Terrorism as a Factor of Production in a Coup

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The subtle differences between various forms of political violence makes it easy to confuse and conflate these categories. The Politics of Violence: Revolution in the Modern World (1968), cites Brian Crozier  as asserting that “… terrorism is a weapon of the weak..” (p.33). There may be veracity to this statement since creating an atmosphere of fear and unrest requires fewer resources than an actual coup d’état. A complete government takeover is likely to fail (p.82); due to onerous coordination costs. However, is it reasonable to separate terror from a coup? Temporally, terrorism campaigns could be an antecedent to a full-on takeover by an aspiring political faction.

It is feasible to see terrorism as a higher order good in the political entrepreneurship (p.143) of a coup d’état. Terror alone will not provide a subversive faction with global domination. However, “… countries may be more vulnerable to coups if they have weak political institutions and lack informal institutions that could support resistance against a regime that itself came to power by staging a coup..” (p.5). Terrorist tactics could weaken faith in the existing regime and even persuade the citizenry to support the more capable insurgent faction.

Much of this is subject to institutional scale; utilizing terrorism to cajole a constituency in a tiny banana republic to abandon the current regime is far easier than forming a global caliphate. The topic of scale becomes pronounced when we consider the costs of communication, organization, and reaching consensus on the direction of the political movement. In terms of networking, the costs of striking consensus increase with the size of the take over/ terror plot; as participating actors not only have to consent to the terms of the political action but also contend with “..local power struggles..” (p.621). Reasonably, if terrorism is fraught with organizational costs, a government takeover is much more costly. Although terrorism by design, aims to wear down the enemy (p. 20), it is not farfetched to assume that it could be a long-term strategy for effectively implementing an extralegal regime change Especially, when Palestinians have used terror tactics to advance their aspirations in the territorial expansion (p.32). It would not be outlandish to extrapolate this phenomenon to government takeovers.

If the dissenting organization is to use terrorism as an effective implement in staging a regime overthrow, the coalition needs to be successful. In the event of foiled terror plots, the group losses support among would-be citizens (p.9). Whether it is a legitimate political campaign, an uprising, or a marketing campaign for a consumer product, bad publicity stalls success. Much how recalls have a deleterious effect on the success of companies producing consumer products, failure on the part of terrorists has a similar effect. Reducing the perception of legitimacy and political clout, making it more difficult for citizens to accept the governance of the new regime.

Adam Smith’s Fallacy of Productive Labor

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This concept has been submitted to the Journal of Brief Ideas.


Adam Smith’s Fallacy of Productive Labor

Adam Smith was the brilliant moral philosopher who dispelled us of the persistent myths of mercantilism. However, as prescient as Smith was, he was far from being above reproach. One example was his inability to solve the Diamond-Water Paradox. Smith being unable to explain the Diamond-Water Paradox was not his only shortcoming. In his economic treatise, The Wealth of Nations (Book II, Chapter III) (1776), Smith surmises that any work that does not result in producing tangible goods is unproductive labor.

Smith writes: “…The labor of some of the most respectable orders in society…unproductive of any value.. does not realize itself in any…vendible commodity..”(p.423). Smith was even bold enough to add lawyers and physicians to the list of unproductive contributors in the workforce. This mistake is a corollary of the labor theory of value, the same principle that hindered his ability to address the value paradox. The value of a product or service is not determined by the amount of labor required to produce it but by whether consumers value it. If consumers values an intangible service and firms can provide such services and yield profits, then whether the enterprise creates tangible goods is immaterial.

The Economic Lessons From Trading Halloween Candy

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Economist Art Carden wrote a brilliant Halloween-themed essay for the American Institute for Economic Research. In Carden’s essay How Kids Create Wealth By Trading Halloween Candy; he details how voluntary trade makes all participants better off than they previously were. However, Carden uses an unorthodox example to demonstrate this point, children trading Halloween candy. As mundane as this simple example may seem, it serves as a powerful analogy defending unfettered trade. When we opt to exchange one commodity (most commonly money) for another product/service, we tend to value the commodity we are giving up less than the good we seek to obtain. This maxim implicitly validates the  Subjective Theory of value, first formulated during the Marginal Revolution in the 1870s. Children trading candy with their friends demonstrates far more than the subjective nature of value. It also indirectly dispels the flawed arguments of protections, bringing the old king’s gold fallacy to its knees in capitulation. The medium of exchange may intrinsically hold value, but this value rests in the goods and services that we can buy with it. A bar of gold may be valuable to us, however to man isolated on an island in a Robinson Crusoe-style model of autistic exchange (p.84) the gold bar is of little value. A man deserted on an isolated island has nothing to gain in trading the gold bar (no trading partners).  Clearly illustrates the fact that subjective worth of money exists in its utility for economic exchange. For a trick-or-treater who dislikes Twix candy bars, this variety of candy has no value as they would be more satisfied with  Reese’s Peanut Butter Cups. However, their friend who has the opposite candy preferences between the two types of chocolate candy would want a Twix over Reese’s cups. What both trick-or-treaters can do is trade their stock of Reese’s for Twix bars and vice versa. Similar to how we exchange with friendly nations that have a comparative advantage for goods that we desire. But stubbornly holding on to the candy that the trick-or-treats do not prefer is not doing them any favors. Much how forcing domestic production of goods the U.S. does not produce efficiently is economically inefficient and a waste of resources.

If trade isn’t an option, she’s simply stuck with a lot of candy she doesn’t want to eat. With access to a market consisting in this case of her brothers and friends, she can swap the caramel-containing candies she doesn’t want for non-caramel-containing candies she does. She is better off. Her trading partners are better off. There’s an important lesson here: by getting candy into the hands of those who value it most highly, the kids are creating wealth.

It’s a mistake to think that wealth consists of stuff. Wealth, rather, is whatever people value. For someone who likes Snickers bars, Snickers bars are wealth. For someone who doesn’t like Snickers bars, they aren’t wealth–unless they can be traded. If they can, the excess Snickers bars become wealth because they can then be swapped for something better.


Time to Restore the Gold Standard- Part V (a): Stability

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The third and final argument of this series for reinstating gold is monetary stability. The notion that pegging money to the value of gold helping ensure its stability to most economists and commentators is laughable at best. Among the intelligentsia, the consensus is that value of gold is highly volatile, and having the dollars tied to such a freely fluctuating asset would be disastrous to the economy. Most notable is how gold fails to achieve short-run price level stability; although, it is generally accepted that it does have a high degree of long-run stability(p.2). Unquestionably there is a tradeoff between long-term and short-term stability when choosing between a monetary regime boasting a fixed-gold standard or a rules-based fiat currency. Upon closer examination, it becomes apparent that fiat currency lacks long-term stability in its value. It only is assumed that there are two core fallacies implicit in the arguments against the stability of gold-back money. One, critics are overestimating the ability of government institutions to artificially sustain price stability. The second and most pervasive assumption is the flawed conception of “stability”. A common concern in any field of study is the question of are we measuring what we profess to be measuring? How we operationally define the fortitude of currency is going to impact how we measure stability. After reviewing the longitudinal variation of the gold standard in comparison to the current fiat standard it is clear that gold has the upper hand when it comes to long-term stability. It is reasonable then to question if we as a society are choosing to favor short-run success over sustained value retention. 

However, one nagging issue that needs to be addressed is whether money is naturally fluctuating or if the value remains fixed. Money in itself is a commodity regardless of what is the currency is backed by. After all, we do have a market for trading foreign currency in the post-Brentwood world; why not consider money as a commodity. The perception of the money goes deeper than the fact that we hold foreign currencies (like a future or security) with the hopes of making a profit. I look back to the insights of the founder of the Austrian SchoolCarl Menger, money often had a prior use as an object with practical utility. As detailed in his book Principles of Economics (1871):

The local money character of many other goods, on the other hand, can be traced back to their great and general use-value locally and their resultant marketability. Examples are the money character of dates in the oasis of Siwa, of tea bricks in central Asia and Siberia, of glass beads in Nubia and Sennar, and of ghussub, a kind of millet, in the country of Ahir (Africa). An example in which both factors have been responsible for the money-character of good is provided by cowrieshells, which have, at the same time, been both a commonly desired ornament and an export commodity. (p.271).

Menger’s concept of money having a prior use function was later encapsulated in Ludwig von Mises’s Regression Theorem.

When individuals began to acquire objects, not for consumption, but to be used as media of exchange, they valued them according to the objective exchange-value with which the market already credited them because of their ‘industrial’ usefulness, and only as an additional consideration on account of the possibility of using them as media of exchange. (p.109-110).

Commodities such as bales of tea or bundles of tobacco demonstrate a self-proclaimed intrinsic value. It is evident people like to consume tobacco and tea as luxury goods, otherwise, these products would not sell. Naturally, making them very saleable commodities on the barter market. But because the double coincidence of wants trade and barter is self-limiting since you may have a commodity that no one else desires, making it necessary for a society to have a uniform medium of exchange. Even fiat currency could arguably have its legitimacy traced back to the days of 100 percent reserve gold warehousing (p.40), a system buried in the sands of history once the United States established a central banking system. The monetized debate we call the U.S. dollar is a distant ancestor to banking receipts for gold redemption.

If money irrespective of its heritage is considered a commodity, then why do we expect the price to not fluctuate? It is understood that economic models are implied to be unwavering and solely for demonstration. When applied, these models are extrapolated rather than assumed to be a direct reflection of economic activity. In theory, if money is a commodity we cannot assume that it will remain stagnantly fixed at the current price level; as with any other commodity, the value of money varies based upon the supply of the good in question. The very concept of a consistently “stable” currency with no variation in the value is flawed at conception. Invariably such an exception of resolute ceteris paribus is nothing more than a fiction. 

Why the Price of a U.S. Silver Dollar is Higher than 1oz. of Pure Silver.

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The current price of 1 ounce of pure silver is approximately $15.21 USD [1]. The average going rate for 2020 Silver Eagle drifts between $20.00- $25.00 [2]. This is not accounting for any variance for any limited edition collector’s coins that command a higher price tag. We are looking at nearly $10.00 premium over an ounce of pure silver. The coins themselves aren’t 100 percent pure silver. They are typically 99.9 % pure. Due to the bonding agents uses to make it a usable coin. Why the premium over pure silver?

We could accept the Cost-of-production theory of value. It was favored by the Classical economists. Who doesn’t love reading a little bit of Adam Smith, David Richardo, or John Stuart Mill? The classical interpretation of value was insufficient for solving the Diamond-Water Paradox. Unfortunately, did not provide us with the precepts to invalidate the Labor Theory of Value. Some people view both theories of value interchangeably, I disagree with such wording. Labor theory in my perception focuses mainly on labor. Generally for the purposes of sowing anti-market bias.


Thankfully the fathers of the Marginal Revolution (Menger, Jevons, and Walras) provide us with a novel approach to determining prices and value. That is through the Subjective Theory of Value.  Meaning that the value of goods is determined by the subjective evaluations of the consumer. If you think about as much the costs of production may influence profits, if the price is too high in the opinion of consumers the product will not sell. I can spend $20.00 making handmade coffee cups with a 10 percent mark-up. Odds are no one will buy them because they will see the price as being too high. Ultimately, I would need to find a new supplier for higher-order goods or more efficient production methods. As the producer, I am at the mercy of the consumer. If I do not meet consumer expectations (in terms of pricing or quality) I will not be in business for long.


What does this have to with the U.S. Silver Dollar? We could say that the premium of a U.S. Silver Dollar over 1 ounce of pure silver is due to the costs involved in the mint processing it into a coin. However, if the general public is unwilling to pay the $10.00 premium the coin will not sell. What the consumer is really paying for is the convenience of silver processed into a coin. Portability is a characteristic of all forms of money. What you sacrifice in purity is made up for in portability. Transporting raw silver is kind of cumbersome. The consumer is also paying for the officiality of the coin. It has the government seal of approval. Versus the seal of some hair-brained, tinfoil hat-wearing conspiracy theorist. Its having status under legal tender laws instills some sense of trust in its value. Depending on your political beliefs of course. Most folks still find the U.S. mint to be a reliable source.