Archive for the ‘contractual economic coordination’ Category

After Doomsday, What?

February 17, 2010

Dr. Higgs on what comes next after a collapse:

Some doomsayers think the collapse will be triggered by runaway government spending, excessive taxation, oppressive regulation, food shortages, fuel shortages or natural disasters such as deadly pandemics or lethal changes in the world’s climate. I have yet to encounter a claim that we are doomed because of an impending beer shortage, but I’m confident that sooner or later, such a scenario will be bruited about.

Still other doomsayers are anticipating hyperinflation when, as Austrian economist Ludwig von Mises observed in his book “Human Action,” the monetary system breaks down, “all transactions in the money concern cease; [and] a panic makes its purchasing power vanish altogether.” Mises saw such calamity in Austria and Germany after World War I. Similar crackups have occurred elsewhere at various times, including the Confederate States of America during the final year or so of the Civil War.

Even in the worst of times, however, economic calamity doesn’t mark the end of economic life. Austria, Germany and the U.S. South did not disappear as a result of their currencies’ ruin. Although many people suffered, most people found a way to survive, life went on, and economic activity eventually resumed after the adoption of a “reformed” or foreign medium of exchange. Most people survived even the recent hyperinflation in Zimbabwe, notwithstanding the Mugabe government’s best efforts to starve them…

We need to have a modicum of faith in people’s common sense, creativity and will to survive and prosper even in the face of great difficulties and obstacles. If people could keep society running in the aftermath of the Black Death, they could keep it running after the U.S. government defaulted on its debt…