Although to many people Libertarianism is a sort of “principle” or “belief” or “philosophy”, the free-market understanding of the economy that powers Libertarianism has little to do with “philosophy” and is thoroughly grounded in a reality that is as irrefutable as that which lets us know that two plus two equals four. Take for example Dr. Ron Paul, who via his presidential runs of 2008/12 and various bite-sized books helped spread familiarity with the free-market economics that underpins Libertarianism. Although he is a pious Christian who sometimes refers to taxation as an immoral theft, what really sets him apart from other politicians is not so much his Christianity or morality, but the fact that he has a profound understanding of economics. Early in his life Dr. Paul read Hayek’s “The Road to Serfdom” and stumbled upon the “Austrian School of Economics”. As Dr. Paul explains in his short pamphlet titled “Mises and Austrian Economics”:

“My introduction to Austrian economics came when I was studying medicine at Duke University and came across a copy of Hayek’s The Road to Serfdom. After devouring this, I was determined to read whatever I could find on what I thought was this new school of economic thought — especially the works of Mises”

To Dr. Paul, the “Austrian School” economists, could properly explain past economic downturns like the Great Depression and make accurate predictions about the future effects of current policies. Dr. Paul could clearly see how our mainstream economics establishment and bureaucrats in D.C. were continually making all the wrong moves based on flawed economic ideas. Alarmed by the path our nation was taking, those familiar with the “Austrian School” like Dr. Paul worked feverishly to educate and take action.

“I decided to run for Congress because of the disaster of wage and price controls imposed by the Nixon administration in 1971… I decided that someone in politics had to condemn the controls, and offer the alternative that could explain the past and give hope for the future: the Austrian economists’ defense of the free market…Americans need a better understanding of Austrian economics” — Ron Paul

Had Ron Paul not stumbled upon such men’s understanding of economics and the vital role that individual freedom plays in prosperity, he would not have reached the heights that he has and been such a great educator and moral inspiration to many. The important point here is that: It is easier to stand up for freedom when you know how freedom works. Again, the key is a basic understanding of economics, which shows how an extremely simple concept, individual freedom, as opposed to leading to chaos and various ‘social injustices’, is what leads to a productive, prosperous, and bewildering complex social order.

Freedom, the Social Order and Government in 4 minutes

Freedom is the key ingredient in economic competition which is what motivates the creation and spreading of superior knowledge and subsequent order throughout society. For example, power door-locks emerged in the minds of a few, and competition motivated and inevitably forced all auto-manufacturers (competitors) to copy/spread/adopt the superior knowledge/idea. It is the freedom of the consumer to select among competing producers which motivates and inevitably forces them to constantly come up with superior knowledge/ideas and copy them from each other, thus spreading superior knowledge and order throughout society. Email and the web increases productivity, so competition motivated and inevitably forced most of us to learn to use them. It really helps to envision the world as seen from high above with an eye on knowledge and how it moves/spreads to alter and guide the social order. Again, in order for competition to work, people, in their role as producers/entrepreneurs/workers, must be free to attempt what they consider to be superior business ideas. And in their role as customers or consumers, they must be free to spend their money and thus nourish/sustain/judge the best ideas/companies, which is what motivates and inevitably forces everyone else (competitors) to adopt them.

As cost-cutting ideas spread and ripple through the social order via competition, new profitable ideas arise in an endless cycle of knowledge generation. For example, there was a time when computers were very expensive, but thanks to competition, cost-and-thus-price-cutting innovations kept making PCs more powerful and affordable which eventually gave rise to the Internet and all the innovation that flows from it.

The very morals and attitudes of people are knowledge or “ways” of acting that are also shaped and spread by competition. Companies/orders that hire lazy, disrespectful, or corrupt people will be less competitive and inevitably pressured to hire people with better morals which in turn forces everyone to be respectful and hardworking regardless of race, sex, etc. Similarly, it is hard-working, tolerant, courteous people who thanks to competition inevitably force everyone else to be likewise. As F.A. Hayek tells us:

“Competition is, after all, always a process in which a small number makes it necessary for larger numbers to do what they do not like, be it to work harder, to change habits, or to devote a degree of attention, continuous application, or regularity to their work which without competition would not be needed.”

Every social order (person/company) uses profit/loss calculation to ensure that it is producing (sales revenue or pay-check) more than consuming (costs/‘living expenses’) thus being profitable and self-sustaining. Economic competition and profit/loss calculation are perhaps the most important aspects of what economists refer to as ‘the market process’ which is what creates and coordinates the social order.

Unlike voluntary/private sector social orders which are self-sustaining and are constantly morphing and learning from each other via competition, government bureaucracies/orders are monopolies that are immune from competition and get their wealth/nourishment by force/taxes so they inevitably grow more inefficient/bureaucratic/consumptive leading to a shrinking economic pie and eventually socioeconomic chaos, especially when not just a few sectors of the economy are government run and thus ‘socialized’ like education and medicine as is the case in many countries, but when the entire country is, as happens in all Communist/Socialist countries like Lenin’s Russia, Mao’s China, Cuba, and more recently Venezuela.

A government regulation is essentially a “way” of doing things, it is knowledge. But unlike knowledge that arises in the private sector and is constantly improving due to economic competition, a government regulation is knowledge that arises out of a few brains in government and is then forced upon the social order via the law and can only be changed via a painfully slow monopolistic/bureaucratic apparatus made up of economically ignorant politicians, lawyers, lobbyists and special interest groups who always lack the necessary knowledge and incentives to discover what is the best way to do something. The more the government regulates, the more it paralyzes competitive knowledge discovery. As government regulations have increased in the health care sector, turning it into a sort of island of paralyzed top-down competition-less socialist central planning, so have costs. These increased costs have led the sector to grow from consuming just 1.6% of the American economic pie in 1960 to 4.2% in 1980 to a whopping 16% in 2006 and about 20% by 2017. What a person must learn in order to legally offer medical advice via licensing of doctors, where he must learn it via licensing of medical schools, what chemical compounds can be legally consumed, how to test drugs, how the medical insurance industry should work, and countless other gigantic bodies of knowledge are dictated by monopolistic competition-less bureaucracies like the American Medical Association and the Food And Drug Administration and numerous others. By comparison the Information Technology sector has very few government regulations so competition motivates the creation and spread of superior knowledge at breakneck speed and is obviously transforming our world right before our eyes. There is no American Association of Computer Programmers dictating what a computer programmer must learn, or where to learn it. There is no government monopolistic bureaucracy ensuring the proper functioning of the software that runs PCs, smart-phones, the Internet, or ensuring the lack of malware or viruses in software. Freedom and competition in the Software Development industry is even quickly evolving culture. It is increasingly seen as uncool and backward to have a traditional degree, where one wastes thousands of dollars and time physically attending gigantic temple-like universities, inefficiently (profs. instead of popular online videos you can pause/rewind) learning things that have nothing (English 101, ‘humanities’, etc.) to do with being a productive software/web professional. Economic ignorance leads many to believe that since one has to be seemingly more careful with medicine, such monopolistic regulatory oversight is somehow necessary. This is irrelevant, if it is superior knowledge that is needed, which includes figuring out how careful to be, freedom and competition is the best way to discover it, period.