Vernon Smith Prize 2016: Winners announced

Vernon Smith Prize 2016 Call for Papers
Vernon Smith Prize 2016: Direct Democracy versus Representative Democracy …

1. Prize: Karol Zdybel (Warsaw, Poland)

2. Prize: Alan Futerman (Rosario, Argentina)

3. Prize: Mark O’Kane (Lancashire, UK)

Essays had been judged by an international jury. They will be posted after their defense at the ‘International Vernon Smith Prize Ceremony’ on February 6, 2017 in Vaduz, Principality of Liechtenstein.

The 9th International Vernon Smith Prize for the Advancement of Austrian Economics was an essay competition sponsored and organized by ECAEF European Center of Austrian Economics Foundation, Vaduz (Principality of Liechtenstein). Topic: ‘Direct Democracy versus Representative Democracy. Cost and Benefit of the Citizenry’.

Although, democracy is fundamentally a method for preserving individual liberty and civil rights, this almost narcotic term has become so powerful today that all essential limitations on governmental power are breaking down before it. By deteriorating into a scheme of legitimizing the regime of coalitions of organized interests, representative democracies gradually transform into oligarchies. While it is assumed that governments always have the people’s best interests in mind, for the most part they seem to act in their own behalf. In direct democratic systems, however citizens have more controlling devices at their disposal and can propose, decide, or profoundly modify their governing laws, and even secede from the republic. Are direct democracies more cost effective and beneficial for the citizenry?

1st Prize EUR 4,000 – 2nd Prize EUR 3,000 – 3rd Prize EUR 2,000

ECAEF invited papers on this topic which needed to meet several requirements, such as:

Entries may be submitted by individuals of up to 30 years (in 2016).

Entries may not exceed 12 pages; 1.5 spacing; left/right margins no less then 1 inch; full bibliography and a 1/2 page summary (abstract) must be included.

Entries had to be submitted in English in electronic form (PDF) including an abbreviated CV. Entry deadline was November 11, 2016.

Unlocking the Wealth of Indian Nations

By Terry L. Anderson*

Many Europeans still view Native Americans as the “noble savage” depicted in the paintings of Karl Bodmer. Traveling with the German explorer Prince Maximillan zu Wied-Neuwied from 1832 through 1834, Bodmer saw and painted American Indians with the dignity and cultural wealth they deserved. Unfortunately, that dignity and wealth have been stripped from most Native Americans by the federal government.

The dignity painted by Bodmer derived from the fact that Native Americans had well established institutions—property rights, limited government, and trade—that sustained indigenous economies. Before the arrival of Europeans, the more sedentary Indians of the East had well defined tribal and individual property rights to land, and invested in making land more productive. Pacific Northwest tribes invested in weirs to catch salmon on their upstream migration and sustainably harvested salmon to increase populations. Pueblo bands in the southwest developed sophisticated irrigation systems to cope with aridity. Even the more nomadic Plains Indians invested in “surrounds” into which buffalo were driven and in stone walls miles long to drive buffalo over cliffs. Thanks to the ingenuity of their members, many tribes were able to build up a surplus of goods—to, in other words, accumulate wealth—and trade with other tribes.

A story from the Lewis and Clark expedition shows the propensity of Native Americans to trade. While the Corps of Discovery, as the expedition was called, spent the first winter of 1803 in a Mandan village (now North Dakota), the blacksmith among them made trade axes and used them to barter with Indians for food, horses, and artifacts. Months later, when the expedition reached the Pacific Coast, they were surprised that one of the axes had beaten them there, having been traded between Indians many times across the plains and mountains. In the words of Adam Smith, Indians had the “propensity to truck, barter, and exchange.”

If Bodmer ventured into Indian Country today, however, he would be struck by the poverty and lack of economic development. Housing is typically substandard, businesses are small if they exist at all, and infrastructure is poor. In 2015, average household income on reservations was 68 percent below the U.S. average of $53,657; twenty percent of the households made less than $5,000 annually compared to 6 percent for the overall U.S. population; and 25 percent of the Indian population was below the poverty level compared to 15 percent for the nation as a whole. The suicide rate among Native American males aged 15 to 34 is 1.5 times than for the general population, the rate at which Native American females are raped is 2.5 times the national average, and the rate of child abuse on reservations is twice the national average.

In essence, Indian reservations are islands of poverty in a sea of wealth. Even though the Native American population of 2.9 million is roughly the population of Kansas, it is mainly ignored except by Washington bureaucrats. Bureaucracies, housed mostly in the Department of Interior, employed 9,000 people and spent approximately $2.9 billion in 2012. That amounts to one bureaucrat for every 322 Indians and $1,000 for every Indian.

The subjugation of Native Americans by the federal government began at the same time that Bodmer was traveling with Maximillan, when in 1832, Supreme Court Justice John Marshall concluded that the relationship between the federal government and Indians is that of “a ward to his guardian.” Since then through laws such as the Allotment Act (1877) and the Indian Reorganization Act (1934), Congress has locked Indian lands into perpetual trusteeship with the Department of Interior (DOI) as the trustee. As trustee, the DOI regulates land use, oversees leasing of Indian lands, collects revenue from Indian land leases, and distributes revenues back to the tribes and individual Indians. The resulting bureaucratic red tape makes development virtually impossible.

Consider what this means for the abundant energy resources in Indian Country. Reservations contain almost 30 percent of the coal reserves west of the Mississippi, 50 percent of potential uranium reserves, and 20 percent of known oil and gas reserves. The Council of Energy Resource Tribes recently estimated the total value of these resources at nearly $1.5 trillion.

Energy development on reservations could lead to jobs for people with the highest unemployment rates in the country, in some cases over 50 percent. For instance, on the Blackfeet reservation in Montana, drilling a single oil well resulted in 49 new jobs for the tribe, and each of its members received a $200 royalty payment in 2013. From its oil and gas reserves, the Blackfeet tribe has collected around $30 million in leases and bonus payments. Not surprisingly, Ron Crossguns, from the tribe’s oil and gas department, doesn’t think outsiders should tell the tribe how to manage its energy resources: “It’s our right. We say yes or no. I don’t think the outside world should come out here and dictate to us what we should do with our properties.”

The Bureau of Indian Affairs (BIA) is involved in nearly every aspect of energy development on Indians lands, including reviewing and approving pipeline agreements and rights-of-way approvals, and the process is notoriously inefficient. A 2015 Government Accountability Office (GAO) report observed that “the added complexity of the federal process stops many developers from pursuing Indian oil and gas resources for development” and that the process “can involve significantly more steps than the development of private or state resources, increase development costs, and add to the timeline for development.” The GAO report noted further that in 2014, the Southern Ute tribe reported that the BIA’s review of several of its pipeline rights-of-way agreements took as long as eight years. A simple review of a wind-energy lease on the Rosebud Sioux Reservation in South Dakota took a year and a half for the BIA to review. According to the developer, the delay made the project lose its agreement with the local utility, resulting in a loss of revenue for the company and the tribe.

Beyond energy resources, tribes also have water, timber, fisheries, grazing lands, and recreational amenities that could help pull them out of poverty. And, of course, for some tribes, especially those in more urban areas, gaming has brought jobs and income.

The enormous resource potential on reservations begs the question: Why can’t tribes unlock their wealth potential? Is it because their culture is inimical to economic growth? Is it that their members lack entrepreneurial and technical skills?

As described above, the historical record suggests that these are not the reasons for poverty in Indian Country. As tribe member and law professor Robert Miller notes, “Contrary to what most Americans believe, individual and family entrepreneurship is not a new concept to Indian cultures.”

If culture and entrepreneurship are not the impediments, what is the key to reservation growth? The key to Unlocking the Wealth of Indian Nations (Lexington Press, 2016),, is for Indian Nations to establish clear and stable property rights to their land, to create a rule of law that will attract the capital investment necessary to stimulate reservation economies, and to create fiscally responsible tribal governments that can provide the local infrastructure to support investment.

The lack of a rule of law on reservations thwarts capital investment in Indian Nations. Because tribes are considered sovereign nations, many have their own judicial systems separate and apart from the states in which they reside. Because tribal courts often do not follow jurisprudential rules taken for granted outside reservations, they discourage capital investment and credit markets on reservations. Writing for Forbes, Joseph Koppisch quoted an officer of a local lending institution near the Crow Reservation in Montana: “We take on such a huge extra risk with someone from the reservation. If I knew contracts would be enforced, then I could do a lot more business there.” As a result, when reservations with independent courts are compared to those whose civil disputes are adjudicated in state courts, per capita income for Indians on the latter reservations was 35 percentage points higher than the former. Hence, a stronger rule of law on reservations could contribute significantly to helping Indian Nations rise out of poverty.

The Trump administration may change much of this status quo. Trump has formed the Native American Affairs Coalition to free Indians from “a suffocating federal bureaucracy.” As Markwayne Mullin, a U.S. representative from Oklahoma and a Cherokee tribe member who is co-chairing Trump’s coalition, put it: “It is time to end the overreaching paternalism that has held American Indians back from being the drivers of their own destiny.”

If Native Americans are to determine their own destiny, rise out of poverty, and unlock their wealth trapped by trusteeship, they must achieve what the great Nez Perce Chief Joseph sought in 1879: “Let me be a free man, free to travel, free to stop, free to work, free to trade where I choose, free to follow the religion of my fathers, free to talk, think and act for myself.” It is past time to give Native American the freedom they deserve to make their own decisions about the future of their culture and economies.

* Terry L. Anderson is a fellow with the Lichtenstein Academy, PERC (Bozeman, MT), and the Hoover Institution, Stanford University. This essay is based on research published in Unlocking the Wealth of Indian Nations (Lexington Books) edited by Dr. Anderson.

25 years after Maastricht, the euro is worth rescuing

GIS Statement* by Prince Michael of Liechtenstein

For the euro currency to thrive, the ECB must commit to protecting its value, as opposed to aiding politicians in their current budgetary troubles (source: dpa)

Europe is commemorating the inception of its common currency, the euro, a quarter of a century ago. The goal to establish it was set forth in the Maastricht Treaty, which was drafted in December 1991 and entered into force in 1993. The currency began its virtual existence in 1999, and euro bills and coins entered circulation in 2002. The anniversary is remembered, but not celebrated. The euro, created with great enthusiasm, is now widely perceived as a failure. In fact, the common currency was introduced not only for valid economic and business reasons. There was a political agenda attached to the project as well – to push forward the process of European integration and unification.

In the Maastricht agreement, conditions were set to guarantee the stability of the new currency and to make certain that it would enhance economic growth within the European Union. The supranational European Central Bank (ECB) was supposed to act independently and stay focused on ensuring monetary stability. Another crucial Maastricht criterion was that member states were to avoid budget deficits of more than 3 percent of their gross domestic product (GDP), and accumulated public debts in excess of 60 percent of their GDP.

That was the plan. However, there was also the political agenda of the “ever-closer union” and the “harmonization” mania. This led to misconstrued risk premiums for loans. Also, the critically needed program for weaker regions to increase their productivity, and a transition period before they fully entered the common currency system, were neglected. Under national currencies, countries restored their competitiveness through currency devaluation; under the euro, this avenue was closed to them. This resulted in financial signals that were misguiding. Business in southern Europe turned en masse to construction, financed with – thanks to the euro – comparatively cheap debt.

Tall bill for mistakes

The consequences were dire. A much larger disaster, however, was brought about by disregard for the deficit criteria. These were immediately flaunted by the two largest members of the community, the supposed stability guarantors Germany and France. Other governments took their cue from them and breaking the deficit ceilings became common practice.

The list of sins was expanded further when the eurozone’s entrance criteria were diluted to accept countries such as Greece. It was clear from the onset that some countries in the EU did not meet the requirements and never would. They cheated the system while the ECB, the European Commission and other member states looked the other way. Greece was the most striking case, but a few other states were in the same category.

In the new eurozone, states happily spent and accumulated debt. Politicians eschewed reform under the protective shield of baseless triple-A ratings on their burgeoning sovereign debt. Such fictions can continue only to a point; in 2010 a severe fiscal crisis hit. In many instances, the euro was blamed. It was an easy scapegoat.

The present policy of the ECB, of low to negative interest rates and “quantitative easing” (which consists of increasing the money supply and buying financial assets especially sovereign debt from banks) represents a complete breach of the rules and criteria of the ECB. This policy not merely debases the currency, it also erodes the public’s remaining trust in European institutions and, in consequence, the European Union.

How to rescue the euro

A grave mistake of the past was that not all eurozone criteria were correct. The pursuit of the “ever-closer union” and “harmonization” caused the architects of the euro zone to ignore the large regional differences in the real economy and economic behavior. Making matters worse, the proper criteria were given short shrift by many member states and the European Commission. Now the ECB has joined in the destructive process.

As the cures for the assumed failure of the euro are promoted, they again turn up to be the harmonization and the ever-closer union. It is said that what Europe needs to salvage its common currency is a common economic policy – which is rather difficult to accept, as a currency should serve the economy, not vice versa. In this bubble, the very same assumptions which led to undermining the euro are presented as the tools of its rescue. This is only a way of centralizing EU economies, nearly certainly making them more inefficient, and a script for arriving at a planned economy.

As a businessman, I appreciate the convenience of a common currency. It is hugely advantageous in trade inside the eurozone, as well as globally. As a means of exchange, saving and investment, the euro is beneficial to the entire European society and certainly worth maintaining. But this can work only if the political agenda, attached to the euro from the beginning, is dropped. A proper system requires a central bank committed to the value of the currency. It will also be necessary to allow some members of the eurozone to disengage in an orderly fashion and return to their national currencies.

The time is high for the technocrats to realize that Europe is successful in its rich, natural diversity, not in “harmonization” of an artificial, “ever-closer union.”

*GIS is a global intelligence service providing independent, analytical, fact-based reports from a team of experts around the world. We also provide bespoke geopolitical consultancy services to businesses to support their international investment decisions. Our clients have access to expert insights in the fields of geopolitics, economics, defence, security and energy. Our experts provide scenarios on significant geopolitical events and trends. They use their knowledge to analyze the big picture and provide valuable recommendations of what is likely to happen next, in a way which informs long-term decision-making. Our experts play active roles in top universities, think-tanks, intelligence services, business and as government advisors. They have a unique blend of backgrounds and experience to deliver the narrative and understanding of global developments. They will help you develop a complete understanding of international affairs because they identify the key players, their motivations and what really matters in a changing world. Our experts examine the challenges and opportunities in economies old and new, identify emerging politicians and analyse and appraise new threats in a fast-changing world. They offer new ideas, fresh perspectives and rigorous study.

Für etwas mehr Mut und Toleranz

In Europa hat sich ein Sicherheitsdenken etabliert, das in einer kleinen Fehlertoleranz mündet und die Innovationsfähigkeit hemmt. Es bräuchte wenig, um hier etwas zu bewegen.
In Europa hat sich ein Sicherheitsdenken etabliert, das in einer kleinen Fehlertoleranz mündet und die Innovationsfähigkeit hemmt. Es bräuchte wenig, um hier etwas zu bewegen.

Von Michael von Liechtenstein
(Finanz und Wirtschaft, 3. 12. 2016, Seite 3)

Es gibt in Europa viele bedeutende Universitäten, Think Tanks und führende Forschungsteams. Auch ist die Bereitschaft, wissenschaftliche Forschung mit viel Geld zu fördern, hoch. Sobald aber Forschungsergebnisse vorliegen, stottert der Kapitalmotor, und die Umsetzung in innovative Produkte, Dienstleistungen oder Prozesse rückt in weite Ferne, obschon das Finanzkapital vorhanden ist. Warum ist dem so?

Das Wohlstandsniveau in unseren Breitengraden ist hoch. Entscheidende Treiber dafür waren eine liberale Wirtschaftsordnung, Fleiss, hoher Arbeitseinsatz, Mut und Toleranz. Im Zuge der Wohlstandsentwicklung aber hat sich nach und nach eine ausgeprägte Risikoscheu etabliert, aus der ein dichtes Netz an Gesetzen, Verordnungen und Vorschriften gewoben wurde. Ein vermeintliches Sicherheitsnetz, das allen negativen Eventualitäten, die den Status quo gefährden könnten, begegnen soll. In der Konsequenz aber gefährdet heute genau dieses Sicherheitsnetz das Wohlstandsniveau. Warum? Weil die für den Erhalt und die Weiterentwicklung des Wohlstandsniveaus unabdingbare unternehmerische Freiheit und innovative Kreativität in einem solch engmaschigen Ge echt keine Luft mehr haben …

Weiterlesen ->
Für etwas mehr Mut und Toleranz (PDF, 3.5MB)

Wer hat Angst vor Donald Trump?


Kommentar von Prinz Michael von und zu Liechtenstein*

Mit dem Sieg von Donald Trump ist der Welt für einen Moment die Luft weggeblieben. Die Wenigsten haben damit gerechnet und sind erschrocken ob der Tatsache. In den Wochen vor dem achten November setzte fast alles und jeder auf den Sieg von Hillary Clinton. Insbesondere an den Finanzmärkten hielt man das Szenario Trump weitgehend für unrealistisch. Die Mehrheit glaubte den Wahlprognosen und ging davon aus, dass ein Sieg Trumps üble Folgen für die Finanzmärkte haben würde. Eine Begründung, weshalb ein Sieg Trumps denn so schädlich für die Finanzmärkte wäre, wurde in den wenigsten Fällen geliefert.

Interessanterweise hat das Wahlergebnis die Finanzmärkte dann auch tatsächlich fallen lassen, allerdings extrem kurzfristig und innerhalb eines Tages, als bekannt wurde, dass mit Donald Trump das „Unfassbare“ ins Weisse Haus einziehen wird. Die Finanzmärkte haben sich noch am selben Tag wieder erholt. Die ganzen Mutmassungen vor der Wahl haben sich also nicht bewahrheitet.

Der US-Wahlkampf wurde äusserst emotional geführt und die „Angst vor Trump“ war eines der Kernargumente in der Clinton Kampagne. Betrachtet man die jetzige Situation jedoch nüchtern, so zeigt sich, dass diese Angst nur bedingt begründet ist. Trump scheint seinen umstrittenen verbalen Stil mit dem Umstand, dass er der nächste Präsident der Vereinigten Staaten von Amerika sein wird, zunächst relativiert zu haben. Seine provokativen Kampfansagen, wie beispielsweise eine Mauer gegen Mexiko zu bauen oder ein Einreiseverbot für Muslime zu verhängen, hat er nach seiner Wahl bereits relativiert.

Donald Trump scheint berechenbarer zu sein, als viele dachten. Auch gilt es zu berücksichtigen, dass der US-Kongress ein klares Korrektiv zum Präsidenten darstellt. Zwar werden das Repräsentantenhaus und der Senat von den Republikanern beherrscht, das bedeutet aber nicht, dass damit auch alle Ideen des zukünftigen Präsidenten umgesetzt werden. Positiv daran ist, dass durch die republikanische Mehrheit in beiden Häusern die alten Prinzipien der Grand Old Party wieder stärker in den Vordergrund rücken werden, was eine liberale Wirtschaftspolitik bedeutet und eine Aussenpolitik, die auf die Pflege von Verbündeten setzt.

Aus einer geopolitischen, unternehmerischen und auch liberalen Perspektive ist das Programm Trumps aussichtsreicher, als ihm bislang zugestanden wird. Trump will Steuern senken, Infrastrukturprojekte vorantreiben und das verwachsene Regulierungsdickicht durchdringen. Auch in der Aussenpolitik will er wesentlich stärker auf die amerikanischen Verbündeten setzen.

Von Europa fordert Trump, in der Verteidigungspolitik selbstständiger zu werden. Für Europa könnte dies die Chance sein, um unabhängiger zu werden und weltpolitisch wahrnehmbarer auftreten zu können. Und um eine eigene Politik sowohl gegenüber Russland als auch südlich und östlich des Mittelmeers zu bestimmen. Denn die USA waren im Rahmen der NATO bisher zwar stark daran interessiert, dass Europa das Verteidigungsbudget erhöhte, aber an einer gemeinsamen europäischen Verteidigung waren sie weniger interessiert.

Wenn nun Europa durch militärische Zusammenarbeit in Verteidigungsfragen auf Augenhöhe mit den USA reden kann, könnte dies die nordatlantisch enge Bindung von Europa und den USA im positiven Sinne stärken. Zugegeben, das Ganze wird Europa herausfordern, aber manchmal braucht es Forderungen, um Aktionen auszulösen. Diskussionen sind bereits im Gange.

Für die US-Aussenpolitik wäre es zudem zuträglich, eine realistische Aussenpolitik zu führen, die weniger auf „Werte“ basierte Einmischung und mehr auf Realpolitik fokussiert ist. Das Verhältnis zwischen den USA und Russland hat sich in den letzten zehn Jahren stark verschlechtert. Eine US-Aussenpolitik, die nun weniger auf eine Einmischung in die inneren Verhältnisse Russlands ausgerichtet wäre, könnte das Verhältnis zwischen den USA und Russland zumindest sachlicher machen. Russland verfolgt eine rein interessensbasierte Aussen- und Sicherheitspolitik. Dieser sollte mit einer rein interessensbasierten Politik begegnet werden. Im Weiteren fordert Trump Japan und Südkorea dazu auf, ihre Verteidigung weiterzuentwickeln. Dies würde beiden Nationen erlauben, gegenüber China selbstbewusster aufzutreten und ihre Interessen zu wahren.

Auch gibt Trump vor, das amerikanische Regulierungsdickicht durchleuchten zu wollen. Nach einer Zeitphase, in der das Regulierungsdickicht vor sich hin wuchern und Programme zur Kontrolle über die Bürger wie Pilze aus dem Boden schiessen konnten, könnte dies eine Phase zurück zur Normalität einläuten. Und sich auch positiv auf die globalen Rahmenbedingungen auswirken. Auch ist Trumps Ansinnen, verstärkt in Infrastrukturprojekte zu investieren, positiv zu werten. Denn der Nachholbedarf in Infrastrukturbereichen wie Eisenbahn, Verkehrssysteme, Elektrizitätsversorgung, etc. ist zweifelsfrei gross in den USA und solche Investitionen würden wesentlich nachhaltiger zum Wirtschaftswachstum beitragen als billiges Geld.

Trump ist anders und wird den Politikstil mitunter verändern. Er hält nicht viel von „political correctness“. Im Umkehrschluss müsste dies dazu führen, dass Dialoge offener geführt werden können und nicht von Tabus eingeschränkt werden. Trump könnte dazu führen, dass eingetretene politische Pfade verlassen werden und sich Neues entwickelt. Lassen wir uns überraschen und stehen wir den Neuerungen einmal offen gegenüber.

*Prince Michael von und zu Liechtenstein ist Präsident des Stiftungsrates der European Center of Austrian Economics Foundation Vaduz, Gründer und Vorsitzender der Geopolitical Intelligence Services AG Vaduz ( und Chairman von Industrie- und Finanzkontor Ets. Vaduz (