Markets or Government - Which is More Efficient?

Everyone has an opinion whether certain sectors of a society should be operated by markets or by the state. There are three viewpoints. Everything should be run by the state, the market or the so called 'mixed' economy. The majority of people hold the latter viewpoint with their love/hate relationship of Capitalism. The problem I find with the mixed economy view is its inherent contradiction. Why are some aspects of society better run by State monopolies yet people with such views generally accept that markets lower costs and supply more consumer goods for us all in other segments. I may disagree with Socialists who believe all sectors of an economy should be managed by the State but at least they are consistent. The march of markets, freedom and capitalism will not stop and people will actively vote for them where it is given the correct conditions. So are markets more efficient? This point can be debated forever. I have a deeper problem with Governments and centralised monopolies.

People mistake Libertarians, Anarcho-Capitalists, Crypto-Anarchists - people who favor free markets - as believing that growth is important. In fact the contrary is true, people with such philosophic views don't care. They don't care if economies contract or if people become poorer. What they care about is that individuals are empowered to make decisions for themselves on a personal level. If people in society wish to work shorter hours or decide to do things contrary to economic growth, then that is fine. They believe when the freedom of the individual is unleashed economies will grow indefinitely and people will get richer; but this is just a by product and not a direct aim. Ironically its people who despise Capitalism and markets who worship growth. The Keynesians, the Government officials, the Socialists. They use growth as a measure of success or failure of a society or a particular policy.

To illustrate a typical debate of free choice vs state coercion lets take a software developer who decides to move job. First there is the downtime in getting up to speed with the new systems they will be working on. These are usually non-trivial so can take months to get up to speed on and this may just be a subsystem of the entire application. Then there are the associated recruitment fees as people constantly move to different companies. This costs the economy millions. There is a loss of domain knowledge when an experienced team member leaves, often leading to their successor taking more time to make changes. Then there can be issues with morale, if many people leave it can cause dejection among a company who suffers attrition. With all the above and no doubt other issues you could argue for the sake of economic efficiency that we should make people work the same job forever and remove the choice from the individual. Similar polices are enacted in Cuba, where people choose a job for life mandated by the State. 

There is however another side to all this. When people move jobs it spreads knowledge from people working with different colleagues with different experiences. These new ideas can help improve an application. People avoid becoming bored and unproductive and have the opportunity to move to what they perceive as more fruitful work.

We could argue both cases are an illustration of the superiority of free markets or Centralized coercion in the general form of a Government. In my mind its markets that are more efficient but I will be happy for someone to take the opposite view. If we just look at morality then the answer is surely markets. Only markets put the individual at the center, the State takes decisions away from the individual. For example if people want to use vetted medical drugs or "Quacks" or have medical procedures that do not comply with regulation A, B and C, then they should be free to choose; currently they can not (for the misgivings of regulation see this post as detailed it is tyranny). If we mandate services we loose out on all the unseen innovation. Who could argue against freedom? Isn't this what we all want as individuals. 

We can take a look at another example, Software Technology. Why have multiple programming languages? Why have multiple database applications? Not just dozens but hundreds. Many cover the same uses and offer no real difference thus there is a duplication in effort. Many fail, wasting time and resources. Again the other side to the coin is the failures build the successes. The competition creates better products for consumers. The multiple platforms ensures diversity and resilience. Whats more efficient or compatible with economic growth? We really shouldn't use this metric to decide, instead freedom; people should be free to do as they please. If someone wants to create their own programming language just for the fun of it then they should be free to do so, despite it not contributing to the GDP figures.

Would we think its right to mandate a dictate where people can and can't live in their country of birth? What job they could take? What food they could buy? Many Westerners may think the preceding list as absurd, but that's exactly what liberties some Governments take away from their citizens. Markets are right because they represent the freedoms of individuals to make choices for their own needs. Not because they are more efficient or contribute to increases in GDP, but because they disperse and decentralize power.

We should all be free to do as we please, even if that means we make bad choices. If we choose the wrong job, house, car or say things we regret; we should be grateful that we had the choice in the first place, many others don't have such freedoms. Happiness metrics are all wrong. People can have all the freedom in the world but still be unhappy at the time they are surveyed, but at another time may feel euphoric. Human beings are emotional creatures who experience happy/sad swings all the time. As Frank Sinatra said "Thats Life". He also sung "I did it my Way". That is true equality. Liberty, not State coercion. The right to live life by our own decisions. Regardless of if those decisions do not contribute to the GDP statistics.

Healthcare has to be Earned

"Always have a healthy disregard for the status quo"

Myself

Healthcare. Should it be a right or should it be earned? Ask 99% of people and they will probably state it is a right for everyone within a developed nation. I'm the one percent. I believe healthcare needs to be earned. The crisis in healthcare within developed countries has not come about from the free market or a defunct laissez faire capitalist system. It has come about from years of Big Government. There is no crisis in the software and computer industry where costs are spiralling out of control with service quality in decline. The freedom of the human spirit and mind is the most powerful weapon to combat poverty. Abundant healthcare needs to be earned.

Altruism is the status quo with Big Government as the institution that forcefully implements such principles. I used to be a believer in the "mixed economy", the current system that we are taught at school, the "right" moral system that we should abide by. Then I started asking questions and the more questions I asked the more contradictions I would unravel whereby altruism is supposedly the only way a civilised society can be run. Healthcare was one such mystery. Why do markets improve services and bring down costs over time, yet I saw the so called "free market" healthcare system in the United States do the complete opposite. Many accept such a view; that the Healthcare system in the United States is free from Government control and that Healthcare needs to provided by Government. I didn't and kept asking questions; questions that need answering are hard; accepting conventional wisdom is easy. Healthcare, just like food, needs to be earned.

Food is a similar commodity to Healthcare in that it is vital for human existence.  In the present time-frame we find ourselves in we have an abundance of food. We can all comfortably eat ourselves to an early grave should we wish. It wasn't always like this. Back in the 19th century food bills consumed a large proportion of a workers pay. In the infamous 1848 food shortages that ran throughout Europe, many including Karl Marx, concluded that Capitalist systems had run its course. Food was a right. Many Western countries thankfully did not implement collectivisation, the policy to trick people into believing abundant food can be provided by a coercive state. Instead food was to be earned. People set to work improving agricultural methods, respecting private property and allowing entrepreneurs the freedom with their minds and resources to enable abundance. Thanks to such policies and people I now enjoy a nutritional diet that a King would once have dreamed of. However in countries that believed food to be a right the complete opposite happened. Under Tsarist Russia, a backward political system, the country exported grain to Europe. Under Collectivisation, food, rather than to earned, was deemed to be a right for all of society. In Lenins famous "bread, land and peace" speech the stage was set for the inevitable food shortages that would occur. Russia could put a man in space but they couldn't provide basic staples for the majority of the population. During the 1960's Khrushchev sold of a third of Russia's Gold reserves in order to avoid mass starvation. Zimbabwe, once the bread basked or Africa, under collectivisation became a barren land of pestilence and starvation for its people. Food, it was claimed in such countries, to be right.

Do we give a people a right to a car? To a phone? To a computer? To a 40" flat screen TV? When Henry Ford set out to make a car that was affordable for the common man many in the industry said it couldn't be done and he was mad for even trying. Well we should all be thankful for the people who have a healthy disregard for the status quo. Once an object of the elite Henry Ford revolutionised the way cars were made making them affordable. Re-known for his obsession to detail he had no interest in being a CEO in the office with elaborate job titles, instead he was constantly on the assembly line looking to make things more efficient. Innovation such as the moving assembly line and asking questions of why does that man have to turn for that component it should just be there, were the hallmarks of an wealth maker. He became rich but he made us all far richer in the process and we didn't have to lift a finger. Three Quarters of Americans who are classed as living in poverty now own a car thanks to people like Henry Ford. If the Government had mandated a car is a right that would not be the case - it would still be an object for the wealthy elite. Instead a car had to be earned with hours of dedication and freedom for individuals to pursue their own selfish interests.

If the Government had introduced a policy that mobile phones during the late 1980's should be a right for everyone what would have happened? One can be sure that the innovation that occurred over the next 25 years would not have happened. Back in the 1980's mobile phones were expensive. It would have required a subsidy program, regulation and government enforcement in the industry in order to provide a phone to everyone. Freedom for the wealth creators to pursue their own interests would have been blocked as the government would have artificially supplied everyone with a phone. Thankfully we had to earn that right. Now anyone can have a phone; the old ones go free. Phones are now so sophisticated its incredible. Car navigation, language translation, bar-code scanners, sound systems, all round entertainment wherever we go.

Why is all this important for healthcare? Because I believe healthcare is no more a right than any of the above. It needs to be earned and if it is earned then healthcare becomes abundant for all including the poorest in society. So the first thing to tackle is Americas so called "Free market" healthcare system. 

Around 50% of Healthcare payments in America is spent by government due to regulations, Medicare and Medicaid; I should just stop there as even an ardent socialist will realise that this is far from a free market. Then there is licencing. This is a process to ensure a limited supply of labour is supplied to a particular field in order to drive labour rates up for doctors. That's what creates artificial supply in doctors or a specialist. In the 19th Century Doctors didn't like the fact that anyone could enter medicine so lobbied government to restrict entry - under the guise of "helping" people. In reality all it did was to skew market forces and monopolise a profession. A monopoly that also controls how medicine should be practised stifling creative thinking. In Software this doesn't happen. Anyone can code you don't even need a degree despite the fact many computer systems are critical to all our lives and complex. Its based on reputation and merit; not monopoly organisations that can control entry. People quit university and never even qualify with formal education. Bill Gates didn't even do his degree in computers yet is one of the most renown names in the field and we all trust him with the software his company creates (and by all accounts he is a very good programmer).

Regulations in Americas healthcare system is a maze. Insurance policies in America include no direct correlation on lifestyle habits, age or previous history - the government bans it. Catastrophic healthcare is not an option, instead people claim insurance for routine inspections. Its like getting insurance for your car and the government mandating that it must include an oil change, wax and clean every month and minor wear and tear on parts such as tyres. There's a reason we just insure for major car damage and pay cash for tyres and optional extras. Its a more efficient way of people looking after property. If tyres were included then there would be no incentive for people to ensure they did not "burn rubber" or to maintain their tracking which rip through tyres. Insurance would rise as a consequence quite considerably. By regulating the government stifles start-ups that cease to even exist. Just getting a new drug approved means only large companies can create such innovations with all the paperwork involved no young start-up can do this. If there are huge costs and regulations as to what can be done then such start-ups will never exist. Free markets encourage trial and error. American healthcare persecutes such behaviour. 

Insurance in some cases has to cover for example massage therapy which many individuals would see as a non essential item. There's a whole host of treatments that "must" be included in a healthcare policy. Insurance companies can not offer insurance between states due to Government regulations. Patent laws enforced by Governments drive the price of drugs up. The West in my opinion are unwittingly pursuing genocide in continents like Africa due to such restrictions (patents are another issue for discussion, immoral and against free trade). As the Government is the largest single payer in America for healthcare they have no price conscious. There are flat fees for patient treatment resulting in no innovation to drive down costs. Why do hospitals need to drive down costs when the price paid will always be the same. Employers get tax breaks for offering employers insurance as part of their employment. Its like getting your car insurance paid by your company, the price concious consumer is removed. There should be no tax break and consumers should choose as required.

As the Government pays in many medical cases people have no incentive to look after their health. When healthcare is a right and someone else is paying, why bother. New technology should be making healthcare more inexpensive and plentiful instead the complete opposite is seen. If we have a MRI scanner shouldn't such equipment diagnose people quicker and require little human intervention. Yet costs continue to go up, despite the fact that the electronics field for example where equipment becomes more sophisticated and yet the costs to the end consumer continue to plummet.

With all the Regulation this stifles entrepreneurial doctors. If the Government has fixed prices and fixed rules on what they can do then how can your doctor challenge the status quo? How can they as experts use their judgement to make things more efficient? Many entrepreneurs in software were derided as nuts and went against what was convention in their selective field. Steve Jobs, Bill Gates, Larry Page and Sergy Brin. As IBM once said to Bill Gates "All the money will be in the computers; not the software", or when Steve Jobs and Wozniak created Apple, computer executives used to quip "What would an ordinary person want with a computer?". When the google co-founders decided that they would index the Internet that was growing at an exponential rate and offer the service for free many said, "How will this be sustainable and possible?". Healthcare in its current inception does not have the conditions in place for a Steve Jobs doctor. Entrepreneurs when allowed full freedom drag humanity towards prosperity and always start as a minority having a healthy disregard for the status quo.

Healthcare has been heavily Government regulated throughout he 20th Century so it is impossible to say what healthcare would look like under a free market. However one interesting area is Laser Eye surgery which has had very little regulation and government involvement. Once the preserve of the rich it has now become affordable for the common person. Prices have fallen and the quality has improved. This is despite the ever increasing sophistication in tooling. They can even do it with robotics and computing with no human intervention. So when economists such as Paul Krugman claim rising Healthcare costs are the result of every increasing technology think again. When a free market is at work; this brings down the costs. They don't go up.

Since the "Peoples Revolution" in Cuba, Castro and his followers declared healthcare was a right for all. Healthcare would be provided by the state for "free". Cubans now have this so called utopian system of free healthcare whereby people can no longer even obtain paracetamol that cost pennies here in the West. Many cases are reported of patients being neglected with woeful practices. Ambulances are in the form of people using wheel barrows to take their loved ones to hospital due to shortages of transportation. Some of the photos can be accessed online as many Cubans have had enough of Western tourists telling them of their utopian healthcare systems. The locals know the reality. The services they get aren't the special tourist built facilities Michael Moore viewed. His video actually worried Cuban officials so much they believed there would be uproar with people demanding such facilities for themselves. Cuba is so poor they export their Doctors to other nations, not from some altruist principle but to line the pockets of Castro and his cronies, another way the administration tries to gain hard currency. Contracting their principles like all good Socialists; they make a profit.

In the UK we have the National Health Service where healthcare is a right. Instead of insurance companies refusing treatments its the Government. Private Insurance will see you in days; with the NHS its months or years. As we have all the same market limitations as the United States we again have the problems of rising costs and declining customer service. There's many defences made for the NHS. Some say it was deprived from funding during Thatcherism, despite the fact Thatcher spent more on Health in real terms than Labour leaders such as Harold Wilson (rising 32% in real terms during the 1980's). More money is always pushed as a solution but it never works and never will (healthcare continues to rise as a percentage of GDP). Economic freedom is required. Scaremongering keeps everyone in line with current mainstream wisdom; fear tactics tell people they would be far worse under a free market, citing the so called free market healthcare system in the United States. The NHS is propped up by the free market due to the productive wealth of other freer areas of the economy that pay taxes and create long term prosperity which helps pay for the ever rising costs. 

When I was a teenager during the 1990's if someone had said to me one day that I will have access to unlimited email, have endless Video and Music content for free, be able to upload an unlimited number of photos and have a 42" screen Television I would have said what planet are you on. Humanity earned these services we didn't have someone say we needed them they just came about through hard work and the freedom given to free market capitalism. People pursing their own interests is the most powerful tool to solve poverty. It used to be when you couldn't have three square meals a day you were poor. Then when that became implausible they said if you didn't have a Television you were poor. Then a computer. Then a phone. Healthcare needs to take a look at history. If you want to solve the current lack of quality healthcare for all then don't state it as a human right or need. Healthcare needs to be earned and with it will come abundance. The unfettered free market can only solve such such a difficult issue.

Crypto Currency

So you think that money is the root of all evil? Have you ever asked what is the root of money? 

Ayn Rand

Yes, [we will not find a solution to political problems in cryptography,] but we can win a major battle in the arms race and gain a new territory of freedom for several years. Governments are good at cutting off the heads of a centrally controlled networks like Napster, but pure P2P networks like Gnutella and Tor seem to be holding their own. It's very attractive to the libertarian viewpoint if we can explain it properly. I'm better with code than with words though.

"Satoshi Nakamoto"

Computer software is an abstract concept for many. People generally have no idea how Facebook works, how emails get routed or how smartphones perform all their tricks. Developers do an exceptional job of abstracting away from all the low level details that underpin such software. What has software got to do with money though? Enterprising software developers have been at it again, creating a new money known as BitCoin (a dedicated wiki can be found here with further details). This article will not only attempt to explain this new concept that has the potential to revolutionise society, but along the way we will explore how the marketplace free of any Government interference, functions, and how this makes all of our lives better. Its an article of some length, so please ensure you have a large hot beverage at hand, take a breath; let us begin.

Let me start and re-hash what my previous articles have said; I am a firm believer in the fact that Governments should not be in the money business, such a task should be left to the free market. I've also discussed that consumers should select good money, be that commodity backed, in good faith or some clever new innovation that could only occur spontaneously from the free market. Individuals have attempted to challenge the State held monopoly of money by creating their own, a notable case is Bernard von NotHaus with his Liberty Dollar, however such activities have caused Governments to clamp down on challenges to their power. Governments don't like free money, shaking down individuals who challenge their 'wisdom'. Currencies issued from a central organisation will always be an easy target for the Government to shut down. 

Step forward a Cryptographic Currency known as Bitcoin, with the potential to revolutionise e-commerce and challenge the governments monopoly of money. It uses modern day Cryptography (Mathematics) to solve the conundrum of having a currency that is devoid of central control. The protocol functions in a peer-to-peer network. Rather than having a central third party checking the transactions to be correct, many users who are scattered all over the world perform such checks (known technically as miners). Think of it as the accounting ledger being public to all and distributed in such a way that everyone has access to it and works together to ensure its integrity. Integrity is also enforced by the difficulty of the Cryptographic problems. Anyone can then make anonymous transactions with the need for no financial intermediary, there is no third party. The buyer transfers the money direct to the seller. The coins themselves are cryptographic hash codes which are unique identifiers. With the use of public-private key pair technology these are then signed by the relevant parties. Miners then process transactions, validating that they are correct adding them to BlockChains (the accounting ledger). Each coin is unique and can not be double spent which is one of the key concepts that makes Bitcoin so unique. Up until that point digital currency systems were always susceptible to double spending and required a central third party to validate all transactions. Not with Bitcoin.

Want to know more. Here are some of the advantages:

Open Source Code
The code is open along with its theory, meaning it has been critiqued by a number of security experts around the world. It has no known flaws. It uses the same Cryptographic algorithms as your e-banking. The only flaws in e-banking are generally end users, or developers implementing the banking systems incorrectly. Therefore Bitcoin can be considered very secure.

Free from Inflation
Currently the currency grows at a predetermined mathematical rate, an algorithm that was purposely chosen to track the rate at which commodities, such as Gold, are mined. Eventually this will in all practicality stop with the supply never exceeding 21 million bitcoins. There is no corporation or political control over it therefore it can not be inflated. In this aspect it is even sounder than Gold. The Mathematics ensures it future scarcity.

People can now actually hold a currency that has the potential to not only retain its value but will appreciate over time. No need to worry about which is the best negative interest rate at your bank. Just keep your Bitcoins saved up and they will appreciate on their own, due to free markets increasing everyones purchasing power over time. I'm sure one day someone will create lending services, where users can lend their Bitcoins for a rate of return (legal property aspect would need to be explored) in a similar fashion to a Bank. Regular banks could take your Bitcoins, give you a rate of interest, lend this out to business for a slight profit. No doubt these areas will be gaps in the market that will be explored by the entrepreneurs as the money matures.

Peer to Peer Network
There is no central server for the network. Transactions are actually validated by the thousands of distributed servers, known as miners. This proof of work (the accounting ledger) is spread out among the miners who are rewarded with new coins created at a pre-determined mathematical rate. This proof of work, which is computationally expensive, makes it incredibly hard for someone to change the past or to double spend and corrupt the money. This distributed nature has great advantages. The Government can not physically shut it down (without shutting down the Internet). If they shut down one cluster of miners then others would join the network.

"No" (Low) Transaction Fees

Bitcoin cuts banks out all together. Its like dealing in cash but with all the benefits of electronic commerce. Banks no longer need hefty cuts for dealing with admin, bank managers, Government red tape and regulations. The third party is the mathematics. I'll cover the concept of low transaction fees later, suffice to say, its lower then any existing market offering.

No Double Spending
Coins can not be created out of thin air (excludes mining, which works on a pre-determined mathematical algorithm). Once a payment has been made it can not be reversed, nor can the coin or a wallet be copied and spent again. This keeps the system honest.

Cross Country E-Commerce
At present there can be boundaries from conducting trade between nations. As soon as you cross international boundaries fees can start to rise quite sharply. Bitcoin has no such limits, it doesn't matter if the person is half way round the world living in some totalitarian state. This is beneficial to nations who have been blocked from paypal or other credit card companies; the recent example of Wordpress now accepting Bitcoins shows how the currency can support free speech. No one on the network can tell you who not to pay, not even your Government. The currency itself is the ultimate liquid asset. Payment happens in seconds and becomes fully verified in minutes. I could pay someone in a country with strict capital controls or a nation that been blacklisted by paypal with no problem. Its just like Cash only with all the benefits of being digital.

Removes Political Censorship
Wikileaks is a recent example of where even Western Governments didn't like free speech and pressured payment companies to no longer process donations. Bitcoin allows free speech to prevail and Wikileaks now take Bitcoins as a form of donation. 

True Monetary Freedom
The most important feature of this new currency is the freedom is gives to people. Freedom to trade, free from inflation, free from currency or capital controls, inheritance tax (along with other forms of tax), free to manage your own assets completely free from a third party. Over time the money will no doubt be of wonderful value to society, however its the freedom of the currency that most appeals to me and is the most revolutionary concept it has created.

How it Began
The creator possessed the rare combination of being a Cryptography expert with Libertarian values. Known under the alias of Satoshi Nakamoto (a Japanese name, however people believe him to be British as he made references to the UK banking system) he built upon various ideas of others and created the first truly distributed free money. He created the protocol which others now maintain and the first thick client (a desktop application to create your own wallet containing coins). He did this because he wanted to. Not for money or fame, just because he believed it was the right thing to do. Individuals have other motives than money, despite what the left will tell you.

Since he gave his creation to the world he hasn't been seen since. However this is where others pick up and run with the system as it was all made open for other to contribute towards. 

So how do these Bitcoins work? How do I get hold of some? How can I store them? As detailed the coins themselves are in effect digital signatures that have been signed and verified by a network in a way that keeps everyone honest. These coins are stored in wallets. Wallets come in a number of forms and you can think of them just like your regular wallet that contains your cards and any cash you may be carrying. There are no limits to the number of wallets you can own, nor any limit on the size of your wallet (a wallet could contain an amount that is a fraction of a penny all the way up to millions of pounds). There are a number of options to store such coins.

Local Wallet
Local Wallets are created and stored on your local computer. This is how it started, the original client was written in such a manner (Bitcoin qt as it is known can be found here). Your wallet once it has some coins can be encrypted, meaning if someone does "steal" your wallet, they can't actually spend the coins without the password. This is the ultimate form of monetary freedom. You have complete control of your finances. If you want to spend money, it takes a matter of seconds to send to a seller. Likewise if you wish to receive funds then you can create an anonymous address and allow someone to credit your account.

However with great freedom comes great responsibility. If you forget your password, you can't access your coins, they are in effect lost. If your hard drive crashes and you didn't backup your wallet, tough, you've lost your coins. If your local machine becomes compromised by certain virus software, such as a key logger, and that person is able to log your password and ultimately have enough access to your system (and wallet), then again they could spend those coins (to their own account).

Then theres the problem of the client software, the original one for example took two days on my desktop to download the whole block chain (and when running in the background will considerably consume resources periodically as more transactions cross the network). Other clients are currently being released to solve such issues (Multibit is an example, I presume pruning the merkle tree) however then you find that Multibit doesn't support encryption yet (soon to be released I believe). Theres also the fact that you can't use these on Smartphones, or though a nice to use Web Interface. I can comprehend all the technicalities, so can others, but your average Joe will have a hard time. In order for the network to work, it needs to be made easier from a usability perspective (in fact this is just as important as the security, without usability the network will never gain mass appeal). This is where e-wallets step into the breach.

E-Wallet

Step forward the entrepreneurs amongst us. They could see all the issues above so set about solving them by taking away all the management involved, in effect assisting the end users in storing the coins securely and allowing non technical people to get started. E-Wallets have a number of advantages. You can access your money anywhere, anytime. You don't have to worry about backups, viruses or your personal computer being compromised. A third party will take care of such worries, for free. They generate their income based on either margins from buying and selling Bitcoins to their customers, advertising or some other source of income yet to be conceived. E-Wallets allow customers to access their coins on any computer system through an easy to use web interface, similar to your e-banking. They also supply applications for your Smartphone (due to its recent state predominately only for Android and iOS platforms). They take care of the all the intricate plumbing.

There is however a catch. E-Wallets were a first generation attempt to allow the majority of us to use bitcoins. Currently the bitcoin network has never had any weakness. Like I've said security weaknesses are the end users or the implementation of a system. There have been a number of notable cases where e-wallets have been hacked, the thief managed to gain access to the servers data which stored the wallet along with the private key and steal peoples coins. 

A Governments solution if they were aware of the Bitcoin platform, would be to condemn the service, stating more regulation was required in effect raising prices for consumers and stifling innovation. This is what always happens when Governments, Technocrats, Politicians and Commentators get involved. Thank God we have entrepreneurs, the people who do, as opposed to the people who talk. Enter the next solution.

Hybrid E-Wallet
One of the problems with e-wallets was that they stored all the data on the server, including the wallets private key (which could be used to gain access to someone's wallet - think of it like the key to your safe). If the central server was compromised then everyone's wallets were compromised. Another problem would be if the server went down, or even if someone attempted to shut it down, say the Government. All your coins would be tied up to that supplier with no way to get them back. New e-wallets, known as hybrids began to spring up. The concept was simple, try to solve the security issues of conventional e-wallets but maintain usability. Still not convinced?

A common attack was to gain access to the private keys in the central database. The solution therefore was to not store the private keys on the central server, instead run javascript on the client computer (your local machine) to generate the correct private key to open your wallet (hence the term "hybrid", you have in effect your wallet locally, but the server has all the APIs used to access your wallet). The server only stores the encrypted copy of your wallet, not the key to access it. Such third party systems in fact can not access your wallet, or your transactions and balance like a Bank or Government can. An overview can be found here. You own your wallet, all they do is provide a system that is far easier to use then a desktop client and store an encrypted version of your wallet. The disadvantage of course is if you forget your password, they can't help. In my view this isn't even a disadvantage. We all deal with passwords. If its important, write it down on paper and put it in a safe, share it with a loved one and so forth. I'm sure services will pop up that will store peoples passwords safely with ingenious security techniques that haven't been developed yet.

A popular hybrid e-wallet in the UK is BlockChain. The video below shows how ridiculously easy it is to create an account and pay someone. No paper work, proof of id, or admin - just trust in mathematics.

Before detailing the other superb security features of hybrid wallets I'd like to detail an example of why entrepreneurs are so important to economic development. BlockChain is a start-up conceived by someone called Ben Reeves. It is funded by the famous ycombinator start-up fund, that has made many a great company. He has done what many of us lack, realised the potential of a particular technology and begun to make this a usable for consumers. This is what Entrepreneurs do. They take future ideas, and turn them into accessible services. As great as Bitcoin is in theory, that's all it was a couple of years ago. You had to use desktop applications and manage all the security yourself, in that state no one was going to use it. It takes entrepreneurs (many others exist, similar to what Ben is doing with BlockChain) to take those services to the masses.

Steve Jobs was a great example of this in action. He was no engineer, but had an eye for value. He was the first to spot the value in Graphical User Interfaces and bring them to consumers, it was all stolen from Xerox. The iPod was just a copy of existing MP3 players that hadn't gained traction in the consumer market. Smartphones existed well before the iPhone, Bill Gates was trying to push tablets a decade before the iPad but Job's timing was impeccable. To achieve this Jobs stood on the shoulders of giants. OS-X which currently runs Apples computers exists because of Unix, a platform developed by engineers for engineers but not for consumers. No one can take away Steve Jobs brilliant talent for spotting value and making products accessible to consumers. That isn't to say he got everything right. He once famously remarked when Amazon brought out the Kindle that no one reads any more so they won't sell, and seven inch tablets would never sell - like all entrepreneurs its all trial and error. Bitcoin will be similar. All sorts of innovations created by entrepreneurs who spot gaps in the market will create new products to fill consumers needs. Lend/Borrow systems, Brain Wallets, send coins direct on Facebook further use of NFC swipe to pay with Bitcoins anywhere in the world seamlessly.

Back to the security, so what if it doesn't store the private key I still don't trust a third party with my money, you may say. BlockChain understands this. It doesn't want to lock you in. Young entrepreneurs are smart and realise the value they create is not in payment for their services, but for getting traffic to their servers, making money once they have the user base, similar to a Google business model. With a Hybrid wallet you can backup your wallet locally whenever you want. Alternatively you can send it to some other cloud storage solution, Dropbox, Google Drive your email account. You can have the backup copied automatically for every single transaction you perform, ensuring you always have the latest copy of your wallet (encrypted of course) at hand should the third party service disappear/go bankrupt.

The service also allows you to create a second password. This would then be requested whenever transactions are performed, ensuring in the unlikely case if someone gained access to your logon password and could look at your wallet they would not be able to transfer any coins. The coins are double encrypted with another private key a feature someone may wish to use with a savings account.

Two factor authentication is another security feature that is supported to further secure a wallet. When you login you would also be asked for a recent code that was sent to you. This can be either be through SMS, Email or Google Android Authenticator that runs on your mobile phone (meaning someone would need a physical device). It also supports Yubikey, similar to a physical key drive that provides a code to enter to your account. Again a physical device that is outside a hackers sphere. They only have access to data over cyber-space, not physical objects you possess. The service will only allow four password attempts if two factor authentication is enabled. If four failed attempts are made they will temporarily lock your account for a couple of hours and notify you that this has happened ensuring rough guess attacks are not attempted.

If you have a static IP address, you can lock your account to it (meaning a hacker would need to gain physical access to your actual computer).

You can create a physical paper wallet whereby your private key is printed as a QR code on a piece of paper. This means if your local computer is compromised with a virus or key logger software they couldn't see your password as your private key is stored at your house. You use your webcam to scan it in. Useful for long term savings accounts that you don't want to access or spend but wish to lock down. 

You can split your funds among multiple wallets, as there is no limit to the number of wallets you can own (I created around 3 to test - zero balances are fine). For small change you may wish to have little or no security, just a simple login password (similar to carrying cash) and for large savings wallets have many types of authentication detailed above - Bitcoin allows for many choices all down the consumer.

BlockChain also holds the majority of its code open source held in github meaning people can check for flaws and find bugs in it. All the code deployed to the servers is verified against known checksums to minimise malicious third parties changing the code. BlockChain provides local browser plugins that verify the local javascript that is run on your computer when generating your private key for login that I mentioned earlier.

In my opinion all Internet banking should be done on a secure system, preferably a non Windows device. I'd buy a Chromebook (if your tech savvy a recent Linux Distro will do). They run on Linux, a rock solid Operating System kernel that has been around for 20 years and is open source. Chromebooks give users minimal permissions meaning picking up malicious software is very hard. Verified bootup ensures any difference between boots are detected and a previous good copy of the Operating System is installed (the only way to hack this is to actually get physical access to the device and change the hardware - meaning its pretty safe). It runs the latest version of the Chrome Web browser, a very secure browser which is open source (constantly under the eyes of security experts with Google giving regular bounties to people who discover issues). Far more secure than closed source browsers such as Microsoft's Internet Explorer. The system is seamlessly kept up-to-date in the background. Why do a mention Chromebooks? Because consumer devices will continue getting thinner (not size, but in admin rights to the user). When people use computers, they don't want to update their OS, get anti-virus applications and check their firewall is up up-to-date. They want to turn on a machine and go. The Mozilla foundation have been working on a slimline smartphone OS, Firefox OS (based again on Linux), with the aim of making the phone a lightweight platform. No doubt Google will wish to eventually take Android (based again on Linux) in this direction, merging with Chrome OS, the operating system on Chromebooks.

All the above sounds complicated however Bitcoin is a platform and can be as complicated or simple as consumers want. Just as I have chronologically detailed how the platform for consumers has evolved within the short space of 3 years, in another several it will be even simpler and safer to use, the next generation of Bitcoin banks will emerge making payments effortless and efficient.

Bitcoin started with thick clients. Users had to keep this software up-to-date, download the complete BlockChain, ensure their computer was secure (Chromebooks were not around back then), deal with plaintext wallets, use third party software to encrypt them (in many cases use of a command line), back them up manually and so forth. You had to be a computer pro to do all this. As I have shown this state of affairs has now evolved into the fact you can login to a web interface, signup in a matter of seconds and you have a fairly secure wallet. As innovation improves so will usability along with security. 

Many have compared Bitcoin to the Internet when it first began and quite rightly for a number of reasons. Back when the Internet was in its infancy it was obscenely hard to use. No web browsers, graphical user interfaces, auto connect broadband wireless - it was just plain awful. However the basics were there a global interconnected network where people could share ideas and information. It took a decade later to gain mass public support and usability, now many rely on it as a service. The Internet was once dismissed as a toy for Geeks. Why do I need email, thats what the postal service is for? Why do I want to read something on a computer, thats what books are for? I think this quote best sums up how long it takes for new ideas to become mature enough for mass adoption,

"I predict that Bitcoin will reach usability sometime around 2019. I base that prediction on earlier disruption technologies, where blogging started appearing in 1994 and reached mainstream adoption in 2004; file sharing started in 1989 over the net and Napster hit in 1999. You had streaming video 1995, mainly porn sites streaming animated gifs, what was then tip of the spear technology; Youtube was founded 2005 and just swept the floor with everyone else just because they were usable. This is not something bad; it is just an observation that it takes ten years to get a disruptive technology from inception to becoming so easy to use that it reaches mainline adoption."
Rick Falkvinge

I'm sure there are other security options for e-wallets that I have missed but it gives you an idea as to the thought that has gone towards security. I bet many of you use internet banking, Paypal or whatever. How secure do you think your conventional banking is compared to all this detailed above (did I mention BlockChain also uses conventional TLS HTTP encryption on top of all the rest)? Sure, the Government protects your money but in the same breath they are secretly confiscating your funds through inflation and negative interest rates. You can make bitcoins as secure or in-secure as you wish. Some of the above may seem complicated to a non technical user however tutorials exist to show you how to do all this. Creating an online account takes seconds. To experiment with the above you don't even need to get any bitcoins, you can test by just continually logging in and out of the application, changing passwords levels etc. There will no doubt be many further security innovations to come.

Bitcoin is still in Beta. Many of the e-wallets are still very immature, its a high risk venture as non of this has been done before. All its users agree on one point, only put in what you can afford to loose. However many can still see the potential for the currency, how it could transfer the banking landscape forever. Due to its low user base it is still very much out of the public eye. Many users are either computer geeks (myself included), finance speculators who have spotted the potential, anarchists and libertarians. I'm sure mass use will come one day, but we are still in murky waters with a lot more to learn about the system.

Austrian view
Bitcoin aims to be a free, hard money. Mathematically its harder than Gold as it has a precise finite limit. Still many in the libertarian movement actually oppose such a system or have prematurely predicted its downfall. This would seem counter-intuitive. Investors who ascribe to the Austrian view, such as Peter Schiff and James Turk are also sceptical believing it to offer no advantages over Gold. I hold Gold. Gold has held value for thousands of years. Bitcoin can not compete with that historical record. However Bitcoin can compete in terms of technological superiority with its modern mathematics. I believe there is some vested interest within the libertarian community. Many make money from selling commodity based financial products. Bitcoin does away with the need for financial advice, fancy money managers. People can just hold the coins and take care of their own finances without the usual worry of inflation eating their life savings away. 

Bitcoin will be the spark that ignites the debate over regulation in finance - there is no bailout for a Bitcoin bank. In practice we will see the old banking system swamped under heavy regulation and a new finance sector, using true free market currencies to trade with. Governments will have a tough time trying to regulate such a decentralised system. Bitcoin won't be the last crypto currency, there will be others (there already are), weeding out the uncompetitive based on consumer demand.

It will also assist in debunking Socialist and Keynesian economic theory that is current conventional thinking, but as I and others have laboured, is plain wrong. 

Deflation
Bitcoin has appreciation built in. Inflation is not allowed. According to the State worshipers of all creeds without Inflation trade will ground to a halt. People will hoard their money, they won't buy food as an appreciating currency is far more important. Of course people will spend just as they had before. Genuine capital and savings will be able to form more naturally and spur economic growth to new levels. Prices adjust. People on the lowest incomes will benefit the most as all prices fall at a common rate. Inflation benefits the rich, not the majority. 

Credit Bubbles
There is no such concept in Bitcoin, but this is contary to the prevailing economic wisdom that of we need to fine tune this, or inject some "credit" here. Bitcoin will put that case to rest as bad businesses go bust, releasing scarce economic resources faster. Prices and production lines will not be distorted by massive credit bubbles engineered by central authorities. No more boom and bust on a nationwide (worldwide) scale. Liquidation of unprofitable lines will occur in small pockets in a continuous nature.

Central Planners and Regulation
We don't need them or their innovation stifling policies. Stop treating people like idiots and get out of the way. It will be a great challenge on the establishment.

With all of the above I'm still puzzled why many existing Austrian economic thinkers are still uneasy with Bitcoin. Busily reading their Mises or Rothbard texts for some clues, problem being that both economic giants had no idea how human imagination would create such an abstract currency.

People will be able to see all these concepts for themselves, not from some textbook. To see concepts can never be understated and is why a free market always wins out eventually. Actions speak louder than words. Socialism has a lot to say for itself but a miserable historical record for action. Socialists perversely usually manipulates the benefits that free markets have given to people, claiming such progress for its unjust causes. Markets need little words or political representation. It makes itself heard by its actions.

Counter Arguments
Bitcoin has been in the public domain for a few years now and therefore has been under widespread academic scrutiny. So far there have been no found compromises or issues with the protocol. That still hasn't meant there have been no concerns, many of which are popular myths.

Hard Limit on Money Supply
With a hard limit of 21 million coins many have said this will not be enough to expand to the needs of commerce and will not scale. The designers thought of this and ensured a bitcoin could have 8 decimal places to it. Meaning you can pay with 0.00000001 bitcoin. The whole currency has 2 Quadrillion units (a 2 with 15 zeros, compared with the World which has a population of 6 with 9 zeros), meaning it is more than sufficient to pass the divisibility test for years to come. Other currencies will no doubt come along if required.

Nothing Backs Bitcoin
The Dollar is backed by nothing but is still accepted as a medium of exchange. Gold is backed by nothing. The Software you are using now is backed by nothing, however it still has intrinsic value to us all. The internet is just a series of electrical pulses. Its the advanced Mathematics that backs bitcoin. It ensures it has a finite supply. It is backed by all the connected nodes who stay honest, its in their interests to do this as their income is derived by it being of value to the consumer. The very fact that it is not "backed" by a central authority is the very thing that gives it such value. Its no ones liability, only your own.

Its a Ponzi Scheme
In a Ponzi scheme you will always find someone at the base. In Bitcoin there is no central point, its decentralised. 

What if miner nodes are not Honest?
This is a published and known weakness. However it would cost millions of dollars to mount such an attack and as the network grows it would get more expensive, to the point that no single organisation could do this. If an attack was made the attacker would only be able undo what they have recently spent. They could not create money or steal from others. Compared with the millions of dollars it would take to mount the attack the gains would not add up, even if a collection of miners would form a cooperative. Currently miners get more financial gain from mining the network (transaction fees and bitcoins) then they would from bothering with an attack. Miners want it to remain honest as many hold and use Bitcoins themselves. The attack would also have to be run continuously as the network would resume normal operation as soon as the dishonest nodes stopped colluding.

Its a similar weakness to modern cryptographic algorithms which are considered secure but can still theoretically be broken. Brute force is always an attackers option. However in order to break a simple 8 digit alpha-numeric password using modern encryption may take 1000 years to do even with state of the art equipment, many of us won't care by then so we can live with that risk (in reality no one would attempt this as its a waste of resources and their lives). Its similar to the the honest node attack, theoretically its possible, in practice it won't be an issue.

Miners help keep the network secure and honest. To support the network during its first steps they were vital to ensure block chains (the accounting ledgers) were correct. To give incentives as gatekeepers of the network they were given Bitcoins. Anyone could participate, there were no rules or privilege. Money creation will slow over time, eventually to nothing so a question has to be asked why will people still mine and keep the network secure then? The plan is transaction fees will cover the costs. In its early years there is simply not the traffic to generate enough transaction fees to pay for the miners, hence the developers solved this by issuing money at a predetermined mathematical rate during the currencies growing pains. As the network grows and more people use it, more transactions will occur and fees will be a part of this. So why use this as opposed to Paypal? Because the fees should be so low as to be negligible. If the network gets really efficient then fractions of pennies will be all that is required. The incentive to pay fees for the users is their payments get processed quicker. If someone has a time preference for a quick payment, then they pay a larger fee. Many e-wallets set the optimal fee for a transaction so that it gets processed in a timely manner (when I say processed, I mean verified, it goes from wallet to wallet instantly).

The Biggest Risk is Government
This is what I perceive to be the biggest risk. Even if another crypto currency takes over from Bitcoin, the Government will fight tooth and nail to stop any monetary competition as whatever market money will exist it will be infinitely better than the Governments fiat. They will never be able to truly shutdown the network, but they will make it hard for the public to trade with it. No doubt we will see controls on trading houses on legimate companies providing services. They will use scare stories to bamboozle the public into their way of thinking, that can be assured its a common tactic. 

Governments will misinform people that it is for all our good to use our nations currency, with guilt trips a plenty. "Competitive Currencies damage the welfare system", "It will mean higher costs for goods and services", "it will be wasted effort when we already have a currency", "It encourages black markets and illegal activity". I can see it all already. 

The currency will however be the complete opposite. It will encourage the welfare state to shrink leading to more innovation, lower prices due to market competition and increased purchasing power for everyone. The Government will have to compete by not allowing arbitrary inflation as people will flock to other currencies.

Buying Bitcoins
If you live in the US you should have no problem buying Bitcoins. I think most places in the World it is fairly easy to buy. In the UK its a different matter and a real pain. It may be due to the heavy regulation or tight Government control but its not that simple. I had to follow this tutorial to exchange some money (as of writing there was a £10 limit per 7 days, previously this was £500. I suspect most people in the UK now have to use this service - its that bad!). It involves getting a smartphone app from Barclays called Pingit, a mobile payment platform (Pingit allows you to pay people if they have the application by just entering their mobile number). So you need either an Andoid or iPhone. Then once you have created an account follow the instructions. It worked fine for me and was simple enough, however its not for the average person. Bitcoin still has a lot of maturing to do.

I also setup a local wallet on my computer. Its just a case of downloading the software, waiting for the whole blockchain to download (took me around 2 days!), then creating a wallet and an address. This is what I used to transfer a penny from my e-wallet. Again, there is no way non-technical people are going to find the current thick clients very usable. E-wallets will be the way forward for mass adoption.

Fees are also an issue when converting domestic money into Bitcoins (not an issue in the US, but it is here in the UK). The fees using Pingit and BlockChain.info are around 6% - so for trading on a daily basis, its not worth it (in the US its around 1% for fees). The eventual ideal will be that your incomings and outgoings will be both denominated in Bitcoins, meaning no transfer fees. Governments will fight this.

A lot of people are speculating on Bitcoin and with good reason. If this is going to be a useful Global currency then if someone buys a Bitcoin now, imagine how much it will be worth in 10 or 20 years time? Current market valuation for the currency is around $120 million dollars. That is insignificant compared to global trade. As more people use it, then a Bitcoin will be worth more. Couple this with the fact its a deflationary currency and its value will go up over time. These two factors mean it potentially could be a very wise investment. Like all new concepts, just like a startup, you could loose it all due to its unproven model (although it has been going for a few years now). Its win or loose.

The Future

Bitcoin can exist alongside Gold and existing fiat money we use today. There is space for all. Whether Government fiat money can stand up to the competition remains to be seen, as history has shown with Government services against market services, they never do. Bitcoin was the creation of individuals who pursued their own goals under the influence of no central committee or planners. Their ideas happened spontaneously, the bottom up approach. We should all be thankful we live in such times to witness not just the creation of the greatest tool humankind has ever created, the Internet, but at a time when the Governments days are slowly numbered and there are genuine solutions to break the hypnotic grip it has held over the public. With revolutionary concepts such as Bitcoin there will be real examples of how markets make peoples lives better. You won't need to read a textbook or understand economic theory to see why money should not be controlled by the State. The actions of such products will speak louder than words. Bitcoin; if it fails or succeeds is not important. Its already made the playing field better for all of us.

The root problem with conventional currency is all the trust thats required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible. A generation ago, multi-user time-sharing computer systems had a similar problem. Before strong encryption, users had to rely on password protection to secure their files, placing trust in the system administrator to keep their information private. Privacy could always be overridden by the admin based on his judgment call weighing the principle of privacy against other concerns, or at the behest of his superiors. Then strong encryption became available to the masses, and trust was no longer required. Data could be secured in a way that was physically impossible for others to access, no matter for what reason, no matter how good the excuse, no matter what. Its time we had the same thing for money. With e-currency based on cryptographic proof, without the need to trust a third party middleman, money can be secure and transactions effortless.
"Satoshi Nakamoto"

Robin Hood Theory

"The essential feature of government is the enforcement of its decrees by beating, killing, and imprisoning. Those who are asking for more government interference are asking ultimately for more compulsion and less freedom."

"Louis XIV was very frank and sincere when he said: I am the State. The modern etatist is modest. He says: I am the servant of the State; but, he implies, the State is God"

"A new type of superstition has got hold of peoples minds, the worship of the state. People demand the exercise of the methods of coercion and compulsion, of violence and threat. Woe to anybody who does not bend his knee to the fashionable idols!"

All quotes from Ludwig Von Mises

Social structures seem to come and go throughout history. Absolutist Monarchies, Religious sects, Communist central planners, Feudalism, human history is littered with a constant evolution of selecting what is seen at the time as the next logical progression for the organisation of society. Many of us currently live under a democratic system. Such a system gives us choice between various political parties who stand for certain principles that are supposed to represent the wishes of the public. The problem is that democracy never works. You can never please everyone all with a single unified action. Many people use Apple or Linux Operating Systems rather than the dominate Windows system. Yet under democracy we would all heed to the majority. The biggest irony being that the majority actually would choose the weakest one. Individual freedom allows people to try new things under their own will and thus improve societies well being.

Governments prey on peoples belief that they can offer something for nothing. Notions of "Free" health services, "Free" education are popular sound-bites used by politicians and to give the sayings credit they tell us the minority pay for such services. Ever think why the political system now targets middle income families? So long as people think they are not paying for such services they are sucked into the mirage that is state planning. Someone has to pay for all these projects and it isn't the rich. They can cope with inflation or the Government waste as they can afford to use the additional high quality private services. Its you and me, the majority that pay for the states wasteful use of societies resources.

Anarchism generally conjures up images of chaos, lawless society with no rule or order. The opposite is in fact true when seen through a free market Anarchism viewpoint or Anarcho-Capitalism. Sure we could all go round killing one another, but the majority of people wouldn't. We don't kill one another not because of the implications of going to jail but for a simple human factor, it wouldn't be right or make sense. The majority of people want to get on, increase their living standards and quality of life, ensuring the next generation has access to a lifestyle better than their own. That's peoples nature. 

People also when left to their own devices, do what they want. Why do people want to become Doctors? Because either they want to help people, notice that it is a specialised profession with job security and good pay or they just enjoy that field of work. When individuals have the freedom to do as they please, human needs are met. The only limit is our current knowledge base. As time passes knowledge from generation to generation is passed down, the next problem is solved but then 10 other new problems are created from its solution. A free market has infinite amounts of work for us all to do. 

In a classic example of how Government destroy wealth, think of jobs. Governments on a frequent basis state they want to 'protect' jobs. The free market however creates new opportunities. Under the state we would still be working underground mining coal or whatever our ancestors did as the state would 'protect' such jobs. Meanwhile the free market sent these jobs overseas, people across the world can make products we used to make for a fraction of the cost, thus increasing peoples wealth. How many people 10 years ago could afford a 40 inch Flatscreen TV? Now it doesn't even cost a months minimum wage here in the UK. Meanwhile despite the loss of jobs, new ones have been created. One day Chinese people won't have low paid jobs. We will have sophisticated machines to do the jobs they carry out today. The global pool of intellectual labour increases. Current developing nations workers now join the West to help solve the next 10 problems we have created, while our ever advancing capital structure does the jobs we don't want or need to do. This process happens spontaneously under the action of individuals and free markets. Governments want us to work as we did in the past, all to appeal popular aiding their short term election campaigns. Despite it being a detriment to societies progress.

We don't require a state to co ordinate our lives. Who runs the schools, hospitals, police or fire services? People do. But under the states stewardship there is no consumer demand in order to direct these resources. These monolithic entities are enforced on us all, through the use of taxation, regardless of utility to the individual or society as a whole. I would personally like to use private health insurance, however I feel it is a matter of principle that I don't and instead use the NHS as I already pay a wedge of money every month in which I have no idea what it goes towards. I may as well get my moneys worth despite private care being better.

If we rationally think of taxation we see the reality of its stupidity. Every month I have to hand over a certain part of my pay packet. I don't know where this money goes, or even if it goes to services I use. On most products and services I buy I also have to pay 20% to the government. Again I have no idea where this money goes. By law I have to pay this, similar as to the Kings taxes hundreds of years ago. Theres no mutual exchange, just expropriation. This is another of the states great illusions, a "progressive" society, a Robin Hood childhood make belief, take from the rich to give to the poor. All taxation is regressive. There is no such thing as a progressive taxation.

If it was that simple why don't we just hit all entrepreneurs with huge taxes - simple, poverty solved. Why don't we just create ever more rigid labour laws? Got a new business idea, not sure if there is consumer demand, risky venture? Well if you need to recruit someone the state will impose a minimum redundancy notice of a year and an annual salary payout. Not many Googles or Facebooks would have got started in such an environment. Taxes are always regressive because what if we had not taxed the wealthy entrepreneur that money. Wouldn't they have used it more effectively than the state? In new ventures to create further wealth? Heaven forbid that they would try and create charitable organisations such as what Bill Gates is doing, giving back to society run by the stewardship of someone who has proved himself to have a sharp brain at directing economic resources. The invention of electricity, the refinement of the motor car, the rapid advancement of electronics have all improved our lives and some people have got rich along the way. But the state wants us to just see this side. The reality and the side that they conveniently ignore is that with these innovations, products and services - we all got richer along the way! When was the last time the state made us all richer? I'm typing this article, for free, and I'm able to access a global audience. It's not provided by the government but a company set up by individuals. 

The quotes provided above from Ludwig Von Mises provide an excellent historical perspective of the current state system. It's not the final step that society will take. Just like we abolished Feudalism, or Absolute Monarchism or transitioned towards a secular state, we will one day abolish the state. Just as in the past people could not imagine a world without the absolute rule of a King, the majority of people today can not see a world without the state. Just because we do things a certain way does not make it right. For years the world practised slavery. We didn't allow free speech. We were dictated by a privileged few. We used to accept lower living conditions to be ruled by a tyrant in the vain belief that we would go to heaven in our after life. Now people are told the Robin Hood theory from the state and without our current socio-political system the majority of people's lives would be substantially worse. The opposite is true. The sooner people relinquish the oppression of the state, the better all our lives will be. Maybe not in my lifetime, but as a student of history this type of event would definitely be up there as one of the most historically important events for humanity. I just hope its within my lifetime so I can witness such a momentous event. 

"Whoever wishes peace among peoples must fight statism."

Ludwig Von Mises