From: Bart  Croughs <bart.croughs@tip.nl>
Date: Wed, 14 Aug 1996 04:33:42 +0800
To: "'cypherpunks@toad.com>
Subject: Re:  National Socio-Economic Security Need for Encryption Technology
Message-ID: <01BB892E.F84FC960@groningen13.pop.tip.nl>
MIME-Version: 1.0
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Timothy May wrote:

>The problem with the "Croughs Axiom" is not that there is not a _general_
correlation between average national wages and average national capital
investment--there is. <

As I said, I would be proud if the axiom that wages are determined by the amount of capital invested was discovered by me, but it really isn't, so there is no reason to keep calling it the "Croughs axiom". This is no display of false modesty. This axiom was already accepted by Austrian economists when I wasn't even born. See my quotes of Rothbard, Hazlitt, etc. in one of my previous posts on this subject.

>A scatter plot of wages vs. capital investment for
the 200 or so nations would almost certainly show that the Ivory Coast has
low per capita wages and low per capita wages, Sweden has both higher wages
and higher capital investment per capita,  and so on.<

I couldn't agree more.

> Correlation, of course, is not causation.<

Sometimes correlation and causation don't go together; sometimes they do. In this case, they go together. I mentioned the reasoning behind this in a previous post on this subject, but maybe you didn't read this, so I will repeat it here:
"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 Robin's standard of living depends on the amount of capital available on his island. The same goes for the rest of humanity."

:>No, the problem was that Croughs invoked this general _correlation_ (which
can arise for various reasons) to support his mercantilist protectionist
ideas.<

This general correlation between wages and the amount of capital invested does not arise for various reasons; it arises for the reason explained above. But of course there are reasons why there is more capital investment in the U.S. than there is in Third World countries. The main reason is that economic activities were and are hindered by the Third World governments more than by the U.S. government.
	As I already explained in a previous post on this subject, I have no mercantilist protectionist ideas. Even when the movement of US capital abroad would lead to a drop in wages for US workers,  I would still support the free movement of capital, simply because I subscribe to the libertarian non-aggression axiom. (And no, I didn't discover this axiom either. Alas.) 

> (He also didn't say he was talking of nations, which is why some of
us found the examples we did, e.g., MacDonald's vs. law firms, which have
the opposite correlation he described.)<

I didn't say I was talking about nations, because I thought this would be obvious for anyone who knows a bit about economics. Maybe I should have been more explicit here.

>And the cloud of ideas connected with somehow forcing capital investment to
remain in the U.S....well, the best way to do this is to alter the tax laws
so that America (for example) becomes a magnet for investment. (If one is
looking to help America, that is.)<

I couldn't agree more. But this still doesn't answer the question I asked in my original post.

>In any case, the original notion, of somehow using cryptography policy to
support U.S. interests....well, I rather doubt that Menger, Von Mises,
Hayek, Hazlitt, or any of the others connected with the Austrian School
would buy Crough's protectionist arguments.<

I don't understand. Do you mean to say that I had the notion of using cryptography policy to support U.S. interests? Read my posts again, I can't find this notion in my posts.
	It agree that Menger, Von Mises, Hayek or Hazlitt could probably answer the question I asked in my original post, which I will repeat here for the sake of clarity:
	 "If American companies are moving capital to Third World countries because of the low wages in these countries, then the workers in the Third World will of course be better off. But in the US, the amount of capital will be lowered. So the American workers will be able to get other jobs, but these jobs will pay less, because of the diminished amount of capital in the US. (As I said in another post on this subject, I mean that these jobs will pay *relatively less*, that is: less than they would have been paid if the American capital wouldn't have left the U.S.)
	Of course there are advantages also for the US (shareholders will get higher returns, trade will increase), but how can you proof that these advantages will offset the disadvantage of the lowered amount of capital in the US? "
	 
So I agree that the Austrian economists could probably answer my question, but in their books I wasn't able to find the answer, and these economists are not on this list. So I hoped that others on this list who had knowledge of Austrian economics could answer this question.  That's really the only reason I asked my question: I wanted to be able to rebut protectionist arguments more effectively.You seem to be acquainted with the Austrian economists, but so far, you didn't answer my question.

>And I certainly know that jingoistic appeals to "America First!" are
inconsistent with the sentiments of many or even most on this list.<

I know, that's why it's so disappointing that nobody has been able to answer my question thus far. And, as I said earlier, I share this sentiment; that's why I'm on the list. I just want to be able to defend my sentiments better against protectionist arguments.
	


Bart Croughs