 Good morning everyone. Today I am happy to be back at the Ludwigan Mises Institute for the 30th Mises University. I couldn't have asked for a better year to be speaking as a faculty member for the first time at Mises University. I feel compelled to provide a semi-autobiographical digression, but I'm afraid it could seem a bit unmotivated. So I'd like to begin by properly delimiting the main topic of our discussion today. The primary problem considered by this talk is the following. The state has no political legitimacy, and in particular has no legitimacy to enforce tax laws by coercion. The citizens make obedience to tax law primarily a matter of prudence and pragmatism. But do citizens, or at least libertarians, have the right to actively seek and receive financial or in-kind subsidy from the state, or at the very least have an obligation to not actively seek and receive such subsidy? I claim that we are obligated to not actively seek and receive such subsidy despite the competitive disadvantages that may result from this. The only possible exceptions I could think of are those where state monopolization or crowding out has made it virtually impossible to conduct these activities without the subsidy as often occurs in basic science, which I usually work in. In discussing the business challenges that me and my family have in putting ourselves at a competitive disadvantage by not accepting, in our case, farm subsidies, I claim that one can and should seek entrepreneurial opportunities to overcome these competitive disadvantages and that I believe that those of you here today can and should seek entrepreneurial opportunities in your own lives to overcome competitive disadvantages of not receiving such subsidies and of course to not receive such subsidies in the first place. I'd like to clarify some other things first. Though on the schedule, I think this talk was titled Practical Career Advice for Young Austrians. Its topic is more appropriately described by the working title that I had, Moral Principles in Practice for Interdisciplinary Austrolibertarians. I want to challenge the audience somewhat on what I mean by Austrians or the Austro part of Austrolibertarian. I would go so far as to say if this is your first time attending Mises U, then if I knew nothing else about you, I would assume you are not an Austrian or at least not yet. This week could teach you enough to be a fellow traveler or sympathizer of the Austrian school by teaching you the core ideas. But unless you have read the historical masters of the school, many of their names are displayed about me here, and if you have not read from the other schools to understand their various ideas, then I don't think you could reasonably consider to be an Austrian. And in that respect, I'm challenging you to learn more beyond this week to find out if you really are, at least to learn the good economics that the Austrians have to offer. Then there's the matter of interdisciplinary. Of course, I'm familiar with trying to use this term in grant applications to say, oh, I'm going to combine results from this field and that field to come up with some novel result. I don't mean it in that sense or what one uses in an academic department. I have in mind rather a case like mine where one has a significant background in the economics of the Austrian school or in philosophy of liberty, but nevertheless goes into some field or endeavor that is not traditionally associated with these fields, not going into the academic economics or political science. I mean for those who go into some field like business or science, medicine, literature, engineering, or really any other manner of professional concentration. And then there's a matter of what do I mean by moral principles. The Austrian School of Economics, although it is often associated with certain policy and political philosophy views, is a positive body of thought, not a normative one. So what am I doing talking about moral principles and for something that is at least the Austrian part, is about positive thought, not normative thought. While some of the normative principles that I have in mind are those of a scholar proper, not simply for adherence to the Austrian school or libertarianism, but some normative principles are related specifically to Austro-libertarian views that state intervention is destructive and immoral, and our questions primarily concern whether and to what extent Austro-libertarians should accept benefits from that destructive intervention, especially in the sciences and business. So I'll tell you a little bit about myself and it touches on some of these interdisciplinary and other themes that we'll discuss. The story begins with my own father, Hal Walter, who is a rugged individualist through and through and has always been an entrepreneur. And on my side, I was a precocious child and my father encouraged me in my intellectual development, which led to me ultimately graduating high school at age 14. I went on to pursue a Bachelor of Science degree in Math, Physics, and Economics at the University of Arkansas, graduated age 18. In that time, I completed significant graduate coursework in economics, actually, in macroeconomic theory, statistics, and econometrics. But I had better developed research programs in Math and Physics and I ultimately decided to pursue those subjects for research in graduate school. I'm now a PhD candidate in those two areas and hold some competitive university and national fellowships, which is, say, I have benefited from the state as well, so I come across some of these moral challenges of accepting subsidy from the state. Now, it makes me mention that I went into Math and Physics. Why was I interested in economics in the first place? Well, in the first place, my family when we moved to Arkansas about 11 years ago, originally from New Jersey, we purchased the farm and I joined the Future Farmers of America, which is a very large youth organization in the United States. And my Math skills allowed me to excel in their competitions in farm business management and agricultural economics. And I use this experience today, the manager of my family's growing farm operation now. But also in my development, of course, I had a voracious appetite for reading. My father fed me with a few books, including John Flynn's As We Go Marching about the Rise of Fascism. And, of course, Ayn Rand, the Fountainhead and Atlas Shrugged in particular. I actually went through an Objectivist stage that, of course, is quite common. And while doing that, I was looking around the Ayn Rand Institute's online bookstore. I saw this book, Human Action, and had this description. It was like Einstein's General Theory of Relativity and Physics, but for economics. And incidentally, that's an excellent comparison. So anyway, I thought, well, that sounds really interesting, but it's really expensive. So I go to Google, look up Human Action. And the Mises Institute comes up. Here's the book for you online. Oh, here, let me start this. And I read it all the way through to the chapter on Monopoly Theory. It's not the most readable chapter of that book. But when I did that, well, I started looking around. I started looking at economy and state, and gradually with that, and eventually attending Mises Institute events, I became a well-read Austrian. So, so much for my background. Now, for many of you, this is your first time at Mises U. I had that experience in 2009, where my young age was 15. My disability and my wide reading drew some attention. Ralph Raco in particular, I remember. But there was another student that year in a wheelchair who quite stood out to others. Some of you probably have never heard of him, and some of you have forgotten him, and some of you remember him, John David Fernandez. At the time John David attended Mises U, he had completed his first year at Columbia University, the same institution where Walter Block and Murray Rothbard took their doctoral degrees. David was a strong network for libertarian outreach. He made a strong impression on many Mises U attendees and the faculty. And in 2010, a scholarship was awarded in his name. Sadly, David died on Saturday night, January 16, 2010. He was 20 years old and was less than a year after he attended Mises U for the first time. If time permitted, I would dedicate more time to discussing state intervention, the realm of health and disability, which has significant consequences for me and my quality of life than certainly did for David. But those topics are for another time. The reason I mentioned John David Fernandez in this talk, at the time many people felt that he, and we heard a lot about this yesterday, that he channeled the spirit of Murray Rothbard. Not that John David was necessarily a polymath, but like Murray, John David was the quintessential joyous libertarian in a world that cannot appreciate the full scope of liberty. The enthusiasm of the joyous libertarian can draw many others to liberty, just as Murray Rothbard did, just as John David did, before his good character could bring about all those good acts of which he was capable. So in the time after your first year at Mises U, I implore you to be a scholar, be a networker, to be a defender of liberty, as of course Murray Rothbard was, as John David was in the time that he had. But we need more than joy in the fight for liberty. We need principles. And for those of us entering spheres of life other than academic economics or political science, there are some distinctive moral challenges that really require what Ludwig von Mises took as his motto, tunne che dei mali, sed contra al dentio reto. And that brings us to the main topic of my talk today. The challenge is a primary interest to us, those that give rise to choices between one's Austro-libertarian principles and abandoning those principles. Are those challenges that arise from particular forms of social competition in various modes of social organization or institutions where the state significantly intervenes? These challenges come to center in large part on whether we should seek and accept subsidy or similar such benefits from the state to seek a more favorable position in the system of social cooperation. I'd like to quote from one of my favorite passages in human action on competition. And here's Mises. The term competition is applied to the conditions of animal life, signifies the rivalry between animals, which manifests itself in their search for food. We may call this phenomenon biological competition. Biological competition must not be confused with social competition, i.e. the striving of individuals to attain the most favorable position in the system of social cooperation. As there will always be positions which meant value more highly than others, people will strive for them and try to outdo rivals. Social competition is consequently present in every conceivable mode of social organization. I would like to pause for a moment on the meaning of every conceivable mode of social organization. Now I think Mises may have meant specifically those mechanisms of social cooperation through the division of labor like capitalism or socialism, interventionism, some big system like that. But I think it just as well can be applied to other social organizations or institutions such as the smaller ones that comprise modern science, universities and particular industries. Mises goes on to say that individuals in a free society without ambition or social competition behave like the stud horses which do not try to put themselves in a favorable light when the owner picks out the stallion to impregnate his best brood mare. But such people would no longer be acting men. I should mention that modern economists don't write like this. But Mises then goes on to make a step toward comparative political economy. In the totalitarian system, social competition manifests itself in the endeavors to court the favor of people to court the favor of those in power. In the market economy competition manifests itself in the fact that the sellers must outdo one another by offering better or cheaper goods and services and that buyers must outdo one another by offering higher prices. Now, my main example concerns interventionist society which combines elements of courting the favor of those in power as well as profit and loss. If time permitted, I would discuss social competition in the realm of modern science and universities. On that subject, Jeff Deist hinted at this in some detail and ultimately I chose to focus on different things in this talk but there are notable parallel challenges in the lives of Ludwig von Mises and his famous brother, the applied mathematician Richard von Mises both of which relate to perversion instances of social competition. Of course these take place under the Nazi regime or in connection with the Nazi regime, so they are admittedly extreme examples but very instructive ones. So I refer you to my talk from AERC 2014 on the ideas of Ludwig von Mises in the context of mathematics under the Nazis and of course you're welcome to ask me any questions you like about that. Now the intrusion of ideology through the state in contemporary science is much less overt with notable exceptions of course. The state influence on science comes primarily in the form of financial support of various funding agencies such as the National Science Foundation, the Department of Energy and of course many military contractors in the case of the US National Institutes of Health and so on. Now Dr. William Butos was here earlier this week and I don't know if he's still here is an expert on the topic of government funded versus privately funded science and the nature of crowding out of basic science by the government and I defer in large part to his knowledge of the subject. Of course it's always been difficult for me to reconcile my Austro-libertarian ideals with the government funding I've received even if the awarding of those scientific grants is largely meritocratic. It's not really a problem of the abilities of science so much as it's a problem of whether those abilities are directed toward the most important end without the profit and loss in many instances of science it's hard to determine. But I won't dwell on those distinctive moral challenges for libertarian scientists and accepting the support of these agencies. The funding of basic science is an instance in which crowding out often occurs to such a significant extent libertarians are often left to support to accept that support if they are going to engage in those activities. As it turns out at least two-thirds of research, you know, R&D research is done in private business but in the case of basic science it flips about two-thirds come from the government at least in universities. Perhaps the best models on this question are Oigan, Bon Bon Bavere and Ludwig von Mises who in their capacities as government advisors try to bring rationality to the conduct of the policy of their agencies. But now I'd like to consider my main example of perverse social competition under interventionism based on my own experience from agricultural business. So my family owns and operates Brier Creek Ranch which consists of about 500 acres in Clark Ridge, Arkansas a known incorporated township in northern Baxter County, Arkansas. It's about a 550-mile drive from here to there. We're primarily a cow-calf pair, commercial cattle operation but we also produce hay and forage for our own use and occasionally sale to others. This began with our initial purchase of 165 acres at, like, 11 years ago when we moved and we have expanded significantly since. In the last two years the farm has entered its own as a viable business venture. I should mention here that historically farming has received a preferred status as a tax shelter. Its greater exposure to weather relates to other risks has often been used to justify deductions for investment in farming. The idea being to compensate for that increased risk and increase the willingness of lenders to put up capital for farming operations. But in contrast to general accounting rules that generally require deferral of capitalization of expenses incurring connection with products which only yield income in future years farmers may accelerate deductions such that this may be taken out of current income. Among other things this encourages cash basis accounting despite that accrual basis accounting may in fact be more accurate reflection of capital because it includes inventory which can be quite significant in farming operations. Farmers also receive preferential options on deducting now or capitalizing later for certain things which can even give the appearance of an operating loss despite making an economic gain and this is particularly helpful for reducing tax liability on income earned outside of farming. And in some cases deferred tax liability may often be converted into capital gains in the case that capital gains are taxed at a lower rate. Incidentally if Hillary Clinton is elected president of the US that probably would be more difficult which is a bit strange because farmers are a major supporter of hers. But anyway, some of the point of this is a lot of what happens in what we call farms are actually not business ventures in the normal sense that are directed toward maximizing profit. They are actually based in loss aversion to the paying of taxes and not being based on profit and loss. It has more bureaucratic nature than business nature. Now, Lutagomises and sociologist Max Weber incidentally if you want to be an Austrian you should also read Max Weber that's very least of what the idea is in context. But as they pointed out farmers have always been poor to adopt rational economic calculation and those traditions of sound accounting that emerge spontaneously with the rise of capitalism. I am suggesting that inconsistent tax interventions have further bastardized problematic economic calculation among farmers and I think it has proliferated various farm operations in our area that again are not businesses in the normal profit maximizing sense. You have various weekend warrior farmers who raise a few cattle here and there and of course old land by various inputs. What they end up doing is bidding up land prices in the area. They flood local markets with generally lower grade livestock and more on that in a little bit. And they tend to involve themselves in land disputes in the familiar case of disputes due to inconsistent land title. Also there are people that are more affluent people that are not farmers in the professional sense they're interested in tax implications and put further pressure on these various inputs. But then there are also more professional farmers and they're really our main concern in this talk. We'll visit this in a little bit. These professional farmers realize the same preferential tax treatment and morally I have no issue with accepting these tax breaks or if I'm out of their existence despite what pernicious effects some of this intervention may have because the state has no legitimacy and in particular has no right to enforce tax laws by coercion. Taxation is theft and I think we're right to accept Rothbard's view that we should favor preserving existing tax breaks and use them to the fullest extent. It's defensive to try to keep our earnings of course as I said it's a matter of prudence. It would be unwise to be a fool to bring the tax authorities to bring them after you. But the more professional farmers in our area do substantially greater extent in other areas not only avoid taxes, not so much of paid them they accept state subsidies well and before discussing the morality of accepting subsidy let's consider the magnitude. So our county, Baxter County, Arkansas now these data here are based on U.S. Department of Agriculture numbers that were obtained freedom of information at request by an organization called the Environmental Working Group now as it turns out they're more of a left-leaning organization believing some pseudo-scientific things with organic farming and anti-GMO stuff but their anti-corporate elements make them very good at gathering data and they have a very nice database that I encourage you to look up if you live within the U.S. it would certainly be worth looking at to see what farmers are taking in your area you may even know people in the database. So in our county, 7.08 million in subsidies over a 20-year period from 1995 to 2014 I don't have 2015 numbers and now if you look through the list of various federal agriculture programs it's like a devil's resume and I couldn't possibly go through the details of all those various programs so I'm just going to show you so so-called disaster programs are the majority in our area and there's conservation programs you can see something about our area that things traditionally associated with producing major ag commodities other than livestock are received very little so you'll actually see that this county doesn't take that much in resources I'll show you a little bit of things in our area now these numbers are broken down a little bit these things don't all add up to the 7.08 million because you'll see already this exceeds it but they fall under a few different things it's really these first three in our area and really disaster payments and livestock subsidies as it turns out most of these things called disaster payments or associated livestock I suppose before lost forages or something like that that's things that you can of course self-insure for by accumulating forages, accumulating hay and that's just for our case people will take on riskier behavior of the existence of these programs also the considerable overlap accounts for why it's a similar number of recipients in these various programs these things are tied to various political processes and of course these aren't inflation and just the numbers but that doesn't account for all of the changes here so this is within our own area with disaster payments these tend to correspond to various farm bill appropriations and in fact some of the disaster relief was cut off for after 2011 and with the signing of the 2014 farm bill there is a very significant increase in the allotment of these programs you can see the livestock disaster emergency as I was telling you these miscellaneous disaster payments correspond to things like fence damage which in a lot of these cases again is part of the proper fence maintenance program this is something that is not many of these things are not actually insurable events and I can tell you from these particular cases this is not a case of systemic weather-related damage throughout once property it's smaller things that could have been handled at one time and were allowed to develop and become worse these things of course these livestock subsidies are very tied to the other ones so I won't really focus on them so much as I was saying there is considerable overlap in what these programs are these are very disaster things livestock forage disaster emergency livestock feed, livestock emergency assistance these other ones I think are a different type of losses but there is at least one bad year's weather goes but again if you're accumulating enough forage to handle a bad year then you should need these things but this money is there you can even get information on particular recipients now I'm not going to be a muck raker I'm not going to go through and show you how much all of these various individuals took I can give you the example of the top recipient this is just for livestock this is livestock subsidies here and let's say we take the top recipient 160,000 livestock subsidies over a 20 year period okay now you can take the last year and this is for totals so this number doesn't correspond to this one but you see the sudden increase roughly one third of this individual's total subsidy payments is all from 2014 and again I don't have 2015 numbers so you can't see how this behavior continues and I won't focus on this one these are environmental programs you can see that not so much of this comes from recently then actually I should put this in perspective so a few months ago I attended some event a young farmer and ranchers conference so they're farmers from all around the state of Arkansas and went down there and it was notable we were the only people from Baxter County at this event there were you're going through the line for food and if you don't get any rice on your plate one of these rice farmers looks at you funny and why are you not getting any rice and I think we even said something about the subsidies that you take look at this in the case of the you know these people are buying various other inputs that we're buying in the area too so this is interesting when you look at how congressional districts are broken up in Arkansas I don't have a map here of Arkansas but some of these other ones that take substantially less these are all weird things this is in Northwest Ark I think that one there's a lot of weird shapesate but this district took 8 billion in USDA subsidies over a 20 year period we are actually in this district and I showed you were only 7.08 million over a 20 year period so this is obviously dwarfed what happens is you go across the top we're in the district let's say state of Arkansas square with the middle on the top this is Baxter County you go over here the district goes all the way here and then all the way down the Mississippi River including the whole Delta region there's a lot of rice farming so obviously we're dwarfed by this so when you look at Arkansas over a 20 year period this is not in proportion to the total land area and population this is 11.5 billion in subsidies over a 20 year period for farmers you see in this case commodity programs crop insurance subsidies in particular these are indicators of production of other very prominent commodities like rice, Arkansas itself produces a very large amount of rice disaster programs and conservation programs are much smaller 9 of 50 states now interesting, 77% of farms in Arkansas do not collect subsidy payments of course some of these aren't serious professional farms but there are people not taking them but these people have a very obvious competitive advantage and this just shows you rice, cotton, soybeans, wheat are a big recipient of these and then some other things we can often see if you look at state on a statewide basis in the US everything's bigger in Texas they take it at the top and then of course the entire well takes up and then Arkansas comes in here you don't see California on this list it's sort of an interesting thing and then Missouri which is a bordering state so on just in the top 10 recipient states 58% over that 20 year period goes to these so 322 billion overall over that 20 year period now this is smaller than what some other industries receive but this is substantial given everything you hear about farms and I believe that's the last little slide so that was just to give you a feel for some of the data now so there is competition already for receiving these subsidies in the agricultural bureaucracy and legislatures there's the usual public choice consideration by which these subsidies are distributed according to effective lobbying then there's competition within the disbursement of the funds themselves so on the local level you get this sign up now sign up now mentality and the idea is at least with respect to some of these programs the late joiners are the last in line to receive these funds and in particular if funds run out then those people late that join late will not receive funding I don't know how often that actually happens that's not so much the point it's a sort of tragedy of the commons in some respects to what it is but there's also competition on the markets on which these subsidy recipients buy inputs and sell outputs and then there are very significant cases of regulatory capture and agriculture we're not going to go through that now in the case of major agricultural commodities and we saw some of this already rice, cotton, soybeans, wheat, sorghum, corn and sugar commodity payments and crop insurance are tied to volume of production and average yield which is tied to various economies of scale of course larger operations have advantages there these when through competition we'll tend to increase land prices and cost of credit and cause of very nonspecific inputs that are needed to engage in agriculture and could be purchasing of agricultural equipment or even getting repairs done by local vendors and this tends to make it harder for smaller entrants in particular younger farmers is why in agriculture there's this amazing emphasis to recruit younger farmers a lot of it derives from these interventions and where my family lives, these subsidy recipients also gain advantage with respect to not only the buying of land and doing business with local vendors it also increases their sales in local livestock auctions and private sales and my family is yet to directly benefit from receiving this subsidy but it's extremely tempting and of course if you talk to our friend Walter Block why not take the money it's been argued by others that we should try to starve the beast by accepting financial support of the state the idea being by accepting the state's support we accelerate its demise this strikes me as a remarkably convenient I believe it underestimates the stability of interventionism if at least into socialism it takes a very long time at best I think the starving argument perhaps would apply to trying to accelerate the collapse of social security or socialized medicine and it's not clear to me that forwards libertarian goals because what would the response be when those programs collapse it could be worse than what we have another argument is that accepting state subsidy is actually reclaiming stolen goods which in the modern case would happen in fungible monetary terms first I don't know if anyone really points this out at least in this fashion there's an economic calculation problem figuring out how much one has benefited financially from the state I really have in mind those cases where the state has either crowded out private alternatives or has utterly monopolized something as in the case with security or for roads and then the matter of many governments are indeed insolvent and this gives reduces the problem how do you say who's stolen goods are you reclaiming it's you can't assign it even if one takes out no more than one has paid in taxes or state monopolized services you don't know who's goods there are now there are more sophisticated arguments we're not going to present a sophisticated moral theory here this is to open up conversation and in my view accepting subsidy ends up reducing for at least for private business reduces to receiving stolen goods so how does one overcome the competitive disadvantages of not directly receiving state subsidy the most moral choice would be to judge entrepreneurial profit opportunities to overcome those disadvantages I'll give a very particular example of such an opportunity that applies to my family's farm business the point is to identify such entrepreneurial profit opportunities in your particular cases now our entrepreneurial opportunity for increased profit to overcome these competitive disadvantages of not accepting subsidies consists in an institutional organizational innovation remember of course that in the dynamical market process one must always seek new profit opportunities in fact by even telling you this I probably forced us to have to see even more profit opportunities now in our case this is this organizational innovation comes from marketing our cattle through something called the integrity beef alliance based out of Oklahoma now to understand that this I'll tell you very briefly about something with the market structure with commercial beef cattle unlike some other livestock production the breeding and early stages of cattle production are very decentralized a lot of smaller producers bearing the substantial risk of the actual breeding that happens and one tends to sell these into a larger market often these animals will go to at least in the case of where the animals except for animals that go directly to slaughter many cases these animals are going to backgrounding facilities that prepare these animals before they go to feed lots and then they go to the centralized feeding operations and centralized processing facilities but in the local markets you have what people market failure call information asymmetry in the case of most auctions the only thing you have to go by some external characteristic of the animal most cases it reduces to going by the color of the animal the animal is black there's often assumption that it's Angus which has a which is more likely to have a higher grade meat so it tends to command higher prices white animals tend to be associated with Charley breeds which put on a lot of meat which increases the output but tends to not be as high as a grade and then there are traits that are perhaps make animals very efficient for our area that have Brahmin, Indian sort of traits but don't have as good of a meat and if there are any sign of those traits one tends to get docked for it but many cases these animals aren't that in you could have some things registered but that doesn't command much in our area so in the case of this organization that comes through a trade organization called the Noble Foundation as far as I know this doesn't seem like cartelization device, it's a non-profit entity and it's not a lobbying organization at least not yet for now it seems to me analogous to those stock exchanges that spontaneously arose in the Netherlands in the 1600s in order for that matter of various stock exchanges in the US it ends up providing certification like a underwriters laboratory, you'll hear if you talk to Mark Thornton about this he could have a lot to tell you about underwriters laboratory you'll see their certification on various products that let you know they've tested it to see if it's a good product and on that basis one can realize a price premium for your product so what they're doing in this case is they're taking only registered Angus or registered Charley and to be part of the program to receive the certification you have to go through their own process of their own people check the animals to make sure that they're free of disease and so on and also they have an extensive network that one can use to realize a market premium this is one mechanism of course said eventually even those people of benefit from subsidies in our area if they find out about this where this becomes more widespread then they'll realize the same benefit which leaves us needing to find another profit opportunity I'm already a little over time so it's good time to conclude in my call for libertarians to be joys and to uphold libertarian principles informed by economics and the tradition of the Austrian school I have presented a rather tough challenge except in those instances where state crowding out or monopolization has made it utterly impossible to go without subsidy to continue conducting some activity that would likely still happen absent that government intervention except in those cases a libertarian is obligated to not accept state subsidy and to seek entrepreneurial opportunities to overcome the competitive disadvantages of that moral stance and my father and family and I struggled with this challenges this challenge for several years now and it's matter if you are going to accept those subsidies in the case of business you have to be honest with yourself as a friend put it to my dad a few years ago it's a matter of integrity and thank you very much