r/austrian_economics

I think these people called Baby Boomers don't have enough money.

I think we should start a welfare system that gives them money, and takes it away from the Gen X, Millenials and oh let's not forget Gen Z. A wealth redistribution scheme if you will.

We gotta protect little old grandma. Yeah, her house is paid off and yes it quadrupled in value since the 80s. But who cares, it's not her fault. In fact, I think she pays too much in property taxes. Let's lower those down.

Yes her kids are grown. She doesn't pay childcare or rent but come on, she still deserves welfare.

Those young whipper snappers? Well, who told them to have kids they can't afford? Childcare too expensive? Tough! Boomers figured it out. And don't even think about bothering grandma. She's paid her dues. She deserves peace and quiet, maybe she can take a Norwegian CruiseTM this year.

Rent too expensive? Well just work more! Pull yourself up by them bootstraps.

I know liberals will never go for it. They care too much about the poor. And progressives? Forget about it. I mean those tree huggers would never support such a regressive program. But hey, if we have to drag them kicking and screaming into utopia, well that's just what we'll do.

Anyways, what should we call this new welfare system? Hmm.

Well, it's for grandma's security, so maybe we can call it that. And it's a social program.

Social Security! That's it!

Thanks for coming to my TedTalk.

PS, I also have a healthcare program for grandma brewing up, new details coming soon!

TLDR: economic illiteracy and confusion is a standard in masses and in academia. The monopolists that supply our currency will never be replaced by the free market until people understand the subject of time preference, opportunity cost, and money/currency. There’s no conspiracy (though some conspiracies took place), but merely converging self interests of the powerful people that benefit from keeping population illiterate. Pouring more money into public education will only exacerbate the problem, as teachers and academics get funding from the very people that are interested in perpetuating the existing scam we call education. The only peaceful and effective way out (imho) is not through teaching economics, but through radicalizing people into independence as the only acceptable social norm and condition of the individual.

Where do I start…

Besides the stupidity of stretching a $1M for 83+ years of monthly payments, let’s just see how much of it will be lost to inflation. I’ll take US instead of Canada for this exercise.

Back of of the napkin #s:

- if one took $1k/m in Jan 1990, by Jan 2025, they’d collected $260k-$270k in 1990 purchasing terms. 35 years, that’s barely above the quarter of the actual winning.

- if one took $1k/m in Jan 1980, they would’ve collected <$260k in 1980 purchasing power in 45 years.

- if one the deal on Jan 1970, they’ve collected <$250k in 55 years.

- from Jan 1945 to Jan 2025 one would collect <$240k in terms of 1945 purchasing power. 80 years of payments, still less that $1M ($960k) collected in nominal terms.

That’s an absolute lunacy.

Even with insane marginal tax rates of 1945, having $1M taxed would make more sense. The person would’ve received less than $100k on hand, but it still undoubtedly would make more sense. Because alternatively, taking $1k/m tax free in Jan 1945 would require roughly 144 monthly payments to accumulate around the same purchasing power. That’s 12 years of uncertainty, putting one into 1957, with the same purchasing power they could have instantly in 1945.

The opportunity cost is still so obvious even when losing over 90% to Uncle Sam and completely ignoring the uncertainty.

This short demonstration is a proof of complete ignorance (we can call this a lack of sufficiently rational self interest) of certain individuals when it comes to entrepreneurship, money, capital, subject of inflation, opportunity costs, and time preference. All of these are the major topics of Austrian Economics, but in the mainstream today these topics are reduced to formulas, tables, and macro models, all affirmed by “experts” and being taught to be accepted as validated truths. Models built with flawed metrics accounting for actions of tens of millions of individuals as universal truths. That kind of insanity can be produced only by people that don’t have sufficient understanding of the market themselves and their (mis)understanding of an individual person is often rooted in their own personal belief in egalitarianism. Some of them are well meaning social technocrats (like Stephanie Kelton), some are just doing what they are getting paid for (like Alan Greenspan) - both types are demonstrating their self interests by fooling the public as its own expense, both are not taking self interest serious enough to acknowledge that individuals and businesses are capable of doing rational decisions, while their own work only deprives individuals of ability to make rational decisions, so they get validation of their own ideas by producing terrible economic teachings and policy recommendations.

While there are not that many people out there who would take $1k/month, there’s really no shortage of economically illiterate people out there. I remember similar posts in more politicized vs SipsTea subs, and the number of people liking the idea of $1k/m was staggering. I’ve seen dozens of posts in all sorts of personal finance subs where people discuss annuities, permanent life insurance policies, investments, lottery winnings, etc, and a lot of horrible advice gets upvoted to the top. Because people were taught bad economics.

I’m have a strong feeling that a subject of economics is being deliberately moved to “not for peasants” category by over complicating, hyper compartmentalization, fixating on models (aka planning), and macro vs being focused on human and market psychology, rationality, and microeconomics.

Anyone thinking this girl that have chosen $1k/m made her decision in the vacuum of her own empty head didn’t take a second to think about it. An unqualified, especially younger person, usually would seek opinions and/or advice from whoever they find to be more competent of making the right choice when we speak about a fortune like that. Which means the people she spoke with were overwhelmingly on the side of $1k/m over paying taxes on the entire $1M and calling it a day. They don’t know better because they were taught bad economics.

Not to diverge from the subject, but this speaks a lot about quality of education that children and young adults get at schools and colleges. I remember my first economics textbook in the ex soviet state in the 90s, which was a mix of soviet planned economy theory with some of the Keynes’,

Fisher’s, and Samuelson’s work, and it still defined Inflation as nothing but increase in the supply of currency, and it had a clean explanation of how currency inflation affects prices on products and services. Ironically, it wasn’t a new subject to anyone in the classroom because by then, we’ve lived through 3 cycles of hyperinflation in less than 10 years, and everybody knew that inflating currency always leads to hire prices.

Yet today, even educated people, including academics and supposed experts, will engage in all sorts of mental gymnastics to explain price inflation (cost push and demand pull inflation “experts” drive me nuts), where they never put currency supply inflation as the first cause, when it’s really the only cause, as any other changes in prices are nothing but fluctuations which reflect market conditions and consumer preferences.

To conclude-

It doesn’t take long to understand who benefits from such economic illiteracy, especially when it comes to money. We just have to follow the money. Federal government debt soon will hit $40 Trillion. Banks will continue to gamble and inflate prices of real and paper assets as long as “money” can be created out of thin air and they can get bailed out through any number of schemes set by the Federal Reserve. Massive asset holders will continue to exploit the system that allows them to leverage growth in nominal terms to acquire more assets while producing nothing new in terms of value for the market. So realistically, we have <5% of population that controls, benefits, and perpetuates the system in direct and indirect ways. Maybe 20% - 30% of the population that understands it, but prefers to remain silent (upper middle class with diverse assets). And roughly 60% - 70% of the population that’s being exploited by that system. That’s why many young people don’t shy away from calling existing conditions a modern slavery. However, they don’t blame the government, they seek government intervention, when it’s the government who financial crippled them in first place. Some blame capitalism, and the overwhelming majority blames free markets which never been free, and been heavily influenced and controlled through government policies ever since the US was established. Hamiltonians have stolen people’s sovereignty by taking over the control of currency, Keynesians have brainwashed people into aggregate demand based policies, and we’re paying for it with our lives. Because every hour of work is an hour of our lives. An hour that we could spend with our loved ones. An hour we could spend on our hobbies. Younger generations that entered the market around COVID can absolutely call this a legalized slavery/feudalism scheme because they never experienced anything resembling good economy in US terms. And I don’t blame, or judge them for having such opinion.

There’s only one way out of this mess. While spending time on trying to educate your friends and strangers online on rather boring and somewhat complex, less applicable economic topics like theories is helpful, I personally believe the idea of independence/freedom and personal responsibility would go much further than trying to teach someone about the differences in schools of thought. Pushing independent contracting, small business, and entrepreneurship hits both - independence and responsibility. Anyone who engages with markets as a business owner/independent contractor/entrepreneur will inevitably learn real truths about money, opportunity costs, time preference, and a cost of government intervention. They’ll become austrians in their thinking and in their actions, which is way more important than knowing the differences in theories.

THE END.

My personal background - I didn’t learn about Austrian Economics from books. I’ve practiced anarcho capitalism within a state before even moving to the US and discovering anarcho capitalism as an ideology. I’ve seen and I participated in de facto free markets as a child, as a teenager, and as a young adult and it’s almost entirely opposite of what people are made to believe about free markets in the West, in countries that never experienced heavily planned economy and heavily controlled currency, and in the US in particular. I learned Austrian Economics and all its ideas via my interactions with other market participants.

Side story: up until around 1995 we were literally doing origami and papier-mache out of sheets with bills printed on them, because adults didn’t bother cutting low denominations into single notes. Most private businesses would not accept them, but nonetheless, the central bank continued to print those and forced them into the market through private banks and by paying a portion of salaries of government employees. So at least a part of that of inflation was mitigated by private market rejecting small denominations notes, but its unknown at what cost to the regular people, because business owners that had to get cash out of banks would keep all high denominations to themselves, and any bureaucrat that had power over controllers and accountants in government entities made sure they don’t get paid in small denominations either (same dynamics was in the 80s while still in socialism with co-ops). So just like in the market economy, in a mixed economy, and in heavily planned economy via interest rates manipulations and incentives schemes, as long as the government sets a monopoly on currency, it’s the less financially fortunate people that will have to bear the cost of inflation.

The problem with “market economy” of the US is that people aka market participants no longer have proper understanding what causes inflation because the existence of private banks and due to the deranged explanations of academics and “experts” that only obfuscate and confuse the public. Children and young adults being taught to think - money is whatever the government declares it to be. They don’t see money as commodity. They don’t see labor as commodity. They are being disincentivized to lower their time preferences due to inflationary policy while being repeatedly told “we need 2% inflation”. And many waste years and tens of thousands of dollars on tuition to be taught the nonsense that supports fiat feudalist system.

The end the end.

He recognizes that a brick cannot sell to someone who doesn’t want to build a home, but it can to someone who wants to build it, at least I am assuming he does because he admitted humans have preferences or maybe I am understanding him wrong seriously what can be done?

I’ve mentioned it a few times in common sections. I think it’s good to make a post dedicated to it.

The old age security hypothesis is the most earth shattering hypothesis to a lefty, because it reviews how unconstrained their beliefs are. From my experience it’s probably the most effective hypothesis to get somebody to reflect on their left world view.

What is it? The old-age-security hypothesis is an economic hypothesis according to which parents view their children as a source of income and personal services in old age. Within the framework of this hypothesis, the demand for children is considered as the need to ensure a safe old age. As a consequence, increasing the profitability of alternative assets or introducing a universal public pension system reduces the demand for children. This is one of the most praxeologically, empirically, and evidently backed hypothesis I’ve seen so far.

Praxeologically; humans act purposely to remove, felt uneasiness with scarce means to achieve a satisfactory state, humans have children to help them at old age, as a result with public pensions being a thing they no longer have to go through the tedious task of having multiple children, the demand for children goes down.

Empirically: this is a major explanation for why 2/3 of the world’s nations have below replacement fertility rate, even Israel that has a high fertility rate has seen it drop for about several years so far and when you search up around the time that it started dropping, guess what you see? Pension reforms. There is too much evidence to go over it’s staggering.

What does this mean for the lefts worldview? Because the old age security hypothesis makes it so that public system, such as Medicare, Medicaid, Social Security, food assistance, and housing assistance all help fertility rates collapse, it makes those very same programs unsustainable and self-destructive. As we are currently seeing all over the world due to low fertility and aging population, public pension systems and healthcare are having significant funding issues with Social Security in the US expected to start depleting in 2032. Aging population means more people who consume but don’t produce, more people with significant upkeep in everything, more people who’s medical care is significantly more expensive, etc all of which cannot be fully solved, only delay delayed, you can’t tax forever, don’t even try talking about immigrants lmfao it eventually will swallow them up and they will not have as much children.

In short, the old age security hypothesis is the hypothesis that reveals to a lefty that their systems and their worldview is unsustainable, that’s right 50% of the population have a self-destructing world view. No solution that they would like to believe works, countries like Estonia have some of the most generous paid leave at one year and it still isn’t reversing.

EDIT: a lot of people asked for evidence I thought they could connect the dots on their own, but here

https://drive.google.com/drive/folders/15f45fcmMyE0Cd\_o8LpifF7Be3yormoLT (collection of RESEARCH STUDIES)

https://grokipedia.com/page/Old-age\_security\_hypothesis

Fallacy fallacy fallacy.

Completely ignore how the M2 money supply is 22.7 trillion which is half what Elon musk wants to be. These people believe he robbed them of that much money? What? They believe that if he’s worth that much he made them poorer? WRONG.

Value is subjective, but there is something that must be added on top of saying this, it is not simply about someone saying they value something that makes it valuable, it is also the given action of the individual that makes it valuable. A lefty who says “I don’t like Jeff Bezos because he owns Monopoly Amazon.” Won’t change the fact that they value Amazon by the fact that they order from it. They value simply what they buy more than the amount of cash than they hold, when I buy human action by Ludwig Von mises, I buy it for my reasons because I value understanding the knowledge, but I also know I can get it for free so I really value having it physically.

In short voluntary exchange via subjective evaluation isn’t robbing you of anything it’s giving you more in return. There was a NBER study that showed that the social surplus generated by innovators entrepreneurs and firms alike they only captured 2% of it. The rest of us got it back. I sure do love the fact that Elon musk isn’t restricting my speech on Twitter and that he is advancing space technology. Elon musk isn’t making you poorer, you yapping that he is and other billionaires are the literal devil is actually contributing more to that than they are.

My funniest point that I love bringing up to people who are on the left, who criticize billionaires like Mark Suckybird for being so rich, is firstly how do they know this information in the first place and how much money did their favorite lefty influencers like hasan (never even watched him) make on his Social media platforms?