The Overarching Policy – The Moral Authority of the Divine Economy

To quote Ludwig von Mises: ‘The first condition for the establishment of perpetual peace is the general adoption of the principles of laissez-faire capitalism.’[16]

I would like to modify his recommendation slightly.

· First, we can rest assured that the prosperity of an ever-advancing civilization emanates from the divine economy.

· Second, we can trust in the equilibrating power of the divine economy.

· Third, we can trust in the divine justice that comes from protecting property rights and that comes from recognizing that property rights are human rights.

 Those who fail to admit their own limitations and then expect others to believe their assertions that they can comprehend all that is going on in the economy — thereby 'giving themselves the right' to interfere — these are the ones who are now without authority. It matters not what position of influence one holds or what degree one has or what record of publication one has. There is no human act of intervention in the economy that is not feeble-minded when compared with the infinitely dynamic and ever-pervading market processes which happen to be intricately connected to each and every subjectively-perceiving and acting human being. All interference with the economy is necessarily ego-driven; and it lacks moral authority.

Policies that convert latent entrepreneurship into active entrepreneurship and policies that encourage alertness and discernment expand the overall potential of entrepreneurship in the minds of all. When market information is free from the distortion caused by intervention it is then that the divine economy is in a charged state releasing an increased power of human creativity.

Policies that are conducive to building a link between capital and entrepreneurship complete the transformation implied and described by the recurring designation ‘Ever-Advancing Civilization.’

Policies that foster the nature and role of knowledge in the individual and in the market carry forward an ever-advancing civilization. Implied in the ‘nature of knowledge’ is the refinement and progress of human learning. And implied in the ‘role of knowledge’ is economic communication by the means of market prices and voluntary worldwide trade.

Policies that promote justice and unity universally stem from the preservation of both the nature and the role of knowledge; that is, preservation and protection from those who have ego-driven motives. It is the ego-driven who try to interfere with the nature of knowledge since they are the ones who benefit from the existence of prejudices, superstitions, and ignorance. Likewise it is the ego-driven who try to manipulate the economy through intervention, all for the purpose of benefiting themselves directly or indirectly.

Each of the following eleven simple policies fall within the overarching policy of the moral authority of the divine economy and will effectively promote an ever-advancing civilization in various ways. All of them also compliment each other. Of keen interest is the fact that all of these policies represent positive changes that have been brought to the forefront of our attention by the divine economy theory.

The Eleven Simple Policies

1. Well-defined and continually refined property rights

2. The right of secession

3. Market forces will moderate business sizes

4. Enforcement of property rights

5. Education about entrepreneurship

6. War and inflation violate property rights

7. Gold passes the market test

8. Counteract the misinformation about capital

9. New capital is a good start

10. International free trade

11. Minimal taxation

There is no macroeconomic theory that is more specific in its policy. Nor is there a macroeconomic theory that is as well-grounded in both theory and in the classical liberalism tradition as is the divine economy theory.

This then represents a challenge to all economic theorists. Is there a better theory, more cohesive, more succinct, more clear, more doable? The answer is "No".

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Defining And Refining Macroeconomic Terminology.

Active Entrepreneurship: A state of alertness where opportunities are easily discerned to be acted upon.

Capital: The financial resources which are necessary for the production of most current goods and all future goods.

Disequilibrium: The real economic condition that exists in the world because of uncertainty and imperfect knowledge.

Disutility of Labor: Of the three qualities of the human reality — physical, intellectual, and spiritual — humans least prefer to occupy themselves with physical labor.

Divine Economy: The equilibrium force that is at the center of the divine institution — the economy — that has been bestowed upon humankind by God.

Divine Economy Model: A subjectivist model that describes the economy in the following terms: human spirit, transformation, law, order, purposeful action, capital structure, market, property rights, justice, and unity.

Divine Economy Theory: The theory that uses the subjectivist methodology to explore how the human identity of being created in the ‘image of God’ helps us to understand how the economy works.

Division of labor: Since every human being is unique, as they pursue their goals there is the potential that they will make a unique contribution to production.

Empiricism: The use of data rather than theory to explain things.

Equilibrium: The tendency towards balance and harmony.

Ever-advancing civilization: Humans, individually and as a whole, always aspire towards and potentially achieve greater perfections.

Hampered Economy: This is an economy where acts of intervention interfere with the equilibrium forces.

Human Operating System: All of the inherent human faculties that serve as the means to fulfill our human purpose, which ultimately is to know and love God.

Inflation: Artificial expansion of the money supply.

Intervention: Imposition of finite human acts of control onto an infinite and divine system.

Laissez-faire: An economic philosophy based on the insight that the economy works best when there is no intervention.

Latent Entrepreneurship: A state of potential unachieved due to discernment dormancy.

Leisure: The desire to satisfy one’s highest valued physical, intellectual, or spiritual aspiration instead of working.

Macroeconomy: A term used to indicate that aggregate indicators in the economy are being looked at.

Market: The place and process where information flows between and among participants.

Market Process: A natural and universal process that functions like a language does to facilitate the making of exchanges.

Production Possibilities Frontier: A macroeconomic tool using two opposing aggregates to explain the limits of production.

Purchasing Power: A measure of the value of the medium of exchange in terms of the goods that can be purchased per unit of money.

Savings: The portion of income set aside for future consumption.

Secession: The right to leave a jurisdictional arrangement in a contractual society.

Standard of Living: An aggregate reference point assessing the degree of well-being and prosperity in relative terms.

Subjectivism: The scientific approach that recognizes that humans act subjectively, and this then leads to realistic and relevant scientific discoveries.

Taxation: Coercive extraction of wealth by government.

Time Preference: The universal law of human action that states that people prefer to have a good now rather than that same good sometime in the future.

Unhampered Economy: A synonym for a laissez-faire economy and a free market economy. It is also the condition that exists in a divine economy.

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Minimal Taxation.

If you look at the Divine Economy Model © you will notice that taxation does not appear to be present at all in the model. What this means is that, theoretically speaking, taxation is not necessarily present in a divine economy. Taxation is not necessarily absent either.

Economics is the study of the means to obtain the ends chosen. If some type of taxation is the best means for achieving order in a cooperative society that protects life and liberty then taxation serves a purpose and it is present.

In a society where property rights are well-defined, and refined, and protected, taxation will be either minimal or absent. As long as taxation is restrained by laws that protect and enforce property rights then taxes will be held to a minimum. The law and order of the divine economy is a reflection of life and liberty which means that taxes need to be zero or minimal so as not to disrupt the flow of knowledge inherent in the free market process.

Divine Economy Theory Policy #11: Since under most circumstances taxation is a deterrent to private production and employment there is no sound economic reason to generate tax revenue to support a government beyond its purpose. The purpose of government is to protect life and liberty.

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International Free Trade

Essentially it is important to recognize that the economy works at all times and it works regardless of scale. The same benefits that come to an individual when taking part in exchange in the market occur with trade at the international level.

 

Only international free trade allows the potential prosperity within the economy to be fully released. Only international division of labor under a system of secure property rights and free trade brings the resources of the world to the market efficiently and with justice — for all to enjoy. Artificial and imaginary boundary restrictions are simply interventions that lessen the prosperity that can come from an unhampered economy and these interventions do damage to the advancement of civilization.

Divine Economy Theory Policy #10: International Free Trade

All trade barriers interfere with the divine economy and cause unnecessary suffering. ‘Free trade’ agreements are really acts of intervention and therefore are a misnomer. Free trade, in reality, is action not words and free trade will occur automatically and naturally if the ego-driven interventionists are removed from the picture.

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Always - New Capital Is A Good Start!

In an economy that is undeveloped (although this principle operates as well in advanced economies) the first steps taken should be to encourage and nurture capital. Unprotected property rights are very often the reason people do not save. Any steps that secure property rights and foster trustworthiness lead to the emergence of new capital. New capital advances productivity and then the development process begins.

Divine Economy Theory Policy #9: New Capital Is A Good Start

 

Recognize that having secure property rights leads to savings and then to new capital which then begins the advancement towards prosperity.

 

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Counteract The Misinformation About Capital.

There is a very difficult educational task ahead to counteract the institutionalized prejudice against capitalism. Capital has been maligned and misunderstood for so long that most people feel that capital is not really a part of themselves — that it is outside of themselves. One goal of the educator will be to help people to see that every choice or act to improve oneself is capital in process and capital made manifest. And the improvement made is then an advancement and the starting point for the next step.

Appreciation of capital, when seen as honoring one’s own progress, will go a long way towards reversing the poisonous bigotry directed at capital which permeates the world today.  The anti-capitalist mentality is a malady emanating from Marxism, socialism and much of empirical economics. It stems from a combination of atheism and the adherence to an incorrect methodology for the social sciences, and it leads to a removal of capital from its proper place in the human psyche. Our inherent nature — when it is properly educated — declares capital to be a vital part of the human operating system.

Divine Economy Theory Policy #8:  Counteract the Misinformation About Capital      
    

Encourage providers of education to recognize that every improvement an individual makes — their education, for example — is a form of capital. Then instead of spreading negative impressions about capital the education system will compliment itself for being a contributor to capital formation around the world and will empower the next generation with knowledge about this factor — capital. This is a significant contribution to an ever-advancing civilization since capital is the most limiting factor in the economy.

 

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Gold Passes The Market Test

Inflation reduces the purchasing power of money: and it causes the redistribution of wealth towards the ones favored by the interventionists. Both of these represent theft of private property and both are acts of injustice.

The free market chose gold as the medium of exchange simply because of the following: it optimizes the characteristics determined in the market to be necessary for a trustworthy medium of exchange. The ability to strongly prevent dishonest and untrustworthy acts by the interventionists is certainly one of those characteristics and is a good reason to return to the gold standard.

Free banking, where banks compete against each other for the trust of their customers, is almost completely sufficient to safeguard against fraudulent banking practices. Combined with refined and enforced property rights it is wholly sufficient. Having a strong and honest banking system has the advantage of encouraging savings.

Free banking is a very important component of a divine economy since it has the merits of self-regulation, and since it serves the people by providing a storehouse for capital. This is in contrast to the current banking practices which mask the insolvencies of banks and promulgate a system of capital consumption and wealth redistribution. 

 

Divine Economy Theory Policy #7: Gold Passes the Market Test

Policy Statement: Clear the banking system of all of its barriers and restrictions — these are acts of intervention designed to control the economy and direct wealth towards the favored ones of the ego-driven interventionists — and let the market process determine if the current system is a viable one or not. Legal tender laws are unnecessary in a divine economy where the medium of exchange is universally recognized simply because of its independence from monetary intervention, along with its other merits.

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War and Inflation Violate Property Rights

If people can trust the future they will have lower time preferences which will amplify the transforming capability of capital. There are very specific interventions into the economy that strongly influence the level of trust. If there is a tendency to choose war as the main or even as a viable alternative to diplomacy then the lessened trust that such an act engenders atrophies the economy. Or if there is a medium of exchange that can easily be debased by a central bank (for example, when there is a fiat currency) then the horizon of the time preference shortens, stifling prosperity. Both of these acts of intervention — war and inflation by the central bank — violate the property rights of humanity.

Those things that foster trust and trustworthiness need to be given particular emphasis as part of the learning process in the education system. The pivotal nature of property rights needs to be made crystal clear.

Divine Economy Theory Policy #6: War and Inflation Violate Property Rights

Policy Statement: War and its exorbitant costs and its associated destructiveness, and inflation of the money supply by the central bank, are unacceptable violations of property rights and those who try to impose either of these should be held accountable by legal means. Authority to take these actions (war and inflation) needs to be specifically assigned so that there is specific and definite accountability.

The legal liability for such acts needs to take precedence over the act itself. The government-created veils of self-protection and inculpability need to be removed so that property rights can be protected.

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Education About Entrepreneurship

The purpose of educating people about entrepreneurship is basically to encourage and foster the acquisition of the skill of discernment. This comes from learning about the learning process in humans. The more discernment and alertness there is in the market the more quickly knowledge will flow and the more quickly will it be acted upon. This leads to an advancement of the market process and to prosperity. If the market is in an inefficient condition the solution is to do a better job of educating people about entrepreneurship.

 

Divine Economy Theory Policy #5: Education About Entrepreneurship 

 

Policy Statement: A rational policy would be to encourage all providers of education to acknowledge the role of entrepreneurship in advancing prosperity and to teach any and all skills that help to make people discerning and alert.

See this policy in the greater context here.
 

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Enforcement of Property Rights

Corollary to having well-defined and refined property rights is the strengthening of the legal system such that it can effectively enforce property rights. The best means to protect private property rights is to strengthen the role of private providers since there is often a conflict of interest when the State is involved in protecting private property rights. Both the definition of property rights and the ability to enforce property rights are currently very weak, even weaker than they were 100 years ago.

 

Divine Economy Theory Policy #4: Enforcement of Property Rights

 

Policy Statement: A rational policy would be to initially begin enforcing property rights at the level of the individual, and then to learn how best to refine property rights from these efforts. Within each community this right and responsibility exists and needs to be given due attention. The proper role of government is to protect its citizens from fraud or acts of violence by enforcing property rights, however, competition by private providers of legal protection will ensure that the best means of enforcing property rights is always available.

See this policy in the greater context here.
 

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Hayek's 'Fatal Conceit' Is Explained Much More In The Divine Economy Theory.

One of the things that I find interesting about the general response to some of the terminology in the divine economy theory is a disconnect - in the minds of those who act like the terminology is incomprehensible - with the essence of classical liberalism and Austrian economics in the literature. I am not sure when Hayek first mentioned 'fatal conceit' or if he is the true originator of the term but I am curious about the reaction and response that he got when he laid it out with clarity. Was the new terminology received well?

Of course Fredrich von Hayek was a renowned scholar and academic which I am sure aided in the acceptance of the idea of 'fatal conceit' but nevertheless during his career Hayek deviated from pure subjectivism. He was a socialist and an empiricist when he read Socialism by Ludwig von Mises and he immediately recognized the fact that interventionism is error-based. His occasional weakness in championing subjectivism may be attributed to his earlier ingrained ideological leanings or maybe it was the consequence of the tendency towards atheism in academia. Humans as unique creatures with the potential to mirror all the virtues or attributes of God is the true essence of their subjective nature, but academia in these - the Dark Ages of economics - has a difficult time permitting such a realization.

Back to fatal conceit, Hayek lays out the following:

"The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design. To the naive mind that can conceive of order only as the product of deliberate arrangement, it may seem absurd that in complex conditions order, and adaptation to the unknown, can be achieved more effectively by decentralizing decisions and that a division of authority will actually extend the possibility of overall order. Yet that decentralization actually leads to more information being taken into account."

The Fatal Conceit : The Errors of Socialism (1988), p. 76

 

The delusion of 'the naïve mind' 'that can conceive of order only as the product of deliberate arrangement' is driven by something. Of course there is ignorance of what reality is like but something drives the possessor of the naïve mind; something that stirs up enough arrogance to presume that a finite mind can comprehend what is relatively infinite and to presume that justice can come from such a puny comprehension. The ego (there is a duality to ego in humans) that blinds a human to his/her own limitations, and at the same time represents a denial of the All-Knowing and All-Merciful God, has always been a part of the dual nature of humans and in Scriptures of old it has been called satan.

 

In the divine economy theory fatal conceit is explained more thoroughly. All interventionism is ego-driven and all reasoning used to justify interventionism is ego-driven interpretation.

 

Ironically the moral relativism that emerged when classical liberalism was attacked by the State is also responsible for the fallacy that claims that wertfrei requires the separation of science and religion. And so hand-in-hand interventionism and atheism destroy economic science and civilization.

 

Ego-driven interventionism and ego-driven interpretation explain in much greater detail the invalidity and the immorality of the fatal conceit. What this means is that if you think that the scientific works of Fredrich von Hayek are important for the cause of liberty then the divine economy theory is at least as important! As a scholar or as a scientist or simply as a subjective human being interested in an greater understanding of human action you do not want to ignore the discoveries uncovered in the divine economy theory.

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Examining Economic Equilibrium With The Lens Of Subjectivism.

To begin I will suggest that economic equilibrium can only be understood within the realm of subjectivism. I will return to this thought.

Let's look at equilbrium in the natural world. We will look at magnetism and gravity and we will look at these beyond the usual elementary perspectives. Consider one pole of a magnet at the center and a metal fragment moving closer until it is pulled to the magnet. Now take the fragment to the other side (180 degrees on that same plane) and at the same distance from the magnet it will be pulled to this same center. In this sense the attraction of the magnet is acting like an equilibrium force from any and all directions in that plane.

Let's examine gravity. Throw a ball up and it returns to the Earth. Now travel to the exact opposite location on other side of the globe and throw the ball up and it returns to the Earth. This is another example of an equilibrium force acting upon objects that move away and then are drawn back.

The force underlying gravity and magnetism is described by its properties but it is still unknown in its essence even though the scientists can make predictions.

Now it gets even more complicated because instead of these physical laws the economy operates  according to the laws of human science! Economic equilibrium is a phenomenon of the realm of subjectivity!

As we know from praxeology the key to understanding the realm of subjectivity is human action. What this means is that economic equilibrium is driven by and expressive of human action.

Why is this important? To understand the economy and how it works requires an appreciation of the subjective nature of humans, which means recognizing that humans have partial knowledge upon which to make their rational decisions. This is then the foundation for the partial knowledge upon which they make their rational decisions in the future, and so on and so on.

Additionally humans use both science and religion to acquire knowledge. Some use one or the other but most use a combination of these as the basis of their partial knowledge. To ignore or deny this does not advance science since humans are subjective and human sciences must necessarily be both accurate and precise about the subject being studied - the study of human action.

One question that is of great significance is: when did economic equilibrium come into existence? It is undeniable that the economy exists only because humans exist and it is also undeniable that the economy always has had the equilibrium element or force operating 'within' it. Certain things are untraceable for many reasons, for example, they may have changed forms over time. It is safe to say that economic equilibrium - the equilibrium associated with subjective beings - is part of the same creation of what is known as 'human.' Humans are subjective and the implications of this distinction leads to the acknowledgement of an intellectual and spiritual nature for this special creature - the human being.

To sit back and leave unexplored economic equilibrium for whatever reason is not a characteristic of the scientific mind.

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