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An image of the Berlin Wall in 1987, taken by Thierry Noir.

An image of the Berlin Wall in 1986, taken by Thierry Noir.

25 years ago the Berlin Wall fell, initiating the final collapse of the communist regime in East Germany. For this anniversary, thousands of people rallied to Berlin and remembered the brave people who stood up against the oppression of the SED regime. Ronald Reagan’s famous quote, “Tear down this wall,” finally became true. 1989 was not only the last year of the Berlin Wall, it was also the end of the “Iron Curtain” dividing the communist states of Eastern Europe from Western Europe for 40 years. You couldn’t find a better reason to celebrate.

That being said, a much stronger wall still divides Europe from many parts of the rest of the world. Every German can now move from every German city to another, and, thanks to the Schengen Treaty, it is possible to travel from Lisbon to Copenhagen without any border checkpoint. This new kind of freedom is taken for granted now, but it’s not granted for those outside of the Schengen zone. If you live outside of Europe, you most definitely can’t travel to Europe without permission, and to get this permission can end in a bureaucratic nightmare. For people who try to come without permission there are security guards, patrol boats, drones, walls that put the Berlin Wall into shame, barbed wire fences and attack dogs waiting as a cynical welcome gift.

The strong fear that immigrants will destroy the welfare state leads many people to conclude that there is no alternative to the “Fortress Europe.” The numbers say otherwise. A new study has found that foreigners in Germany generate a surplus of 22 thousand million euros for the social security. [1] Every foreigner pays 3300 euro more than he gets back as welfare benefit. This is true for most other countries in Europe, too. But even if foreigners did not generate a surplus to the welfare state, they would still have the right to move to Europe. It’s better to reform or abolish the welfare state than to close the borders. Milton Friedman once said “You can’t have a welfare state and open borders.” Fine, than let’s end the welfare state. Or, to find a pragmatic solution, exclude foreigners from welfare benefits. Even this would be an improvement of the status quo.

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Entrepreneurship is inherently disruptive in the sense that it challenges old ideas and revolutionises the way we go about our daily lives. To borrow the terms of economist Joseph Schumpeter, its nature is both destructive and creative at the same time. It threatens the old and paves the way for the new. Furthermore, there seems to be an ongoing struggle between progressive and conservative forces, whose outcome determines the level of human progress. With these ideas in mind I would like to pick the recent Uber controversy as an example of the way our society deals with ingenious entrepreneurship.

Ride-sharing companies such as Uber, Lyft and SideCar have developed their own smartphone apps that allow car drivers to connect with people in need of a ride. These innovative companies offer several advantages over traditional taxi services. For once the use is extremely convenient. In contrast to taxis, there is no need to make a phone call or step onto the sidewalk to hail a passing cab. You merely have to log into the app, determine your location, choose a driver and wait for him to arrive. Since the payment occurs through the app, no cash is needed. Through background checks and rating systems, they hold their drivers accountable and ensure that passengers can enjoy a quick, safe and overall pleasurable ride. Uber, the largest firm among them, was founded in 2009 and has since then expanded into more than 200 cities in 45 countries around the globe, but not without significant backlash.

Unquestionably the largest opposition stems from licensed taxi drivers, who have led numerous protests in London, Barcelona, Paris, Berlin and several other major European cities. As a result, Uber has been banned in several cities in the United States and Europe. The local government in Madrid announced fines up to €18000 for drivers and passengers and threatened repeat offenders with car seizures. Meanwhile the company is facing legal hurdles in multiple other places. Last September the French parliament enacted an “anti-Uber law” imposing a number of ridiculous restrictions on Uber and the like. They are, for instance, prohibited from using geolocation services and are obliged to return to their dispatch after each ride. Last year they were even temporarily compelled to wait 15 minutes before picking up a passenger.

Clearly the crackdown has very little to do with the common good, which our public authorities are supposed to promote. Quite to the contrary, the traditional taxi companies have successfully used the political system to protect themselves to the detriment of consumers and competitors. This is not at all surprising given how interest-ridden and regulated the transportation market has always been.  Indeed whenever agents of the public and private sector sit at the same table, there is a considerable risk of laws favouring them at the expense of third parties with less political power. As Tacitus warned: “The more corrupt the state, the more numerous the laws.”

Apart from being highly problematic from a moral standpoint there are also practical issues to consider. As long as there are laws in place that protect one or multiple firms from competition, the privileged firms are discouraged from improving the quality of their products or services. Imagine we would have forbidden automobiles to compete with horse carriers or computers with typewriters. Not only would we have crushed the dreams of creative geniuses but we would have brought progress to a halt. No wonder the taxi industry has never come up with the technological advances that have made Uber and other firms popular.

 A possible counter-argument might run as follows: “While there are indeed unfair laws that benefit taxi companies at the expense of ride-sharing services, Uber is also engaging in unfair competition by not complying with existing laws regarding taxes, licenses and insurance.” While Uber claims to operate within the law it is certainly true that at least one obvious competitive advantage is due to the fact that its drivers do not pay for expensive licenses. However, this only constitutes a sufficient reason to condemn Uber under the condition that these licenses are just and absolutely necessary. Yet their legitimacy is dubious to the extent that they serve established interests to the disadvantage of newcomers.  Moreover, their usefulness has been called into question by thousands of people, who have put their trust into Uber and its particular way of certifying drivers. It could even be argued that Uber and the like have a greater incentive to ensure quality and safety than the bureaucrats who are charged with the distribution of official licenses. After all the former are threatened with financial ruin in the worst-case-scenario whereas the latter are not.

With all that being said, there is a crucial point that must be kept in mind. Uber is no different from other companies in the way it behaves in a corporatist state. Thus it should not come as a surprise that David Plouffe, Obama’s former campaign manager, joined Uber’s team this year. Additionally, as Nick Gillespie writes: “After spending years antagonising would-be regulators, Uber is now working with them to hammer out agreements that will let the company flourish even as less-connected competitors face tougher regulations.” Indeed Uber’s rising popularity is coming hand in hand with a gain in political influence.

To come back to the idea introduced in the first few sentences of this article, the ongoing struggle is not a static one. Consequently there is no reason to believe that its players eternally remain on the same side. Instead a firm is likely to start out as a a force for progress and turn more conservative at a later point in time. So my aim is not so much to defend Uber but rather to stand up for the rights to innovate, to unleash creativity, to realise your potential and to challenge the status quo in order to bring about human progress.

Laws are usually passed by politicians that have good intentions and hope that a law will improve the status quo, but often laws don’t cause the desired effect and bring unintended consequences with them. One really good illustration of such unintended consequences from legislation can be observed in the patent industry. Intellectual property and patent laws have created an entire industry of so-called patent trolls – businesses that exist solely to abuse patent laws by suing companies that might use patents or licenses from another company.


Patent trolls are usually companies that basically exist solely to sue other players for using patents or licenses. Most patent trolls are so-called non-practicing entities that don’t produce anything and don’t invest anything in research and development but merely consist out of patents and lawyers leveraging these patents by suing companies. Trolls don’t use their patents for products but merely own these in order to use them for legal confrontations with others. These patents were originally not invented by the troll but usually acquired from a bankrupt technology company.It is more than common that various companies use the patents owned by one firm and pay licensing fees for using that patent. A normal smartphone usually uses more than 1,000 different patents and many of these are not actually owned by the smartphone producer, but instead licensed to them. Smartphone producers often even ‘rent’ patent licenses from their competitors.

Patent trolls often disturb this common practice, as they are not interested in companies using patents but in enforcing their monopoly on the patent and filing for compensation from the other patent users. Tech companies usually don’t just license out patents to other companies but also use the patents of those companies. This is called cross- licensing and creates inter-dependencies between market players. This forces all of these companies to apply fair play. Whereas genuine tech companies have an interest in not overcharging their competitors for licenses, patent trolls don’t have the risk of a loss of reputation in the industry and retaliations such as counter-lawsuits by other tech companies.Not only large multinationals get attacked by patent trolls, but small, mid-sized companies and start-ups are particularly afraid of receiving an injunction letter from a patent troll. This fear of being legally attacked by a patent troll disincentivizes start-ups and small tech companies to innovate.Patent trolling has its roots in the 1980’s, but becomes a more and more severe problem in the complex international world we are living in. The good intention to protect a company’s innovation by allowing them patents seems to have at least partially turned into a nightmare for tech-companies and start-ups as the costs of complying with patent law and protecting a company from patent trolls are skyrocketing. This is a textbook example of unintended consequences: Those that were supposed to be protected and incentivized to innovate are now suffering the most from the consequences of this legislation. Those that don’t innovate and merely abuse the legal status quo – the patent trolls – benefit the most.One negative effect of patent trolls’ actions is the reduced innovation and cross-company patent use. Another negative effect can be felt by consumers: Patent trolls raise the costs of genuine tech companies due to litigation and the market distortion created by patent abuse. Tech companies needs to price in the costs of litigation and the risk of being sued by patent trolls. This leads to higher prices for consumers.There are very good arguments in favor of and against patent protection and it’s probably unrealistic to think that Western economies will get rid of patent protection in the near future. However, a serious debate is needed on how to combat excesses such as patent trolling and patent privateering that directly result from patent legislation.

A charge constantly leveled against the libertarian movement is that its political philosophy, once put into practice, must inevitably lead to the breakdown of “values”, “morals” and “traditions”, developed over the course of many centuries. Once everyone can “do whatever they want,” so the reasoning goes, the consequences would come very close to a complete overthrow of our whole civilization. With nothing left to hold them back, people will engage in the most scandalous activities and even receive applause for their behaviour.

Liberalism, it has been said, is based on the recognition of each person’s right to pursue their own wishes and dreams, as long as they do not violate the right of others to do so in the course of their actions. And while I indeed hold that this is the very cornerstone of a liberal political philosophy (and cannot understand how somebody who denies this could still be a libertarian), I want to draw your attention to a crucial distinction – the one between recognition and respect.
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One of the first facts undergraduate students visiting an Economics 101 lesson learn is that that resources and goods are scarce. Nothing comes for free and nothing exists in abundance. Be it raw materials, such as ore and coal, or basic items you can buy in a grocery store.

The best way to show the scarcity of an item is with the price system of a free market. The price is not set arbitrarily but instead is a result of consumer demand and producer supply. Different price levels reflect how much consumers want of a certain good and how much of it is available on the market. The price thus helps to show consumer preferences and acts as an incentive for producers to supply more or less. A high price can indicate that a good is in low supply but in high demand. Producers will invest their own capital to produce more of it, so they can earn profits. At the same time, dire consumer needs are being satisfied.

Common sense should tell us that this logic is true for every good we consume. For some, the provision of housing does not follow this simple economic truth. In order to provide a large number of people with “affordable” living space they demand price controls. This basically means that the government decides what price level is “appropriate” and which one is not. In this article we will see just how damaging this policy actually is and how it achieves none of its intended goals.
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A recent rally in New York City to raise the minimum wage. Image: The All-Nite Images.

A recent rally in New York City to raise the minimum wage. Image: The All-Nite Images.

The minimum wage is one of those topics that is ever-present in the political and public discourse on economic policy. Pledging to raise the minimum wage is a popular move by politicians who want to gain some popularity with the electorate. The topic was raised recently in both the U.K. and in the U.S. election cycles, once again. Although broadly skeptical of minimum wage laws, libertarians often lack a more in-depth understanding of the economic consequences of such laws. In the first part of this series we already examined how the market functions without any minimum wage being set by the government. Now we are going to look at the effects of introducing one.

A minimum wage is a government price control, or more specifically a legal price floor below which the price for labor, or wage, is not allowed to fall. That is, if someone employs a worker at a wage below the specified legal minimum, he is breaking the law, and is liable for prosecution by the government. The government cannot literally stop the equilibrium wage from falling below the desired minimum, but they can threaten employers with violence if they employ people at a rate below that minimum.

The effects this policy has on the labor market are very significant. First, it needs to be clear that for the minimum wage to have any effect at all it must be necessarily set above the equilibrium market price. Because, if it is set below the equilibrium price, it is completely redundant since the wage level is already well above the desired minimum. The same goes for the case in which the minimum wage is exactly equal to the market price. But when the minimum wage is set above the equilibrium market price, other things being equal, this will always cause unemployment.

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Photo credit: epSos.de.

Photo credit: epSos.de.

There will be no more “too big to fail.” The Governor of the Bank of England, Mark Carney, and his fellow regulators the world round have decided that banks should stand on their own and not require public subsidy. There is, however, only one problem: they have decided nothing of the sort.

It really has been quite the deceit. Bankers, regulators and politicians have managed to convince people that the bailouts which followed the financial crisis were the only subsidy given to banks in recent years. Nothing could be further from the truth.

Since the nineteenth century, central banks have become the order of the day. And while they were setup on the understanding that they would act as a lender of last resort to banks, they have become a perpetual source of cheap credit, fueling the very boom and bust cycle they claim to prevent.

Carney and his fellow regulators hope to keep this disastrous system alive. It wins them elections.

Put simply, via the Financial Stability Board, a new worldwide regulator, banks are to be made to hold between 15-20% of their assets as capital reserves. And in a way, it’s a step in the right direction. The greater the capital kept in reserve by banks, the more stable the banking sector will be.

But is 15-20% enough? Quite simply, nobody knows. As markets fluctuate and the economy changes, the capital reserves a bank requires vary greatly. In a free market system, banks would be forced to adopt to this changing landscape. Now, however, they will simply have to meet the minimum regulatory requirements and then point the finger elsewhere when the next dip comes.

A free market would be the best regulator.

Banks need to be taken completely out of government hands. And as much as the political establishment claims to want this too, they quite simply do not. The political class wants to continue the status quo whereby central banks subsidise the over-leveraged balance sheets of financial institutions. They want to print money, not for me or you, but for Wall Street and the City. They want to create the false booms that win them power, safe in the knowledge that they can shirk responsibility in times of recession.

But while central banks are the source of our economic woes, their survival is not in doubt. They are too important to the political class. They are the real “too big to fail.”

Photo credit

A Deutsche Bahn train awaits passengers. Photo Source.

If you wanted to go on a long-range journey through Germany before the year 2013, transportation was limited to your car or train. While international long distance buses were allowed to pass through Germany due to EU-legislation, national inter-city transportation was forbidden by law. This was because existing public transportation was to be protected from private competitors which pretty much created a monopoly where the de-facto still nationalized railway company Deutsche Bahn was the sole provider of long-distance travel opportunities.

Consumer possibilities were therefore limited, while the Deutsche Bahn could set prices above the natural market price since there was no other noteworthy competition. People were forced to accept often sub-par services at an unnecessary high price: trains frequently running late, technical problems and bad costumer services. The situation began to change when a new law was passed that allowed private bus companies to operate inter-city lines.

Opponents of privatization often argue that the introduction of competition leads to two problems. First, a struggle for the lowest possible price would lead to a “race to the bottom”, where companies would lower their standards in order to catch consumers with the lowest possible prices. This would result in sub-par services. The second concern is that privatizing former monopolies would lead to a loss of jobs.
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In the last month Germany has seen a debate on whether it should be legal for people to decide if they want to live or die. The issue was fueled by the case of Brittany Maynard, an American woman from Oregon with a Stage Four malignant brain tumor who gained public attention for her choice to die.

The term “euthanasia” is historically burdened in Germany, because the Nazis used it. However, it remained a common term in the rest of the world. First of all, most people don’t refer to euthanasia when someone voluntary decides to refuse treatments that could save his life, or if someone is not able to choose for himself and their relatives decide to end life-saving treatments. Both cases are already legal in every country of the world. Also, taking active steps of something that causes the death of a patient against his own will is something that no one wants to make legal. (more…)

http://www.flickr.com/photos/secretlondon/3113422394/“Deport all of them. Shut the gates,” was one of the typical comments on an online immigration article. “We are being bloody swamped with immigrants, it’s been a bloody invasion,” said another commenter, who had oddly chosen “hatethiscountry” as their user name. Many of them ended with a cry to vote for UKIP (The U.K. Independence Party). While internet comments aren’t known for their thoughtfulness, these are just the tip of an iceberg that reflects a very real, very toxic, public sentiment in Britain.

This is not the first time that we have seen backlash towards immigrants (in fact, some research suggests that opinions have been fairly steady on the issue regardless of actual immigration levels.) In the 1962 and 1968, two Commonwealth Immigration Acts were passed to prevent immigration from Commonwealth countries, which had been high in the 1950s.
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