From: Bart  Croughs <bart.croughs@tip.nl>
Date: Tue, 13 Aug 1996 09:35:56 +0800
To: "'cypherpunks@toad.com>
Subject: re: National Socio-Economic Security Need for Encryption Technology
Message-ID: <01BB88A7.0F5BA1C0@groningen04.pop.tip.nl>
MIME-Version: 1.0
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My statement that the wages depend on the amount of capital invested, has received a bad press. I thought cypherpunks were economically literate, so I didn't explain the principle and I didn't give any sources for further reading. This proved to be a mistake.
	To avoid this kind of uninformed criticism in the future, I recommend my critics read the following books, which can all be ordered from Laissez-Faire Books: 1) The economics of liberty (ed. L. Rockwell); 2) The free market reader (ed. L. Rockwell) - both books were published by the Ludwig von Mises Institute. 3) Economics in one lesson - Henry Hazlitt. These three books contain popular essays about economics, following the principles of the austrian school, the most radical free market school in economics.

Some quotes:
	Henry Hazlitt in 'economics in one lesson' (p. 139): "The best way to raise wages, therefore, is to raise marginal labor productivity. This can be done by many methods: by an increase in capital accumulation - i.e. by an increase in the machines with which the workers are aided..."
	Murray Rothbard in 'the free market reader' (p. 31): "Wage rates are low in many foreign countries because capital equipment is small and technologically primitive. Unaided by much capital, worker productivity is far lower than in the United States."
	Lew Rockwell in 'the economics of liberty' (p. 26): "Wages are determined by the productivity of the individual laborer, which in turn is largely determined by the amount of capital invested per worker."
	I could go on, but I think this will suffice.

Now I will explain why the austrian economists are right.
Imagine Robinson Crusoe. In the beginning, he catches fish with his bare hands. He has no capital investment, and consequently he is not very productive. His wage will be low (he will not catch much fish). If there is more capital investment - if, for example, he has a fishing rod - he will catch more fish in less time. His productivity is higher. His wage is higher (more fish). If there is still more capital investment - if, for example, he has a boat and fishing nets - he will catch even more fish. His productivity is higher. His wage is higher. Etcetera. So, it's really not difficult to see that the Robin's standard of living depends on the amount of capital available on his island. The same goes for the rest of humanity.

Bart Croughs