws should be left alone, citing only empirical studies as evidence for their position. In fact, both sides have the same motive (reducing drinking), but only differ on what the “research” tells us is the best way to achieve it.”


Such events only foster the evidence, that when government officials all over the world are considering “what works”, their mind immediately translates it to the question – “Which controls work?” It does not matter to them whether or not the government has the right to force an individual to bypass his highest individual judgment. It does not matter whether men can be treated as animals by asking them to blur their choices and suspend their judgment. As Stahl puts it, “But such questions would likely strike advocates of either position as bizarre – there are no rights under consideration here, only desired behaviors.”


This is a classic case which once again shows the inability of all legislators all over the world to grasp the causal link of freedom, which as a secondary consequence leads to real “public good”. Legislators are more inclined to increase the pubic good without recognizing the base that is the cause of all good: freedom. It is important to note here that a person’s hierarchy of values matter with regard to any issue. One has to evaluate what are ones moral primaries and which is the secondary. In other words, it is important to consider which value is the causal value which leads to all other desired values. Leonard Peikoff in his book on Objectivism illustrates this point with an example of a swimmer. If a swimmers goal is to swim a long distance, then he will keep his body as calm as possible, swim in straight lines and conserve his energy. If, on the other hand, the swimmers goal is to exercise, he will swim at a greater speed, zigzag in direction and expend a lot of energy. The point is that the cause, the “why?” is most important as the effect has its root in the cause. The question, “Why am I swimming?”(cause) is what governs the swimmers behavior (effect). If the cause is not enacted properly, then the effect fails too.


Man like all other things around him has an identity and his identity demands freedom to think and act accordingly until and unless his individual judgment infringes the rights of another individual. Since man needs to preserve and safeguard his life, man has to think and for this to happen, liberty in thought and action must be preserved. It is a matter of historical record of how freedom has effected in large scale “public good” which was unimaginable by our forefathers. It is this reason why Objectivists cannot talk about freedom neutrally as they understand that the essence of freedom is the rapture and glory of aiming for the skies and reaching it.

The modern world constantly provides new technologies and techniques which requires the law has to lay down a framework to preserve the rights of the parties. For instance,punishing hackers or to enforce international contracts. Since there is room to maneuver while framing such laws, it the cause of freedom that must be emphasized or lionized upon if its “public good” that legistlators seeks. From Adam Smith to the present, all laws have been drawn up to meet the public good of the people while grudgingly accepting freedom as a necessary evil. As a consequence, legislators have emphasized on the social effect and minimized the individualist cause. While cutting back on the cause, they cry for “some controls” and later for more controls and end up wondering why numerous policies fail in spite of big money put into such programs. If any law does not take into consideration the scientific morality of man based on his metaphysical nature, it is bound to fail no matter what economics or laws one wishes to implement. By divorcing broad philosophic guidance and methods and by ignoring mans basic identity, no proper goal can ever be achieved. Communist China could serve as proof of the above (link). If the cause is corrupt, then the effect necessarily will be corrupt too.


In this context, it would be appropriate to put forth the statement by Hank Rearden, the industrialist in Atlas Shrugged who is charged with the breaking of a regulation which promotes public good while minimizing the individual effect. Rearden states,


“I could say to you that you do not serve the public good-that nobody’s good can be achieved at the price of human sacrifices - that when you violate the rights of one man, you have violated the rights of all, and a pubic of a rightless creatures is doomed to destruction. I could say to you that you will and can achieve nothing but universal devastation - as any looter must, when he runs out of victims. I could say it, but I won’t. It is not your particular policy that I challenge, but your moral premise. If it were true that men could achieve their good by means of turning into some men into sacrificial animals, and I were asked to immolate myself for the creatures who wanted to survive at the price of my blood, if I were asked to serve the interests of the society apart from my own-I would refuse. I would reject it as the most contemptible evil. I would fight it with every power I posses. I would fight the whole of mankind, if one minute were all I could last before I was murdered. I would fight it in the full confidence of the justice of my battle and of a living being’s right to exist. Let there be no misunderstanding about me. If it is now the belief of my fellow men, who call themselves the pubic, that their good requires victims, then I say: The public good be damned, I will have no part of it!” (Bold added)


Capitalism virtue as a social system does not lie in the fact that it primarily serves the public good. Instead, its virtue rests on the cause of freedom that makes any good possible - the achievement of values. The charge that capitalism is “cruel” is true in its entirety – it forces an individual to take the responsibility of his life knowing fully well the effects of tampering with freedom.

China Takes The Rock Bottom

In India, everybody loves comparing the progress of India and China given their rapid economic growth in recent years. Although India is sniveling in its own mystical, religious fantasies, it looks like China is in for a rock bottom pretty soon. John Maudlin in his recent E-letter tells us why. (link)
Its yet another reason why no matter what economics one chooses to implement, one cannot get away with the law of Identity. Man has an identity and his identity demands freedom for rational thought and action. Since this notion is apparently inconceivable in China, they sadly succeed only to fail..and fail at what proportions!