Month: June 2011

Data Are

To me, the most offensive of the many abhorrent usages now current is the treatment of “data” as a singular noun. A person who says “data is” is at best an ignoramus and at worst a Philistine.

Language, above all else, should be used to make one’s thoughts clear to others. The pairing of a plural noun and a singular verb form is distracting, if not confusing. Even though datum is seldom used by Americans, it remains the singular foundation of data, which is the plural form. Data, therefore, never “is”; they always “are.

Fowler says:

Latin plurals sometimes become singular English words (e.g., agenda, stamina) and data is often so treated in U.S.; in Britain this is still considered a solecism…. (H.W. Fowler, A Dictionary of Modern English Usage, second edition, p.119)

But Follett is better on the subject:

Those who treat data as a singular doubtless think of it as a generic noun, comparable to knowledge or information…. [A generous interpretation: ED.] The rationale of agenda as a singular is its use to mean a collective program of action, rather than separate items to be acted on. But there is as yet no obligation to change the number of data under the influence of error mixed with innovation. (Wilson Follett, Modern American Usage, pp. 130-1)

To say “data are” is to present oneself as a learned person of high standards. That, unfortunately, is an “old fashioned” attitude in this day of dumbed-down vulgarity.

The Next Civil War

It begins with the general election of 2012. The GOP retains its majority in the House and gains a majority in the Senate. But the presidential election is too close to call, as the outcome in several, deciding States depends on the outcome of hotly contested recounts.

The outcome of the presidential election remains important because the GOP’s majorities in the House and Senate are not large enough to override vetoes. If the presidential election goes to Barack Obama, Republican efforts to repeal Obamacare, curtail entitlement programs, curb the regulatory agencies, recommit to the war on terror, and rebuild national defense will be thwarted. Democrats, hoping to thwart those GOP initiatives, dispatch armies of lawyers to the States where the presidential election hangs in the balance.

In the end, there is a replay of Bush v. Gore, but on a grander scale. The U.S. Supreme Court effectively decides the election for the Republican candidate, by a vote of 5-4. Democrats are outraged. The governors and legislatures of the solidly Democrat States, in a series of coordinated actions, enact resolutions to the effect that their States will not recognize the authority of the federal government, and will bar federal agencies from operating within their States. The governors of the rebelling States order their States’ police and National Guard forces to seize all civilian federal offices (IRS, Social Security, etc.), the functions of which will be assumed by the rebelling States.

What would you do? Take the following poll, leave a comment, or do both.

Corporations, Unions, and the State

When left-libertarians discuss right-to-work laws they claim to discern a pro-employer — specifically, pro-corporation — tilt on the part of government. I will not play the futile and foolish game of trying to disentangle the effects of decades’ worth of pro/anti/corporation/union enactments. My modest objective is to ask whether the corporation or the union (or both or neither) is inherently antilibertarian.

The question that libertarians (and pseudo-libertarians) ought to address are these:

  • Does corporate status per se enable an employer to coerce employees or prospective employees?
  • Does state-enforced recognition of labor unions by employers amount to coercion?

The obvious answer to the second question is “yes.” Apologists for labor unions will nevertheless assert that coercion by the state, which enables coercion by labor unions, is necessary to offset an “unnatural” advantage that accrues to an employer if the employer is a corporation?

What is that “unnatural” advantage? What power is bestowed by corporate status that is lacking in a sole proprietorship, partnership, or other non-corporate form of organization? It is said that corporate status involves two unique characteristics: perpetual existence and limited liability.  Non-corporate organizations can enjoy the former easily enough, through bequests, property transfers, agreements that allow for the admission of new and/or replacement partners, and so on. These are simply contractual arrangements that do not require the state’s existence, except as a neutral enforcer of voluntary, non-fraudulent contracts between compos mentis adults. In sum, perpetual existence does not confer upon the corporation an “unnatural” advantage when it comes to dealing with employees and prospective employees.

What about limited liability? The key artificiality of limited liability is that it shifts the responsibility for debts from the directors, officers, and owners of the corporation to the corporation itself. But I fail to see how that artificiality plays into dealings with employees and prospective employees. In fact, the artificiality lends stability to the corporation, which is advantageous to employees and attractive to prospective employees.

Nor is it clear to me that the corporation could not exist in the absence of statutory approval. The corporation is usually considered a creature of the state — as if it could not exist absent statutory authority — simply because the earliest corporations were creatures  of the state and often were instruments of state power. But there are other beneficial and “artificial” commercial arrangements (e.g., banking and credit) that began and thrived before the state injected itself into such arrangements. The advantages of corporate status — as a way of fostering commercial expansion — would, I think, be recognized in a common-law regime.

The bottom line on the corporation: It would exist in the absence of the state (or recognition by the state), and its essential features do not give it an “unnatural” advantage in dealings with employees and prospective employees.

I cannot say the same for the labor union, which exists by and for coercion. A union can exist without coercion, in certain limited circumstances, for example, an unskilled, fungible labor force whose members lack the means to uproot themselves from a relatively isolated location. (Think “Welsh coal miners,” for instance.)

But where there is a diverse labor force and diverse employment opportunities, it is not in the interest of the more skilled (or independent-minded) workers to cast their lot with their less-skilled brethren. Their interest is served by the ability to bargain for the best available combination of compensation and working conditions. The submission of highly skilled workers to unionization comes about mainly because (a) they have no legal option (in jurisdictions that back the union shop) and/or (b) “scabs” face threats ranging from harassment to ostracism to violence, directed not only at “scabs” but also at their families.

Employers, for the most part, view unionization as coercion. Yes, there is the occasional business that chooses to recognize a union, even if the business is not compelled to do so by statute. But recognition, in such cases, is the the free choice of the businesses in question. Most other businesses make the opposite choice, where they are allowed to do so. Nothing more need be said on that point.

In summary: The corporation is not a coercive institution; the labor union is. Right-to-work laws are justified on libertarian grounds because they eliminate the coercion of workers and employers.

Related posts:
A Belated Labor Day Message
Union-Busting

PolitiFact Whiffs on Social Security

PolitiFact has a habit of missing the point, usually in a way that favors the left’s agenda. A good example is found in PolitiFact’s recent assessment of statements made by Herman Cain about privatizing Social Security:

During Monday’s Republican presidential debate in Manchester, N.H., former pizza executive Herman Cain touted an alternative to Social Security that has been operating for three decades in Galveston County, Texas.

“The city of Galveston, they opted out of the Social Security system way back in the ’70s,” Cain said. “And now, they retire with a whole lot more money. Why? For a real simple reason — they have an account with their money on it. What I’m simply saying is we’ve got to restructure the program using a personal retirement account option in order to eventually make it solvent.”

We’ll give Cain a pass on a pair of minor errors — it’s Galveston County, not city, and the program launched in 1981, not in the 1970s. Instead, we’ll cut to the bottom line: Has the program meant that participants “retire with a whole lot more money” than they would under Social Security?…

In 1981, employees of Galveston County — as well as those in two adjoining Texas counties, Matagorda and Brazoria — voted, after lengthy presentations and discussions, to withdraw from Social Security and initiate a system of individual accounts to provide retirement, survivor and disability benefits. Participants would contribute to their retirement accounts, supplemented by an amount from their employers, and those funds would be invested in annuities through a financial-services company chosen by a county-run bidding process….

…The Galveston plan is somewhat analogous to a 401(k) plan — that is, a plan designed to encourage workers to save for retirement — rather than a social insurance, or safety-net, program like Social Security….

Keith Brainard, the research director for the National Association of State Retirement Administrators, agreed that the Galveston plan is better for some types of workers, including those with long tenures.

But the “problem,” he said, “lies in Cain’s implication that Social Security should be a wealth-producing vehicle, when that’s not what it’s supposed to be. Social Security is supposed to be old-age insurance. That should be the emphasis of the program, not ‘retiring with a lot more money.’”…

…[T]here are some advantages to the Galveston plan — not just to the higher earners who get more out of the program, but also to the government entity running them. The Alternate Plan doesn’t face the same kind of long-term fiscal challenges that Social Security does, because it only promises participants the investment returns for the money they pay in to the system.

The downside, of course, is that the investments may not perform well enough to exceed what Social Security would have provided….

This is all misguided hogwash. I rate PolitiFact’s analysis as “wide of the mark.”

Social Security (SS) is neither a retirement plan nor insurance (as one interviewee calls it). Social Security is a transfer-payment scheme — some, rightly, call it a kind of Ponzi-scheme. It’s not fraudulent in intent, but it’s fraudulent in effect.

Today’s SS beneficiaries are not reaping returns from investments made by SS with their “contributions.” Their benefits come from the paychecks of today’s workers. And future SS benefits will come from the paychecks of future workers. (If you believe in the SS trust fund, which is nothing but a pile of IOUs, you must believe in the tooth fairy.)

Private retirement plans (and the occasional government plan, like Galveston’s) reap real returns and support economic growth through the purchase of corporate equities and securities. SS, on the other hand, inhibits economic growth by depriving workers of money that they could invest in equities and securities. Comparing real returns on private plans with the “returns” that Social Security extracts from workers is as meaningful as the proverbial comparison of apples and oranges.

There just ain’t no “returns” on SS, so it can’t be compared with a retirement plan that reaps real returns and contributes to economic growth in the process. SS can generate any kind of “return” that its political masters desire — because they have the power to extract the “returns” from workers’ paychecks.

Related posts:
Social Security Is Unconstitutional
Why It Makes Sense to Privatize Social Security
P.S. on Privatizing Social Security
That Mythical, Magical Social Security Trust Fund
The Real Social Security Issue
Social Security — Myth and Reality
Nonsense and Sense about Social Security
More about Social Security
Social Security Privatization and the Stock Market
Social Security: The Permanent Solution
Social Security Transition Costs, in a Nutshell
A Market Solution to the Social Security Mess?
Saving Social Security
The Bowles-Simpson Report
The Bowles-Simpson Band-Aid

In Defense of Wal-Mart

The U.S. Supreme Court’s finding for Wal-Mart in the case of Wal-Mart v. Dukes predictably set off a storm of criticism by Wal-Mart’s critics, who are legion. Those critics, predictably, are mainly upper-middle class professionals who do not shop at Wal-Mart, would not work at Wal-Mart, and fastidiously scorn the politics and religion of those who do shop and work at Wal-Mart.

But the Yuppie crowd nevertheless sympathizes with the employees of Wal-Mart because it represents an evil corporation — as corporations are, in the Yuppie worldview. Why is Wal-Mart evil? Well, it doesn’t treat its employees well. How do Yuppies know that? They just do, that’s how. It’s an article of faith among Yuppies, who tend to take their cues from left-wing pundits and academicians. Yuppies are too busy making money to support their SUVs and McMansions to do their own thinking, you see.

I have news for Yuppies and other critics of Wal-Mart. There are no good squads dragging unwilling people in from the streets to work in Wal-Mart stores. There are no Wal-Mart employees caged in their work areas. There are secret prisions in Arkansas where they send Wal-Mart employees who elect to move on to more highly compensated jobs at other companies.

People work at Wal-Mart because it offers them the best combination of pay, benefits, and working conditions available to them. In other words, employment at Wal-Mart usually is a step up, not a step down.

But Yuppies and their leaders on the left don’t understand such things because they hold the strange view that there is a “just” level of compensation, which is always more than that paid by a villainous corporation like Wal-Mart. I wonder what those big-hearted Yuppies and lefties would say to a “just” compensation or $100 and hour for maids and yard men? I can say that $100 is “just” because — like Yuppies and lefties who don’t shop at Wal-Mart and wouldn’t care if it charged higher prices to cover higher compensation — I don’t have a maid or a yard man.

How to Save the Postal Service

I do not favor the salvation of the U.S. Postal Service. (See this, this, and this). But it seems unlikely that USPS will go the way of the buggy whip.

The best I can hope for is a serious effort to make USPS more efficient and less needful of tax subsidies. To that end, I offer the following modest proposal:

1. Set up a “branch” closure commission, on the model of the base-closure commissions that succeeded in closing many military bases that otherwise would have been protected by their patrons in Congress.

2. Eliminate window service on Mondays.

3. Subcontract package deliveries to outfits like UPS and FedEx, and others that would arise, through regional (not national) competitions conducted at regular intervals (e.g., every three years).

4. Make regular deliveries only five days a week.

5. Consolidate routes so that every carrier is fully occupied for a full, eight-hour day (lunch breaks would not count as work time). Cover vacations and illnesses with part-timers who would be paid only for time actually performing work (i.e., eliminate featherbedding).

6. As a more drastic alternative to #5, subcontract regular deliveries through regional competitions. These would coincide with competitions for package delivery, to entice bundled offers reflecting potential efficiencies from combined package-mail delivery services. (Under this option, USPS would continue to operate regional and branch offices, and the movement of mail between them, but contractors would handle deliveries.)

7. Even more drastically, the USPS or its contractors should be allowed to establish zoned rates for the delivery of first-class mail within the United States — the farther a piece of mail must travel, the higher the postage for a given weight and shape. The rate structure should be simple (e.g., add $0.25 to send a letter across the Mississippi, across the Rockies, and across the Mason-Dixon line) and well-publicized (e.g., through notices placed in mailboxes at regular intervals).

Myopic Moaning about the War on Drugs

The pseudo-libertarian camp is on the warpath about the war on drugs and a resulting rate of incarceration that seem “too high,” relative to the rates in other Western nations. That other Western nations have different distributions of ethnicity and age than the U.S. is beside the point when one’s objective is to pummel the American legal system for prosecuting victimless crimes … blah, blah, blah. Drug-use is as victimless as suicide, except that a fair proportion of drug users and dealers do, in fact, victimize innocent bystanders. Drugs, like alcohol, lower a person’s inhibitions — often with destructive results — and the cost of drugs is often financed by theft and related violence.

Well, then, says the apologist for drug use, just legalize drugs and they will become affordable and the criminal element will be eliminated from the drug trade. The legalization of drugs will make them affordable only by those persons who can afford to pay the inevitably inflated prices that will result from government licensing of vendors, restrictions on the number and location of vendors, and restrictions on the amount of drugs an individual may purchase in a given period. (Regulation and paternalism go hand in hand.)

Of course, non-drug-using taxpayers could be required to subsidize drug users. But I doubt that such a proposition would get very much legislative support. As for the criminal element, government restrictions would open the door to a black market, operated by the usual suspects. In the meantime, drug-users would continue to expose themselves to the same inhibition-loosing effects, and many of them would still resort to crime to underwrite their drug intake.

Instead of blaming America’s “too high” incarceration rate on the war on drugs, a serious person would ask whether America’s incarceration rate has had an effect on the rate of violent and property crimes. Radley Balko comes close to the mark when he writes that

of the two causal explanations [of a drop in the crime rate] that have found the most support, one—the economy—had nothing to do with crime policy. The other, the petering out of the crack epidemic, was simply a return to normal after weathering the effects of a bad policy. Once distributors of the new drug had established turf, levels of violence returned to normal.

The only problem with Balko’s analysis is its incorrectness, which is driven (no doubt) by his pseudo-libertarian desire to castigate the government for prosecuting “victimless” crime.

In truth, according to my quantitative analysis — done almost four years ago — there are three measurable and significant determinants of violent and property crime: the percentage of black in the population, the rate of real growth in GDP, and the incarceration rate. (The fact that the analysis was done before the Great Recession counts in its favor, inasmuch that event would distort the relationship between crime and economic growth.) What follows are some key portions of the post that documents my earlier analysis.

*   *   *

Here’s a graphical depiction of the crime rates and all of the variables I considered:

Key: VIC, violent crimes per 100,000 persons; VPC, violent+property+crimes per 100,000 persons; BLK, blacks as a proportion of population; ENL (active-duty, male, enlisted personnel as a proportion of population aged 15-24; GRO(C), growth of real GDP per capita as a proxy for year-to-year growth (GRO) used in the regression analysis; PRS, prisoners in federal and State penitentiaries as a proportion of population; SNT, mandatory sentencing guidelines in effect (0 = no, 1 = yes); YNG, persons aged 15-24 as a proportion of population.

A few comments about each of the explanatory variables: BLK, unfortunately, stands for a segment of the population that has more than its share of criminals — and victims. Having more men in the armed forces (ENL) should reduce, to some extent, the number of crime-prone men in the civilian population…. I use the annual rate of real, per-capita economic growth (GRO) to capture the rate of employment — or unemployment — and the return on employment, namely, income. (The use of year-over-year growth vice cumulative growthavoids collinearity with the other variables.) PRS encompasses not only the effects of taking criminals off the streets, but the means by which that is done: (a) government spending on criminal justice and (b) juries’ and courts’ willingness to put criminals behind bars and keep them there for a good while. SNT ensures that convicted criminals are put away for a good while.

I focused on violent-plus-property crime (VPC) as the dependent variable, for two reasons. First, there is a lot more property crime than violent crime (VIC); that is, VPC is a truer measure of the degree to which crime affects Americans. Second, exploratory regression runs on VPC yielded more robust results than those on VIC.

Even at that, it is not easy to tease meaningful regressions from the data, given high correlations among several of the variables (e.g., mandatory sentencing guidelines and prison population, number of blacks and prison population, male enlistees and number of blacks). The set of six explanatory variables — taken one, two, three, four, five, and six at a time — can be used to construct 63 different equations. I estimated all 63, and rejected all of those that returned coefficients with counterintuitive signs (e.g., negative on BLK, positive on GRO).

Result and Discussion

Of the 63 equations, I chose the one that has the greatest number of explanatory variables, where the sign on every explanatory variable is intuitively correct, and — given that — also has the greatest explanatory power (as measured by its R-squared):

VPC (violent+property crimes per 100,000 persons) =

-33174.6

+346837BLK (number of blacks as a decimal fraction of the population)

-3040.46GRO (previous year’s change in real GDP per capita, as a decimal fraction of the base)

-1474741PRS (the number of inmates in federal and State prisons in December of the previous year, as a decimal fraction of the previous year’s population)

The t-statistics on the intercept and coefficients are 19.017, 21.564, 1.210, and 17.253, respectively; the adjusted R-squared is 0.923; the standard error of the estimate/mean value of VPC = 0.076.

The minimum, maximum, and mean values of the dependent and explanatory variables:

VPC: 1887, 5950, 4773 (violent-plus-property crimes/100,000 persons)

BLK: 0.1052, 0.1300, 0.1183 (blacks/population)

GRO: -0.02866, 0.06263, 0.02248 (growth in real GDP per capita during year n-1/real GDP per capita in year n-2)

PRS: 0.0009363, 0.004842, 0.002243 (federal and State prisoners in December of year n-1/average population in year n-1)

Even though the coefficient on GRO isn’t strongly significant, it isn’t negligible, and the sign is right — as are the signs on BLK and PRS. The sign on the intercept is counterintuitive — the baseline rate of crime could not be negative. The negative sign indicates the omission of key variables. But forcing variables into a regression causes some of them to have counterintuitive signs when they are highly correlated with other, included variables.

In any event, the equation specified above does a good job of explaining variations in the crime rate:

I especially like the fact that the equation accounts for two policy-related variables: GRO and PRS:

1. Crime can be reduced if economic growth is encouraged by rolling back tax rates. Crime will rise if growth is inhibited by raising tax rates (even for the very rich).

2. Crime can be reduced by increasing the rate at which it is prosecuted successfully, and by ensuring that prisoners do not receive lenient sentences. Therefore, we need to (a) spend even more on the pursuit of criminal justice and (b) restore mandatory sentencing guidelines, which had been in effect (and effective) from 1989 to 2004. (Look at the relationship between SNT and the indices of crime, in the next-to-last graph, and you will have no doubt that mandatory sentencing guidelines were effective and are represented in the equation — to some extent — by the variable PRS.)

ENL and YNG, like SNT, are key determinants of the crime rate. Each of the three variables appears, with the right sign, in many of the 63 equations. So, I am certainly not ruling out ENL and YNG as important variables. To the contrary, they are important variables. But, just as with SNT, I can’t satisfactorily quantify their importance because of the limitations of regression analysis.

Crime, then, depends mainly on two uncontrollable variables (BLK and YNG), and four controllable ones: ENL, GRO, PRS, and SNT. The controllable variables are salutary means of reducing crime, and the record shows that they work. Whatever else abortion is, it is not a crime-fighting tool; those who herald abortion as such are flirting with genocide.

Related posts:
Does Capital Punishment Deter Homicide?
Libertarian Twaddle about the Death Penalty
Crime and Punishment
Abortion and Crime
Saving the Innocent?
Saving the Innocent?: Part II
More on Abortion and Crime
More Punishment Means Less Crime
More About Crime and Punishment
More Punishment Means Less Crime: A Footnote
Clear Thinking about the Death Penalty
Let the Punishment Fit the Crime
Another Argument for the Death Penalty
Less Punishment Means More Crime
Crime Explained
Abortion and Crime (from a different angle than the earlier post of the same name)
Society and the State
Pseudo-Libertarian Sophistry vs. True Libertarianism
More Pseudo-Libertarianism
“Intellectuals and Society”: A Review
Bounded Liberty: A Thought Experiment
The Meaning of Liberty
In Defense of Marriage
We, the Children of the Enlightenment…

What Is Justice?

Justice, at bottom, can only be revenge. Murder and mayhem cannot be undone or somehow ameliorated. The loss of a life, a limb, or an organ is permanent. Other injuries take time to heal, and may heal imperfectly; the healing time and its attendant costs are lost, in any event. Theft is rarely made whole.

Aside from the inculcation of morality, our surest protection from predation is the promise of swift and sure vengeance. When the state fails in its duty to exact that vengeance, it becomes illegitimate.

The Left and Its Delusions

Capsule commentaries on the left and its sure grasp of unreality.

An old meme: “Everyone wants less government spending, but no one wants government to cut their favorite programs.” This observation is used by big-spenders as an “argument” against cutting government spending.

Here’s a more apt observation: “There’s no free lunch.” When you have “favorite programs,” for which others must pay, you are (in effect) allowing others to have “favorite programs,” for which you must pay. Log-rolling is as old as the Republic.

The obvious answer to the big-spenders is this: Cut everyone’s favorite programs — and taxes — in one muscular stroke of the budget axe. And repeat this exercise annually until government is reduced to its legitimate functions: protecting the people from foreign and domestic predators.

*  *  *

The incessant drumbeat of progressivism: share the wealth (of other people), protect my job (at the expense of others), save the planet (from a nonexistent threat at any cost), be nice to people who are different (even if they want to kill you), make my old age more secure (and charge it to my grandchildren).

*  *  *

Q. When was the last time you “gave” money to someone who needed it less than you do?

A. When income taxes were withheld from your paycheck. That’s the thrust of  Steven Landsburg’s proof that public-sector workers are overpaid. If you read Landsburg’s post and still find yourself in favor of public-sector unions, you are (a) an emotional leftist (possibly a hate-filled one) and (b) the kind of person who would take money from others (via taxes) in order to feel good about yourself.

*  *  *

The author of Bookworm Room writes:

[A]fter years and years of indoctrination, Liberals see the world so fundamentally different[ly] than the rest of us that they can no longer recognize human fallibility and evil…. This Liberal view not only cannot survive … , but is the enabler of its/our own destruction.

A case in point, from a recent news story:

A coalition of over 100 interfaith, nonprofit and governmental organizations plans to rally in New York City against a planned congressional hearing on Muslims’ role in homegrown terrorism.

The Islamic, faith-based war against America began in 1979. “Liberals” don’t want to admit that there is such a war and that the Islamic aggressors justify it on religious grounds. “Liberals” don’t care because they think, mistakenly, that their “liberalism” protects them. Tell that to the Americans who were held hostage in Tehran. Tell that to the victims of 9/11. Do you suppose that the Muslims who perpetrated those events (and others) took the time to sort out the “liberals” so that they could focus their hatred on real Americans?

*  *  *

I will coexist with statists because I must, and only for as long as I must. But I will never willingly acquiesce to them.

*  *  *

NewsReal Blog reminds us that the political correctness of another day — anti-anti-communism — led to the near-victory of communism:

In fact, the rightful criticism of [Sen. Joseph] McCarthy is that his theatrics and personal foibles ultimately thwarted a wholly necessary campaign against domestic enemies of the Constitution. Those enemies survived him. They continued their “long slow march through the institutions,” affecting socialism through evolution rather than revolution. They infiltrated the schools and the universities. They infiltrated the churches and other houses of worship. They engaged in “community organizing” to build “coalitions of power” with which to bring about “redistributive change.” Ultimately, they shaped the worldview of the sitting president of the United States. For all intents and purposes, they won.

And so will radical Islam win if today’s political correctness — “mustn’t offend our enemies” — dictates our political discourse.

*  *  *

The minimum wage denies many young persons a chance to step on the ladder of success. It dooms them to a life of dependency and criminality, all in the name of “compassion.”

*  *  *

Regulation:

  1. It is thought of as a cure-all, but it rarely is one. Stuff still happens.
  2. It imposes costs indiscriminately, thus making many people at least a bit worse off, at no gain to them.
  3. It follows from 2 that a lot of regulations make a lot of people a lot worse off, at no gain to them.
  4. In fact, the net cost of regulations — which restrict output and hinder innovation and entrepreneurship — has been estimated at $1.5+ trillion/year for the U.S. economy.

Regulation is like alcoholism. A little bit makes you feel good, so you up your intake. And then it becomes a habit that you can’t break. As a result, you age prematurely and die relatively young because you have effectively killed yourself by poisoning your body.

*  *  *

Bookworm Room captures my frustration with the leftist mindset. It is armor-plated with myths and slogans, and nearly impervious to facts and logic. If I have anything to show for my recent effort to acquaint a leftist with facts and logic, it is probably to tamp down the rhetoric he exposes to my scrutiny. Beyond that, I expect nothing.

*  *  *

Leftist critics of “materialism” and “consumerism” seem to think that mankind’s striving for greater comfort and convenience and the trappings of status began in the United States, sometime in the 1920s. But a great swath of the long history and betterment of mankind’s lot can be ascribed to “materialism” and “consumerism.”

Leftists condemn such things not because they are anti-materialistic (quite the opposite) but because they want to decide for themselves the allocation of the products of economic endeavor. That their presumptuous schemes have slowly strangled the economy and harmed the worse-off into the bargain matters not one whit to them. They either don’t understand the consequences of their schemes or don’t care about the consequences of those schemes. They are like children lashing out at “unfairness,” but with much greater and lasting effect.

*  *  *

Social justice consists of taking money and jobs from some people, giving them to others, and congratulating yourself on your generosity.

*  *  *

The wailing and gnashing of teeth among “liberals” about the possibility that Congress will de-fund “public” broadcasting has given rise to the canard that NPR is an “objective” source of news. Anyone who believes that is a “fish in water” — so immersed in the “liberal” point of view that he cannot see it for what it is. In fact, an analysis of NPR’s audience (compiled and published by NPR) indicates that NPR’s listeners are “124% more likely to have a very liberal political outlook.” A bit of algebra yields the result that 69% of NPR’s listeners are “very liberal.” Which — given the natural human tendency to listen to, read, and watch that which pleases us — is strong evidence of NPR’s “liberal” bias. “Objective,” my foot.

*  *  *

There is almost nothing to be gained by the use of facts and logic against the quasi-religious zealotry and willful ignorance of “liberalism.” For every convert to realism, at least one more “liberal” is created by adolescent rebellion or obdurate stupidity. Think about that, and its implications for the possibility of reclaiming liberty in the United States.

*  *  *

I just read the phrase “we’ve collectively decided,” in reference to  government policy. Surprisingly, this abomination appears on the blog of a self-proclaimed libertarian. (For shame!)

There are no “collective” decisions in a nation the size of the United States, or in a State, or in a city, or in any group with more than a few dozen members. What “we” mostly have are decisions made by majorities of so-called representative bodies (which usually represent factions of minorities), and by executive and judicial fiat.

I don’t know about you, but no one makes decisions for me. I can be (and often am) forced to abide by the decisions of others, but those decisions are theirs, not mine. Only the prospect of a fine or jail time keeps me in line. And sometimes I just say “the hell with it.”

*  *  *

Democracy is inimical to liberty. That heretical thought, which I have expressed here and here, finds eloquent support here. A sample:

This illusion, that the democratic process is the same as liberty, is an ideal weapon for those few who may desire to destroy liberty and to replace it with some form of authoritarian society; innocent but ignorant persons are thereby made their dupes.

*  *  *

The virulent reaction of Dems to budget-cutting efforts reminds me that the belief in a “free lunch” is alive and well in America. It likely will remain so until the economy crashes under the weight of government spending and regulation. The only question in my mind is about what happens first: a still-prosperous China refusing to buy any more U.S. debt or an economically crumbling China unable to buy any more U.S. debt.

*  *  *

When a “liberal” finishes telling you how open-minded he is, ask him for his opinions about religion, homosexuality, abortion, Republicans, public schools, labor unions, capital punishment, Sarah Palin, the Tea Party Movement, defense spending, and Israel. Then stand by for a recitation of the usual talking points from NPR. “Liberals” are open-minded all right; they open their minds and let the lame-stream media fill them with pre-packaged views.

*  *  *

“Liberals” who are angry about the GOP’s insistence on budget cuts remind me of predators who are frustrated by the presence of sheep dogs.

*  *  *

“Liberalism” is to liberty as the Ku Klux Klan is to racial harmony.

*  *  *

If you believe Obama, the “American dream” is to have others pay for your retirement and health care.

*  *  *

Obamacare is to health care as a set of bald tires is to safe driving.

*  *  *

Civil servants and union members are drones to politicians, senior bureaucrats, public-school administrators, and union bosses — the “queen bees” whose luxurious salaries and perks the drones make possible simply by virtue of their existence. Private-sector “drones” have the satisfaction of producing real goods and services, and the “queen bees” (for the most part) deserve what they earn because of their managerial and financial contributions to the output of real goods and services.

*  *  *

The New Republic to the contrary notwithstanding, the Framers of the Constitution did not rely on disinterested institutions to protect the public interest, they relied on checks and balances. There is no such thing as a disinterested institution; institutions are colored by those who happen to dominate them. Checks and balances failed, eventually, because the legislative, executive, and judicial branches came to be dominated by like-minded “liberals.”

*  *  *

Here’s some research which concludes that

compared to anti-redistributionists, strong redistributionists have about two to three times higher odds of reporting that in the prior seven days they were angry, mad at someone, outraged, sad, lonely, and had trouble shaking the blues. Similarly, anti-redistributionists had about two to four times higher odds of reporting being happy or at ease.

Which meshes neatly with the conclusions of my own analysis:

If you are very intelligent … [y]our politics will lean heavily toward libertarianism or small-government conservatism. You probably vote Republican most of the time because, even if you are not a card-carrying Republican, you are a staunch anti-Democrat. And you are a happy person because your expectations are not constantly defeated by reality.

*  *  *

Speaking from experience, I can tell you that P.J. O’Rourke is on to something when he says that

“A” students work for “B” students. Or not even. A businessman friend of mine corrected me. “No, P. J.,” he said, “ ‘B’ students work for ‘C’ students. ‘A’ students teach.”…

…or work in think-tanks, where they are not held accountable for the consequences (if any) of their airy-fairy theorizing.

*  *  *

Leftists and rightists — statists, in other words — labor under the illusion that everything would be all right if only the “right kind of person” was “in charge” of things. Their worldview does not allow for the proneness of humans to ingrained biases, unfounded optimism about favored courses of action, and blindness to inconvenient facts.

*  *  *

“Liberals” believe in Santa Claus government: its coffers are bottomless and its good intentions override the corrupting influence of human nature. Conservatives understand that the “bottomless coffers” of government are filled by taxing and borrowing. They understand, further, that every dollar spent by government is a dollar that cannot be spent — usually in better ways — by the people who surrender their money to goverment. Conservatives also understand that a person does not automatically become wiser or less venal on becoming part of government, and that government cannot replicate the complex interactions that yield economic satisfaction and progress. Government cannot make people better off generally; it can make a relatively small number of people better off, temporarily, at the expense of the many and, in the long-run, at the expense of everyone.

*  *  *

The millennium has arrived: 51 percent of U.S. households pay no income taxes. Meanwhile, 1 percent of individual and joint returns account for 39 percent of income tax collections. What’s this business about making “the rich” pay “their share”?

*  *  *

The battle for the hearts, minds, and bank accounts of Americans will continue for as long as there is, in Thomas Sowell’s phrase, “a conflict of visions” among them. The conflict is between unrealistic and realistic views of human nature and resource constraints.

On the unrealistic side are leftists, whose magical thinking leads them to believe that government can solve all “problems” with the stroke of a president’s pen. Thus “the rich” can be taxed unto impoverishment and the economy will not suffer and all God’s children will cheer for Uncle Sam.

On the realistic side are most conservatives and libertarians, who understand that human nature is immune to social engineering, which means that bad things happen when people are compelled to support the state in its schemes for their betterment, which can only be afforded by giving up things of value (like economic growth). Realists understand, further, that “problems” are not problems, but facts of life, which can be made better by free persons acting voluntarily through markets and other social institutions.

Leftists understand the terms of this conflict — viscerally, at least — which is why they resist efforts to privatize education. To do so would free America’s children from the grasp of the statists who administer and teach in most public-school systems. To do so would sow the seeds of the destruction of the regulatory-welfare state because America’s children would then be free do adopt the realistic vision.

*  *  *

The current polarization of American politics represents a “conflict of visions,” in Thomas Sowell’s phrase. The realignment of the parties, which began in ’48 when the Dixiecrats walked out, has led to a Democrat Party whose leaders and hard-core adherents are committed to the welfare state, and to a Republican Party whose leaders and hard-core adherents are committed to a drastic reduction of the welfare state — thus the Ryan plan. Compromise is seen as betrayal, and is grounds for removal from power (especially among Republicans).

If there is to be a compromise, the GOP will have to blink first; there are too many irrational voters who cannot bring themselves to refuse the welfare state’s promise of a “free lunch.” Witness the recent upset in the NY special election, which would have been close, at best, even without a Tea Party spoiler in the field. Despite that, GOP leaders are leery of the political cost (to themselves) of compromise.

Therefore, I do not expect an orderly, agreed retreat from the entitlement “commitments” that are now on the books. It may well take a full-scale financial disaster (e.g., a federal default of some kind) to spur serious action. But, by then, the requisite action (a severe scaling back of the welfare state) would exacerbate the economic turmoil that surely will follow a financial fiasco. The result: something worse than the recent “Great Recession.”

*  *  *

They just don’t get it. My health is my business, not the state’s. I want to be free to buy my own medical care, and to live as I wish to live. I don’t want the state to tell me how to live as a price for the promise of “free” medical care. “Free” is in quotation marks, of course, because it is not free when the state controls it, and it certainly is not as good when the state delivers it.

*  *  *

From The Heritage Foundation, via The Blaze:

As Congress looks for much-need cuts in federal spending, some are wrongly looking to balance the budget by decimating defense. That’s a dangerous, wrongheaded road to head down.

We live in a hostile world, and being prepared — no matter the challenge — is key to the federal government living up to its constitutional duty to protect America. But as even as the military continues to wage war overseas, defense spending is at historic lows, all while critical investments in modern equipment are postponed.

Marshall of the Royal Air Force Sir John Cotesworth Slessor said it best:

It is customary in democratic countries to deplore expenditure on armaments as conflicting with the requirements of the social services. There is a tendency to forget that the most important social service that a government can do for its people is to keep them alive and free. (Strategy for the West, p. 75)

* * *

A post at The Volokh Conspiracy: “Gay Athletic Group Has First Amendment Right to Limit the Number of Straight Players on a Team.”

In a libertarian nation, the converse would be true, as well, and everyone could enjoy freedom of association.

*  *  *

From an MSNBC print ad:

We didn’t put a man on the Moon because some company thought they might be able to make a profit doing it. It takes vision to involve the common good of the American people without regard for profit. If you’re charting a course for this country and your big idea is, “No we can’t,” then I don’t want you leading the country.

Rachel Maddow

How sad that Ms. Maddow must be led. Evidently, she lacks the wherewithal to choose and pursue her own goals. She — like most liberals — then projects her own shortcomings onto others. It is especially sad that Ms. Maddow thinks of putting a man on the Moon as something that advanced the common good of the American people. It assuaged the egos of a handful of presidents and countless government employees, and it enriched no small number of government contractors, but the vast sums that were spent on the scientifically sterile task of putting a man on the Moon (not to mention other, equally sterile government projects) would have been better spent by the taxpayers whose money funded the effort. Think of the real jobs that might have been created; think of the consumption and investment goods that might have been produced. Now, there’s vision for you.

*  *  *

The latest constitutional innovation:

The Richmond Federal Reserve Bank hoisted a rainbow [gay pride] flag outside its building this month in a bid to support acceptance of diversity in the workplace….

According to the [Richmond] Times-Dispatch, Richmond Federal Reserve officials placed the flag at the request of PRISM – a group of gay, lesbian, bisexual and transgender (LGBT) bank employees – in recognition of LGBT Pride Month in June.

Sally Green, the bank’s first vice president and chief operating officer, said last week: ‘We are flying the pride flag as an example of our commitment to the values of acceptance and inclusion.’

Bank spokesman Jim Strader said there were no plans to lower the flag, noting the Federal Reserve bank operates independently from the federal government.

I wish I could say that.

*  *  *

Democrats favor “death panels.” Greg Mankiw explains:

[U]nder the likely scenario that healthcare spending keeps rising faster than GDP, the Center for American Progress [the Democrat Party’s pseudo-think-tank] would give government the power to prohibit people from buying expensive health plans with their own money. That is not my idea of progress.

Nor mine. But I am unsurprised.

*  *  *

The main psychological root of “liberalism” is a lack of trust, which surfaces in two important ways. First, there is an inability to believe that others can take care of themselves, given the freedom and incentive to do so. Second, and related to that, there is an inability to believe that progress occurs without being imposed from above, according to a master design. This lack of trust is, in fact, a projection onto others of the “liberal’s” own lack of imagination and resourcefulness.

*  *  *

Item:

Just before the 1964 election, a muckraking magazine called Fact decided to survey members of the American Psychiatric Association for their professional assessment of Senator Barry Goldwater of Arizona, the Republican nominee against President Lyndon B. Johnson….

The psychiatrists’ assessment was brutal. Half of the respondents judged Mr. Goldwater psychologically unfit to be president. They used terms like “megalomaniac,” “paranoid” and “grossly psychotic,” and some even offered specific diagnoses, including schizophrenia and narcissistic personality disorder….

Say what you will about their motivation, these doctors had given very specific and damaging psychiatric opinions, using the language and art of their profession, about a man whom they had not examined and who surely would not have consented to such statements.

I could say plenty about the motivations of those doctors quacks, but I refer you, instead, to something I wrote about one of their ilk: “The Psychologist Who Played God.” The “God” part should be a clue.

*  *  *

Marx said, “Religion is the opium of the people.” But that was in 1843. Later, Marxism became the opium of some of the people, but “enlightened” leftists eschewed the violence necessary to achieve true Marxism for the non-violent accretion of the regulatory-welfare state.

*  *  *

Some leftists (including a few of my acquaintances) seem to think that the welfare state is justified by the admonitions of Jesus Christ on the subject of the poor. Hmm… I doubt it. The lessons of the Sermon on the Mount and suchlike are aimed at individuals, not states. Let he who is truly charitable cast the first stone.

Union-Busting

Some not-so-random thoughts about unions.

Allowing public-sector unions is like allowing thieves to enter your home, knowing that they intend to rob you.

*  *  *

Hell hath no fury like a labor union scorned — or like a consumer or taxpayer who has had enough! Public- and private-sector unions, beware. Your days of wage-and-benefit-gouging — enabled by your pet legislators, governors, and presidents — are coming to an end. Let the downfall of Detroit and Michigan be a lesson to you. Accept what customers and taxpayers are willing to pay for your products and services, or do without a job. The choice is yours.

*  *  *

Pro-union rallies are a heaven-sent opportunity for the GOP to stand up to mobs demanding tribute from taxpayers. The GOP has little to lose by standing up to unions, and much to gain. Most union members — public and private — vote Democrat, anyway. And a relatively small fraction of Americans owe allegiance to unions, which in the private sector have been losing members, and clout, for decades. A strong anti-union stand will put the GOP in good stead with over-taxed, non-union, independent voters. So, here’s my advice to the GOP: Hold your ground and you will garner support that will enable you hold the House, retake the Senate, and retake the White House in 2012. You can then repeal Obamacare; roll back Social Security, Medicare, and Medicaid to true “safety net” status; whip the regulatory agencies into submission; and kill unionism with a national right-to-work law based on liberty of contract, as guaranteed by the Constitution.

*  *  *

Legalized extortionists Union leaders foresee a backlash against the GOP for the courageous actions of Wisconsin’s Republican lawmakers. I foresee a “frontlash,” as beleaguered taxpayers in other States demand the same degree of courage from their legislatures.

*  *  *

The American Revolution-in-progress is a movement by and on behalf of oppressed taxpayers. It is opposed by big-government’s wards and apologists — the welfare class, unionists, government employees, crony capitalists, and emotional, fact-challenged leftists.

*  *  *

If I were a taxpayer in a State with strong public-sector unions, I’d feel like a condemned man who was forced to pay for his own execution.

*  *  *

Civil servants and union members are drones to politicians, senior bureaucrats, public-school administrators, and union bosses — the “queen bees” whose luxurious salaries and perks the drones make possible simply by virtue of their existence. Private-sector “drones” have the satisfaction of producing real goods and services, and the “queen bees” (for the most part) deserve what they earn because of their managerial and financial contributions to the output of real goods and services.

*  *  *

The First Amendment reads:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech, or of the press; or the right of the people peaceably to assemble, and to petition the Government for a redress of grievances.

Upon removing the superfluous 18th-century comma from the final clause, the Amendment’s correct meaning becomes evident:

Congress (and through incorporation, the States and their political subdivisions), shall make no law restricting the right of the people to assemble peaceably for the purpose of addressing government.

In sum, peaceable assembly may be restricted when it is for a purpose other than to address government. Protests and picket lines that deprive private persons and businesses of peaceful enjoyment and the lawful conduct of their affairs are affronts to the Fourteenth Amendment‘s guarantees of due process and equal protection. Further, disruptive actions, such as the ones earlier this year in Madison, are not peaceable and should not be tolerated.

*  *  *

From the Austin American-Statesman:

Significant changes to pay and benefits for Texas’ employees, if enacted by legislators, could drive thousands of workers into retirement or jobs outside state government, survey results released Monday show.

About 20,500 state workers — or 14 percent of the workforce outside higher education — responded to the online survey, conducted by the Texas Public Employees Association.

About 57 percent of the respondents eligible for retirement said they would jump ship in the wake of pay cuts, increases in health insurance costs and other benefit changes now under consideration by lawmakers.

Among those respondents not of retirement age, nearly one-third said they would look for work outside of state government. Another 28 percent would wait until the economy improves and then bolt.

Four comments:

1. There’s usually a big gap between survey responses and actual behavior. It’s easy to give a “brave” response, but when the chips are down…

2. Good luck finding a private-sector job that will compensate you as well as your public-sector job.

3. If you do bail for the private sector, thank you. That’s one less “public servant” I have to support.

4. If a “public servant” finds the foregoing comments “hateful,” that’s too bad. I have to support you; I don’t have to love you.

A New Political Label

In “More Pseudo-Libertarianism,” I say that I must come up with a new name for left-libertarians, inasmuch as they are not really libertarians. Some of them have tried “liberaltarian,” an amalgam of (modern) “liberal” and “libertarian.” To be a “liberaltarian” (with a straight face), one must believe that leftists are willing to abandon their pursuit of all-encompassing government and join left-libertarians in their pursuit of absolute fairness (by whose standards?) in economic and social outcomes. Leftists seek the latter objective, but will never be persuaded to drop the former one.

All of which suggests that  a left-libertarian is really a (witting or unwitting) collaborationist: an intellectual Vichyite or, in the parlance of the 1950s, a fellow traveler or comsymp (communist sympathizer).

Comsymp has a certain ring. Perhaps “libsymp” is what I’m looking for. I’ll give it a try.

Confusion on the Budget Front

When budget-cutting is discussed,  the so-called entitlement programs (Social Security, Medicare, Medicaid, etc.) are called “mandatory,” whereas defense is lumped with the rest of the budget as a “discretionary” item. It should be the other way around; defense is a mandatory item (though reasonable non-leftists and non-pacifists can differ about the details), whereas entitlements are discretionary (“optional frills” is a better term).

Getting rid of government is the only way to get rid of waste, fraud, and abuse. Some parts of government — those which protect Americans from domestic and foreign predators — can’t be got rid of. But that doesn’t exempt them from vigilant efforts to root out waste, fraud, and abuse.

Probability, Existence, and Creation

A point that I make in “More about Probability and Existence” is made more eloquently and succinctly by Jacques Maritain:

To attempt to demonstrate that the world can be the effect of chance by beginning with the presupposition of this very possibility is to become the victim of a patent sophism or a gross illusion. In order to have the right to apply the calculus of probabilities to the case of the formation of the world, it would be necessary first to have established that the world can be the effect of chance. (Approaches to God, Macmillan paperback edition, pp. 60-1.)

To say that the world as we know it is the product of chance — and that it may exist only because it is one of vastly many different (but unobservable) worlds resulting from chance — is merely to state a theoretical possibility. Further, it is a possibility that is beyond empirical proof or disproof; it is on a par with science fiction, not with science.

If the world as we know it — our universe — is not the product of chance, what is it? A reasonable answer is found in another post of mine, “Existence and Creation.” Here is the succinct version:

  1. In the material universe, cause precedes effect.
  2. Accordingly, the material universe cannot be self-made. It must have a “starting point,” but the “starting point” cannot be in or of the material universe.
  3. The existence of the universe therefore implies a separate, uncaused cause.

There is no reasonable basis — and certainly no empirical one — on which to prefer atheism to deism or theism. Strident atheists merely practice a “religion” of their own. They have neither logic nor science nor evidence on their side — and eons of belief against them.

Related posts:
Atheism, Religion, and Science
The Limits of Science
Three Perspectives on Life: A Parable
Beware of Irrational Atheism
The Creation Model
The Thing about Science
Evolution and Religion
Words of Caution for Scientific Dogmatists
Science, Evolution, Religion, and Liberty
The Legality of Teaching Intelligent Design
Science, Logic, and God
Capitalism, Liberty, and Christianity
Is “Nothing” Possible?
Debunking “Scientific Objectivity”
Science’s Anti-Scientific Bent
Science, Axioms, and Economics
The Big Bang and Atheism
The Universe . . . Four Possibilities
Einstein, Science, and God
Atheism, Religion, and Science Redux
Pascal’s Wager, Morality, and the State
Evolution as God?
The Greatest Mystery
What Is Truth?
The Improbability of Us
A Digression about Probability and Existence
More about Probability and Existence
Existence and Creation

Money, Credit, and Economic Fluctuations

Wherein the author finds money, banking, and credit to be good, not evil — as long as government keeps its hands off them.

MONEY LUBRICATES EXCHANGE

The important role of money as a lubricant of economic activity has been understood for a long time. Indeed, it must have been understood by the ancients who first devised money of one kind or another and used it to broaden the range of goods they could buy, sell, and use. For a less-than-ancient but venerable account of the role of money, I turn to Adam Smith:

When the division of labour has been once thoroughly established, it is but a very small part of a man’s wants which the produce of his own labour can supply. He supplies the far greater part of them by exchanging that surplus part of the produce of his own labour, which is over and above his own consumption, for such parts of the produce of other men’s labour as he has occasion for. Every man thus lives by exchanging, or becomes, in some measure, a merchant, and the society itself grows to be what is properly a commercial society.

But when the division of labour first began to take place, this power of exchanging must frequently have been very much clogged and embarrassed in its operations. One man, we shall suppose, has more of a certain commodity than he himself has occasion for, while another has less. The former, consequently, would be glad to dispose of; and the latter to purchase, a part of this superfluity. But if this latter should chance to have nothing that the former stands in need of, no exchange can be made between them. The butcher has more meat in his shop than he himself can consume, and the brewer and the baker would each of them be willing to purchase a part of it. But they have nothing to offer in exchange, except the different productions of their respective trades, and the butcher is already provided with all the bread and beer which he has immediate occasion for. No exchange can, in this case, be made between them. He cannot be their merchant, nor they his customers; and they are all of them thus mutually less serviceable to one another. In order to avoid the inconveniency of such situations, every prudent man in every period of society, after the first establishment of the division of labour, must naturally have endeavoured to manage his affairs in such a manner, as to have at all times by him, besides the peculiar produce of his own industry, a certain quantity of some one commodity or other, such as he imagined few people would be likely to refuse in exchange for the produce of their industry. Many different commodities, it is probable, were successively both thought of and employed for this purpose. In the rude ages of society, cattle are said to have been the common instrument of commerce; and, though they must have been a most inconvenient one, yet, in old times, we find things were frequently valued according to the number of cattle which had been given in exchange for them. The armour of Diomede, says Homer, cost only nine oxen; but that of Glaucus cost a hundred oxen. Salt is said to be the common instrument of commerce and exchanges in Abyssinia; a species of shells in some parts of the coast of India; dried cod at Newfoundland; tobacco in Virginia; sugar in some of our West India colonies; hides or dressed leather in some other countries; and there is at this day a village In Scotland, where it is not uncommon, I am told, for a workman to carry nails instead of money to the baker’s shop or the ale-house. (From An Inquiry into the Nature and Causes of the Wealth of Nations, Chapter IV, “Of the Origin and the Use of Money.)

And so it went, until institutions of standing (banks, governments) began to issue money in standard, convenient forms, and which individuals would readily accept and use — within a particular region, principality, kingdom or nation, at least.

MONEY FACILITATES CREDIT, AND CREDIT CAN CREATE MONEY

Even in the absence of money, of course, there can be credit: the lending of products and services (i.e., economic goods or, simply, goods) for consumption or investment (i.e., capital formation: the creation of tools, facilities, and the like that can be used to produce goods in greater abundance, of higher quality, or of new kinds). Money facilitates credit because the borrower can use money to choose from a greater variety of consumption or investment goods; money, in effect, expands the time and space available to a buyer for the selection of goods.

Credit represents a kind of exchange, where the commodity involved is money, itself. The borrower and lender must agree to the terms of exchange, and the borrower (unless he is swayed by personal considerations and inclined to forgive a debt) will want some kind of assurance that his money will be repaid, at a rate of interest that he (the lender) is willing to accept, given the risk he assumes. Credit can underwrite the following activities:

  • Consumption (meeting daily wants, from shelter to food and clothing to such “frills” as internet service, faddish toys and clothing, etc.)
  • Purchases of durable consumer goods (e.g., automobiles, major appliances, and — for this purpose — residential dwellings)
  • Capital formation to enable the production of more, better, and new kinds of goods, including production goods (e.g., farm equipment) as well as final goods (e.g., home computers).

For purposes of this exposition, I consider stock purchases to be a form of credit. The purchaser is not making a loan to be repaid on a schedule, but he is hoping to participate in the dividends and/or capital gains that will be generated by the business that issues the stock. In other words, to buy stock is really to grant an unsecured loan, in the expectation of a high return and with the knowledge that a lot of risk attaches to that expectation.

CREDIT AND THE MONEY-MULTIPLIER

What is the source of credit? That is, who — if anyone — is relinquishing a claim on resources in order to lend that claim to someone else? The obvious answer to the question is: the lender. But that is not the whole story, because of fractional-reserve banking (FR, to distinguish it from FRB, or Federal Reserve Board). FR has a long history, which predates the involvement of governments in banking. With FR, the cash held in reserve by a bank (or private lender) can be parlayed into loans (and thus money) having a face value many times that of the original lender’s reserve. In what follows, I will use examples that assume a “money multiplier” of 10; that is, a cash reserve of a given amount may be used to generate loans with a total face value equal to 10 times that of the reserve. (This article explains the process and the formula  for determining  potential value of the loans, and money, that can be generated by a given cash reserve.) It should be  obvious that FR can be practiced only in a monetary economy; 100 head of cattle, for instance, cannot be parlayed into 1,000 head of cattle, because cattle cannot be created by the proverbial stroke of a pen, whereas money can — if others are willing to accept it.

Without FR, then, credit is created only when a lender forgoes spending that directly benefits him. For example, a lender who has just received $1,000 dollars for services rendered has a claim on the value of the goods he created by rendering those services. He could spend that $1,000 on some combination of consumption (e.g., groceries), durable consumer goods (e.g., a PC), or capital formation (e.g., new software for use in his tax-preparation business). Alternatively, he could lend the $1,000 (or some part of it) to someone else, who could put it to an analogous use or uses. Without FR, however, the growth of economic output depends (almost) entirely on the amount that individuals spend on capital formation or lend to others for capital formation. (I say “almost” because certain kinds of consumption and durable goods can also lead to future increases in output; for example, better nutrition and the use of refrigeration to prevent the contamination of food.)

THE MONEY-MULTIPLIER AND ECONOMIC GROWTH

FR can induce a higher rate of economic growth, if the following several conditions are satisfied:

  • Lenders lend additional sums as a result of FR.
  • The lending is not offset by reduced spending on the part of borrowers.
  • The money that is borrowed indistinguishable from money that is already in use. That is to say, the borrowed money is treated like “real” money when borrowers put it into circulation by spending it.
  • If it is “real” money, it give borrowers a claim on resources that they can exercise for the various reasons outlined above. But the resources that borrowers seek to command must be in addition to the resources that are already in use or that would have been in use in the absence of FR. (There may be some lags, as producers respond to additional spending with increases in output, and those lags will have an inflationary effect, but it may be offset by efficiencies of scale and/or greater productivity that results when some borrowers invest in capital formation.)

In summary: If enough additional money is created, if its expenditure calls forth enough additional production, and if enough that production flows into growth-inducing outlays, the result will be an acceleration of economic growth, relative to the growth that would have been attained without FR.

The biggest question mark attaches to the amount of lending that results when additional credit becomes available (potentially) because of FR. Potential increases in credit become actual increases only to the extent that particular lenders and prospective borrowers are willing to lend and borrow, respectively, at prevailing rates of interest, in light of their expectations of future economic conditions and the returns on particular uses of borrowed money. There is no mechanical or hydraulic process at work. (I am skirting a discussion of monetary policy, its shortcomings, and its merits relative to fiscal policy. For those who are interested in learning more about those matters, start here, here. here, and especially here.)

The essential point is that FR — like money — can foster the growth of economic activity. If there is nothing “artificial” about using money to expand economic activity — in the range of participants, their geographic scope, and the variety of goods they offer — there is nothing “artificial” using FR to further expand economic activity along the same lines.

THE “PROBLEM” WITH CREDIT-FUELED ECONOMIC EXPANSION

The perceptual problem is that people are unable to know just how much worse off they would be in the absence of credit. Credit-related downturns occur at a relatively high level of economic activity — a level that would not have been attained in the first place had it not been for credit.

When economic expansion is credit-based, it can be halted and reversed by a tightening of credit. In other words, credit-tightening supplements and magnifies the usual causes of economic retractions: natural disasters, epidemics, wars, technological shifts, overly ambitious capital and business formation, and so on. It is no coincidence that most of the economic downturns in American history have been initiated or deepened by the onset of a credit crisis.

Michael D. Bordo and Joseph G. Haubrich essay a rigorous historical and quantitative analysis of the relationship between credit crises and economic downturns in “Credit Crises, Money, and Contractions: A Historical View.” This is from the abstract:

Using a combination of historical narrative and econometric techniques, we identify major periods of credit distress from 1875 to 2007, examine the extent to which credit distress arises as part of the transmission of monetary policy, and document the subsequent effect on output…. [W[e identify and compare the timing, duration, amplitude, and comovement of cycles in money, credit, and output. Regressions show that fi nancial distress events exacerbate business cycle downturns both in the nineteenth and twentieth centuries and that a confluence of such events makes recessions even worse.

And this is from the concluding section:

[T]he narrative evidence strongly suggests, and the empirical work is at least consistent with, the claim that credit turmoil worsens recessions. The timing of cycles is likewise consistent with the work of Gilchrist, Yankov and Zakrajsek (2008) and others on the ability of corporate bond spreads to predictrecession in more recent periods.

The results are consistent with work, such as Barro and Ursua (2009), who find a high association between stock market crashes and large contractions, and Claessens Kose, and Terrones, who find an interaction between stock market crashes and tight money and credit….

The current episode combines elements of a credit crunch, asset price bust and banking crisis. It is consistent with the patterns we find using 140 years of US data. How does the current crisis measure up? Between August, 2007, and April, 2009, the difference between the yield on Baa bonds and long‐term Treasuries has moved up 342 basis points, a larger increase than seen in the 1929 contraction, and approaching the combined increase of 436 bp over both the Depression contractions. The percentage drop in S and P index of 42% is second only to the 78% of the Great Contraction…. Zarnowitz (1992) shows that business cycles downturns with panics are much more severe than others. Today because of deposit insurance, financial turmoil does not lead to panics and collapses in the money multiplier, and credit turmoil is less likely to feed into the money supply. The credit disturbance thus becomes relatively more important, given that disturbances on the asset side of the balance sheet no longer have as strong an influence on the money supply.

But there is nothing illusory about the relatively high level of economic activity from which a descent begins. It is real, and due in no small part to the availability of credit.

THE “HANGOVER” NARRATIVE AS A FALSE ANALOGY

A leading explanation of the Great Depression — and one that echoes today, in the aftermath of the Great Recession — is that Americans imbibed too much easy credit. Frederick Lewis Allen put it this way in his popular treatment of the Roaring Twenties and Great Crash, Only Yesterday (1931):

Prosperity was assisted … by two new stimulants to purchasing, each of which mortgaged the future but kept the factories roaring while it was being injected. The first was the increase in the installment buying. People were getting to consider it old-fashioned to limit their purchases to the amount of their cash balance; the thing to do was to “exercise their credit.” By the latter part of the decade, economists figured that 15 per cent of all retail sales were on an installment basis, and that there were some six billions of “easy payment” paper outstanding. The other stimulant was stock-market speculation. When stocks were skyrocketing in 1928 and 1929 it is probable that hundreds of thousands of people were buying goods with money which represented, essentially, a gamble on the business profits of the nineteen-thirties. It was fun while it lasted. (From Chapter 7, “Coolidge Prosperity.”

Thus:

Under the impact of the shock of panic, a multitude of ills which hitherto had passed unnoticed or had been offset by stock-market optimism began to beset the body economic, as poisons seep through the human system when a vital organ has ceased to function normally. Although the liquidation of nearly three billion dollars of brokers’ loans contracted credit, and the Reserve Banks lowered the rediscount rate, and the way in which the larger banks and corporations of the country had survived the emergency without a single failure of large proportions offered real encouragement, nevertheless the poisons were there; overproduction of capital; overambitious (expansion of business concerns; overproduction of commodities under the stimulus of installment buying and buying with stock-market profits… (From Chapter 13, “Crash!“)

And, finally:

Soon the mists of distance would soften the outlines of the nineteen- twenties, and men and women, looking over the pages of a book such as this, would smile at the memory of those charming, crazy days when the radio was a thrilling novelty, and girls wore bobbed hair and knee- length skirts, and a trans-Atlantic flyer became a god overnight, and common stocks were about to bring us all to a lavish Utopia. They would forget, perhaps, the frustrated hopes that followed the war, the aching disillusionment of the hard-boiled era, its oily scandals, its spiritual paralysis, the harshness of its gaiety; they would talk about the good old days …. (From Chapter 14, “Aftermath: 1930-1931.”)

The clear moral — in the view of Allen and many others, unto this day — is that America had overindulged in the Roaring Twenties and paid for it with a hangover, in the form of the Great Crash and subsequent Great Depression, which was in evidence by the time Only Yesterday was published.

The true story is that government caused the financial excesses of the Roaring Twenties, the evolution of the Great Crash into the Great Depression, and a deep recession that prolonged the Great Depression. This long, dismal story has been told many times; there is a fact-filled but concise retelling in the Mackinac Center’s “Great Myth of the Great Depression.” Jumping to the bottom line:

The genesis of the Great Depression lay in the irresponsible monetary and fiscal policies of the U.S. government in the late 1920s and early 1930s. These policies included a litany of political missteps: central bank mismanagement, trade-crushing tariffs, incentive-sapping taxes, mind-numbing controls on production and competition, senseless destruction of crops and cattle and coercive labor laws, to recount just a few. It was not the free market that
produced 12 years of agony; rather, it was political bungling on a grand scale.

The story ends with an assessment of the financial crisis that sparked the Great Recession:

The financial crisis that gripped America in 2008 ought to be a wake-up call. The fingerprints of government meddling are all over it. From 2001 to 2005, the Federal Reserve revved up the money supply, expanding it at a feverish double-digit rate. The dollar plunged in overseas markets and commodity prices soared. With the banks flush with liquidity from the Fed, interest rates plummeted and risky loans to borrowers of dubious merit ballooned. Politicians threw more fuel on the fire by jawboning banks to lend hundreds of billions of dollars for subprime mortgages. When the bubble burst, some of the very culprits who promoted the policies that caused it postured as our rescuers while endorsing new interventions, bigger government, more inflation of money and credit and massive taxpayer bailouts of failing firms. Many of them are also calling for higher taxes and tariffs, the very nonsense that took a recession in 1930 and made it a long and deep depression.

Just how bad is the government-caused Great Recession? It is the worst recession since the end of World War II and, therefore, the worst downturn since the Great Depression:


Derived from quarterly estimates of real GDP provided by the Bureau of Economic Analysis.

To paraphrase Ronald Reagan: Money and credit are not the problem. Government policies — including the mismanagement of money and credit — are the problem.

FREE FINANCIAL MARKETS ARE THE SOLUTION

Government control and monopolization of money, banking, and credit has been the norm for so long that it is taken for granted by almost everyone. But the record of government misfeasance and malfeasance with respect to economic activity (barely touched on above) is such that the proponents of governmental interventions should bear the burden of proving that those interventions are warranted.

I will close with another paraphrase, this time of Winston Churchill: the free market is the least effective means of making resource-allocation decisions that foster material progress, except for all the rest.

Read on:
Mr. Greenspan Doth Protest Too Much
Economic Growth since WWII
The Price of Government
The Fed and Business Cycles
The Commandeered Economy
The Price of Government Redux
The Mega-Depression
Does the CPI Understate Inflation?
Ricardian Equivalence Reconsidered
The Real Burden of Government
Toward a Risk-Free Economy
The Rahn Curve at Work
How the Great Depression Ended
The Illusion of Prosperity and Stability
The “Forthcoming Financial Collapse”
Experts and the Economy
Estimating the Rahn Curve: Or, How Government Inhibits Economic Growth
The Deficit Commission’s Deficit of Understanding
The Bowles-Simpson Report
The Bowles-Simpson Band-Aid
The Great Recession is Over
The Stagnation Thesis
Government Failure: An Example
The Evil That Is Done with Good Intentions
America’s Financial Crisis Is Now
The Great Recession Is Not Over

We, the Children of the Enlightenement…

…are lost in it. Roger Scruton explains:

…Ferdinand Tönnies … formulated a distinction between two kinds of society — Gemeinschaft and Gesellschaft — the first based in affection, kinship and historic attachment, the second in division of labour, self-interest and free association by contract and exchange. Traditional societies, he argued, are of the first kind, and construe obligations and loyalties in terms of a non-negotiable destiny. Modern societies are of the second kind, and therefore regard all institutions and practices as provisional, to be revised in the light of our changing requirements. The transition from Gemeinschaft to Gesellschaft is part of what happened at the Enlightenment, and one explanation for the vast cultural changes, as people learned to view their obligations in contractual terms, and so envisage a way to escape them.

Max Weber wrote, in the same connection, of a transition from traditional to “legal-rational” forms of authority, the first sanctioned by immemorial usage, the second by impartial law. To these two distinctions can be added yet another, du to Ser Henry Maine, who described the transition from traditional to modern societies as a shift from status to contract — i.e., a shift from inherited social position, to a position conferred by, and earned through, consent.

These sociological ideas are attempts to understand changes whose effect has been so profound that we have not yet come to terms with them. Still less had people come to terms with them in the late eighteenth century, when the French Revolution sent shock waves through the elites of Europe. The social contract seemed to lead of its own accord to a tyranny far darker than any monarchical excess: the contract between each of us became an enslavement of all. Enlightenment and the fear of Enlightenment were henceforth inseparable. Burke’s attack on the [French] Revolution illustrates this new state of mind. His argument is a sustained defence of “prejudice” — by which he meant the inherited store of human wisdom, whose value lasts only so long as we don not question it — against the “reason” of Enlightenment thinking. But people have prejudices only when they see no need to defend them. Only an enlightened person could think as Burke did, and the paradox of his position is now a familiar sub-text of modern culture — the sub-text of conservatism….

It was Marx who developed the most popular explanation of the Enlightenment. The Enlightenment saw itself as the triumph of reason over superstition. But the real triumph, Marx argued, lay not in the sphere of ideas but in the sphere of economics. The aristocratic order had been destroyed, and with it the feudal relations which bound the producers to the land and the consumers to the court. In place of the old order came the “bourgeois” economy, based on the wage contract, the division of labour and private capital. The contractual view of society, the emphasis on individual freedom, the belief in impartial law, the attack on superstition in the name of reason — all these cultural phenomena are part of the “ideology” of the new bourgeois order, contributions to the self-image whereby the capitalist class ratifies its usurpation.

The Marxist theory is a form of economic determinism, distinguished by the belief that fundamental changes in economic relations are invariably revolutionary, involving a violent overthrow of the old order, and a collapse of the political “superstructure” which had been built on it. The theory is almost certainly false: nevertheless, there is something about the Marxian picture which elicits, in enlightened people, the will to believe. By explaining culture as a by-product of material forces, Marx endorses the Enlightenment view, that material forces are the only forces there are. The old culture, with its gods and traditions and authorities, is made to seem like a web of illusions — “the opiate of the people”, which quietens their distress….

…Thanks to Marx, debunking theories of culture have become a part of culture. And these theories have the structure pioneered by Marx: they identify power as the reality, and culture as the mask; they also foretell some future “liberation” from the lies that have been spun by our oppressors.

Debunking theories of culture are popular for two reasons: because they are linked to a political agenda, and because they provide us with an overview. If we are to understand the Enlightenment, then we need such an overview. But ought it to be couched in these external terms? After all, the Enlightenment is part of us; people who have not responded to its appeal are only half awake to their condition. It is not enough to explain the Enlightenment; we must also understand it….

[A]s I noted in discussing Burke, Enlightenment goes hand in hand with the fear of it. From the very beginning hope and doubt have been intertwined. What if men needed those old authorities, needed the habit of obedience and the sense of the sacred? What if, without them, they should jettison all loyalties, and give themselves to a life of godless pleasure?… [T]he very aim for a universal culture, without time or place, brought a new kind of loneliness. Communities depend upon the force of which Burke called prejudice; they are essential local, bound to a place, a history, a language and a common culture. The Enlightened individualist, by forgoing such things, lives increasingly as a stranger among strangers, consumed by a helpless longing for an attachment which his own cold thinking has destroyed.

These conflicts within Enlightenment culture are part of its legacy to us. We too are individualists, believers in the sovereign right of human freedom, living as strangers in a society of strangers. And we too are beset by those ancient and ineradicable yearnings for something else — for a homecoming to our true community…. But … there is no going back, … we must live with our enlightened condition and endure the inner tension to which it condemns us. And it is in terms of this tension, I believe, the we should understand both the splendours and the miseries of modern culture. (An Intelligent Person’s Guide to Modern Culture, pp. 24-9)

Religion, community, and common culture have been displaced by the regulatory-welfare state, anthropogenic global warming, feminism, “choice,” and myriad other totems, beliefs, “movements,” and “leaders,” both religious and secular.  Are our minds less troubled, do we sleep better, are we happier in our relationships, is our destiny more secure? Something tells me that the answer to each of those questions is “no.”

The tale was told long ago:

[1] Now the serpent was more subtle than any of the beasts of the earth which the Lord God had made. And he said to the woman: Why hath God commanded you, that you should not eat of every tree of paradise? [2] And the woman answered him, saying: Of the fruit of the trees that are in paradise we do eat: [3] But of the fruit of the tree which is in the midst of paradise, God hath commanded us that we should not eat; and that we should not touch it, lest perhaps we die. [4] And the serpent said to the woman: No, you shall not die the death. [5] For God doth know that in what day soever you shall eat thereof, your eyes shall be opened: and you shall be as Gods, knowing good and evil.

[6] And the woman saw that the tree was good to eat, and fair to the eyes, and delightful to behold: and she took of the fruit thereof, and did eat, and gave to her husband who did eat. [7] And the eyes of them both were opened: and when they perceived themselves to be naked, they sewed together fig leaves, and made themselves aprons. [8] And when they heard the voice of the Lord God walking in paradise at the afternoon air, Adam and his wife hid themselves from the face of the Lord God, amidst the trees of paradise. [9] And the Lord God called Adam, and said to him: Where art thou? [10] And he said: I heard thy voice in paradise; and I was afraid, because I was naked, and I hid myself.

[11] And he said to him: And who hath told thee that thou wast naked, but that thou hast eaten of the tree whereof I commanded thee that thou shouldst not eat? [12] And Adam said: The woman, whom thou gavest me to be my companion, gave me of the tree, and I did eat. [13] And the Lord God said to the woman: Why hast thou done this? And she answered: The serpent deceived me, and I did eat. [14] And the Lord God said to the serpent: Because thou hast done this thing, thou art cursed among all cattle, and beasts of the earth: upon thy breast shalt thou go, and earth shalt thou eat all the days of thy life. [15] I will put enmities between thee and the woman, and thy seed and her seed: she shall crush thy head, and thou shalt lie in wait for her heel.

[16] To the woman also he said: I will multiply thy sorrows, and thy conceptions: in sorrow shalt thou bring forth children, and thou shalt be under thy husband’s power, and he shall have dominion over thee. [17] And to Adam he said: Because thou hast hearkened to the voice of thy wife, and hast eaten of the tree, whereof I commanded thee that thou shouldst not eat, cursed is the earth in thy work; with labour and toil shalt thou eat thereof all the days of thy life. [18] Thorns and thistles shall it bring forth to thee; and thou shalt eat the herbs of the earth. [19] In the sweat of thy face shalt thou eat bread till thou return to the earth, out of which thou wast taken: for dust thou art, and into dust thou shalt return. [20] And Adam called the name of his wife Eve: because she was the mother of all the living.

[21] And the Lord God made for Adam and his wife, garments of skins, and clothed them. [22] And he said: Behold Adam is become as one of us, knowing good and evil: now, therefore, lest perhaps he put forth his hand, and take also of the tree of life, and eat, and live for ever. [23] And the Lord God sent him out of the paradise of pleasure, to till the earth from which he was taken. [24] And he cast out Adam; and placed before the paradise of pleasure Cherubims, and a flaming sword, turning every way, to keep the way of the tree of life. (Book of Genesis, Chapter 3)

A particular feature of the Enlightenment was that its rationalism gave rise to leftism. Thomas Sowell writes about the wages of leftist “intellectualism” in Intellectuals and Society:

One of the things intellectuals have been doing for a long time is loosening the bonds that hold a society together. They have sought to replace the groups into which people have sorted themselves with groupings created and imposed by the intelligentsia. Ties of family, religion, and patriotism, for example, hav long been treated as suspect or detrimental by the intelligentsia, and new ties that intellectuals have created, such as class — and more recently “gender” — have been projected as either more real or more important. (p. 303)

In my view, the

left’s essential agenda  is the repudiation of ordered liberty of the kind that arises from evolved social norms, and the replacement of that liberty by sugar-coated oppression. The bread and circuses of imperial Rome have nothing on Social Security, Medicaid, Medicare, Obamacare, and the many other forms of personal and corporate welfare that are draining America of its wealth and élan. All of that “welfare” has been bought at the price of economic and social liberty (which are indivisible).

Freedom from social bonds and social norms is not liberty. Freedom from religion, which seems to be the objective of American courts, is bound to yield less liberty and more crime, which further erodes liberty.

Related posts:
Our Enemy, the State
Pseudo-Libertarian Sophistry vs. True Libertarianism
Positivism, “Natural Rights,” and Libertarianism
What Are “Natural Rights”?
The Golden Rule and the State
Libertarian Conservative or Conservative Libertarian?
Liberty, Equality, Fraternity: Part I
Bounded Liberty: A Thought Experiment
Evolution, Human Nature, and “Natural Rights”
More Pseudo-Libertarianism
More about Conservative Governance
The Meaning of Liberty
Positive Liberty vs. Liberty
Understanding Hayek

Was There a “bin Laden bump” for Obama?

I was tempted to ask if there was an “Osama bump” for Obama. Ah well, mustn’t be snarky about our “gutsy” leader, who did no more than he should have done, though he had to “sleep on it” before he approved the Abbottabad operation.

The first graph below gives Obama’s unpopularity ratings for the ten weeks surrounding the date on which Osama’s demise was announced: May 1, 2011. The blue shading spans polls that preceded the announcement. (The May 1 results were released in the morning; Obama announced Osama’s death later that day.) The green shading spans the two days (May 2 and 3) for which Obama’s disapproval rating reflected, in part, the results of polling conducted before the May 1 announcement.

It is evident that Obama was gaining ground, even before the May 1 announcement. We may take his rating of -11 on May 1 as a baseline for the evaluation of the effect of bin Laden’s death. Generously, Obama gained 4 points, and held that gain from May 7 through May 18. So much for the “bin Laden bump.”

It appears that Obama’s unpopularity was already returning to its core level of about -10 — a level that it had reached in the aftermath of the enactment of Obamacare. (See the second and third graphs.) And Obama’s unpopularity has stayed around its core level since the end of the modest “bin Laden bump.”

Why has Obama’s unpopularity returned to its core level? Here is my surmise: The battle lines are being drawn for election 2012, and those independents who enjoyed deriding Obama (for many legitimate reasons) are “coming home to roost” because they fear that if Obama loses in 2012 they will have abetted the demise of “free lunch” governance. They are of the ilk that decries the deficit while resisting the necessary (and inevitable) reductions in “entitlements.”


Net unpopularity is measured as the percentage of likely voters who strongly approve of BO, minus the percentage of likely voters who strongly disapprove of BO. The approval and disapproval statistics are derived from Rasmussen Reports’ Daily Presidential Tracking Poll. There is a gap in the 7-day trend because no poll was released on May 9. I use Rasmussen’s polling results because Rasmussen has a good track record with respect to presidential-election polling. The following graphs are derived from the same source.

Understanding Hayek

In an earlier post, I deployed the following statement by Michael Oakeshott:

How deeply the rationalist disposition of mind has invaded our political thought and practice is illustrated by the extent to which traditions of behaviour have given place to ideologies, the extent to which the politics of destruction and creation have been substituted for the politics of repair, the consciously planned and deliberately executed being considered (for that reason) better than what has grown up and established itself unselfconsciously over a period of time…. This is, perhaps, the main significance of Hayek’s Road to Serfdom — not the cogency of his doctrine, but the fact that it is a doctrine. A plan to resist all planning may be better than its opposite, but it belongs to the same style of politics. And only in a society already deeply infected with Rationalism will the conversion of the traditional resources of resistance to the tyranny of Rationalism into a self-conscious ideology be considered a strengthening of those resources. (From “Rationalism in Politics,” in Rationalism in Politics and Other Essays, new and expanded edition, pp. 26-7.)

I hereby retract my implied endorsement of Oakeshott’s view of Hayek as a rationalist. Hayek’s “doctrine” consisted of a reasoned, well-founded warning against central planning. That is no more a doctrine than a highway sign that warns of sharp curves ahead.

Hayek was very much an anti-rationalist. (The use of reason, in itself, is not rationalism, which values only reason and the ordering of socio-economic relationships by the use of reason.) For example, Peter G. Klein writes that

…Hayek’s later emphasis on group selection and spontaneous order is not shared by Mises…. A clue to this difference is in Hayek’s … statement that “Mises himself was still much more a child of the rationalist tradition of the Enlightenment and of continental, rather than of English, liberalism . . . than I am myself.” This is a reference to the “two types of liberalism” to which Hayek frequently refers: the continental rationalist or utilitarian tradition, which emphasizes reason and man’s ability to shape his surroundings, and the English common-law tradition, which stresses the limits to reason and the “spontaneous” forces of evolution. (“Biography of F.A. Hayek,” at Ludwig von Mises Institute)

As for The Road to Serfdom, Peter Boettke explains that it

was conceived of as part of Hayek’s Abuse of Reason project.  It was a political tract for its time, but it was also much more than that.  A careful reader can see in the book both where Hayek attempts to move beyond the political issues of his day to address more timeless issues of social cooperation….

Hayek’s basic thesis in The Road to Serfdom is that the lure of socialist ideology has the unintended and undesirable consequence of economic depravation and political tyranny when countries follow its policy agenda.  The reason for this is that the task of socialist planning requires economic planners to assume a level of responsibility for economic life in a country which is both cumbersome to the point of impossible, and powerful beyond any reasonable limit that could be safely trusted to any one individual or group of individuals….

Hayek’s book was not a deterministic one, but rather a warning to those countries of the West who were enamored with socialist ideology, that the implementation of socialism would tend to undermine the beliefs that were at the core of Western civilization….

…[S]ixty years on, we are still celebrating Hayek’s achievement with The Road to Serfdom.

Most of this celebration of Hayek, admittedly, is ideological in nature and confirms Hayek’s status as an iconic figure for the world-wide conservative and libertarian movement. I do not deny the importance of this in explaining the popularity of Hayek’s work, but I also think those who rely on this explanation exclusively relegate Hayek’s work to the status of a “coffee-table book” — a work to be seen as in one’s possession among the intelligentsia but not read.  Rather, I want to stress the analytical contribution that Hayek makes in his work….

Hayek sought to demonstrate in a manner persuasive to the public and the intellectual elite that the consequences of the policy choice of socialism would lead them down a path that they themselves would never want to go if they made their choices in full knowledge of the consequences of their choice.  It is a tragic tale he is telling in The Road to Serfdom, not one of determinism or even opportunism.  “Is there a greater tragedy imaginable,” Hayek asks, “than that, in our endeavor consciously to shape our future in accordance with our highest ideals, we should in fact unwittingly produce the very opposite of what we have been striving for?” (“On reading Hayek: choice, consequences, and The Road to Serfdom“)

Hayek was out to slay the rationalistic dragon of market socialism:

economic systems where the means of production are publicly owned, managed and operated for a profit in a market economy…. Theoretically, the fundamental difference between a traditional socialist economy and a market socialist economy is the existence of a market for the means of production and capital goods under market socialism.

On that point, Boettke writes:

[Hayek] never impugns the character of those he is arguing with, instead he points out how their intellectual error leads to results that would make these individuals shudder with fear. To reiterate …, the market socialists thought their model of socialist planning could be reconciled with consumer sovereignty, but their position was untenable due to the organizational problems of socialism in terms of aligning incentives, utilizing information, and discovering knowledge.  Neither Lerner nor Durbin [two leading market socialists] ever admitted that Hayek had refuted their claim to have squared the circle.  Of course, they believe in individualism and not authoritarian government. But their theory if put into practice would have resulted in a march toward serfdom as special interest forces would be unleashed to agitate for greater and greater government control over resources and the allocation of labor. Either consumer sovereignty would be suppressed, or planning would have to be abandoned — but the two could not be reconciled. (Id.)

Boettke concludes:

Hayek wrote The Road to Serfdom at a crucial stage in the 20th century. The Nazi threat to western civilization had just been defeated, but the Communist system had grown in legitimacy in the process.  Communism had avoided the Great Depression, and whatever problems might exist, Stalin did mobilize the resources in the Soviet Union to transform a peasant society into an industrial power in a generation and effectively enough to help the allies defeat Hitler.  Hayek’s argument was that our fascination with the Communist ideal will prove to be our undoing unless we recognize the warning signs.  He stood there and could do no other, but to pen this warning.

The Road to Serfdom made Hayek a famous man, but it also partially discredited him among his fellow academics and the intellectual elites in the west.  But he was not deterred and his career post-1944 focused increasingly on the issues of social philosophy and political economy….

…Hayek’s emphasis [was] on how alternative institutional arrangements, through their properties to align incentives and utilize dispersed information, impact the choices people make…. (Id.)

(For more by Boettke, see “Hayek’s the Road to Serfdom Revisited: Government Failure in the Argument Against Socialism,” and “Hayek and Market Socialism: Science, Ideology, and Public Policy.”)

Hayek, in short, was prescriptive only to the extent that his understanding of human nature and social relationships enabled him to issue well-founded warnings about the unintended and undesirable consequences of rationalistic schemes — like socialism.

As for Hayek’s Abuse of Reason project, here is Bruce Caldwell’s outline:

In late August 1939 Hayek sent a letter to his friend Fritz Machlup saying that … he would begin work on a new project, tracing the decline of reason from Saint-Simon to Hitler. The plan of the work was contained in an outline prepared in the summer of 1940, titled “The Abuse and Decline of Reason: The Reflections of an Economist on the Self- Destructive Tendencies of Our Scientific Civilization.” The introduction was to be titled “The Humility of Individualism.” Part 1, called “The Collectivist Hybris,” would trace the topic through French, German, English, and American phases. Part 2 was to be called “The Totalitarian Nemesis.” In a slightly later outline, the first chapter of part 1 was to be “Scientism.”

The Abuse of Reason project would tell a very different story from that of the steady side-by-side progress of socialism and democracy that Webb and others espoused. In Hayek’s alternative tale, the steady growth of scientism and of the planning mentality engendered the (in Hayek’s view, false) hope that scientific advances would allow the creation of a new planned socialist society. Scientism and socialism grew up together. Hayek would trace out the pedigree and history of the ideas that he felt had led the western world to totalitarianism. (“Hayek on Mill”)

In sum, Hayek’s work is anti-doctrinal. Its implications for policy are negative ones. As Francis Fukuyama writes,

Hayek’s skepticism about the effects of “big government” are rooted in an epistemological observation summarized in a 1945 article called “The Uses of Knowledge in Society.” There he argued that most of the knowledge in a modern economy was local in nature, and hence unavailable to central planners. The brilliance of a market economy was that it allocated resources through the decentralized decisions of a myriad of buyers and sellers who interacted on the basis of their own particular knowledge. The market was a form of “spontaneous order,” which was far superior to planned societies based on the hubris of Cartesian rationalism. (“Friedrich A. Hayek, Big Government Skeptic,” The New York Times, May 6, 2011)

So far, so good. But Fukuyama later discusses “two major critiques of Hayek’s arguments”:

The first comes from the left. Hayek provides a very minimalist definition of freedom as freedom from coercion, and particularly coercion by a central government. But as the economist Amartya Sen has argued, the ability to actually take advantage of freedom depends on other things like resources, health and education that many people in a typical society do not possess. (Id.)

Sen is talking about “positive liberty,” which I have addressed here (among other places):

In other words, it is not enough to have “peaceful, willing coexistence and its concomitant: beneficially cooperative behavior.” That kind of liberty — liberty in the fullest sense — encompasses the acts of love, affection, friendship, neighborliness, and voluntary obligation that help individuals acquire the “power and resources” with which they may strive to attain the fruits of liberty, insofar as they are willing and able to do so.

That should be enough to satisfy the proponents of positive liberty … but I suspect otherwise. I would be more sanguine were they proponents of a proper definition of liberty, but they are not. Thus, armed with an inchoate definition of liberty, they are prepared to do battle for positive liberty and, I fear, the positive rights that are easily claimed as necessary to it; to wit:

  • A lack of “power” entitles certain groups to be represented, as groups, in the councils of government (a right that is not extended to other groups).
  • A lack of “resources” becomes the welfare entitlements of various kinds — for personal characteristics ranging from low intelligence to old age — which threaten to suck ever more resources out the productive, growth-producing sectors of the economy.
  • The exercise of “free will” becomes the attainment of certain “willed” outcomes, regardless of one’s ability or effort, which then justifies such things as an affirmative-action job, admission to a university, a tax-subsidized house, etc.
  • “Classism,” “sexism,” “racism,” and now “beauty-ism” become excuses for discriminating against vast swaths of the populace who practice none of those things.

With respect to the final point, a certain degree of unpleasantness inevitably accompanies liberty. Legal attempts to stifle that unpleasantness simply spread injustice by fomenting resentment and covert resistance, while creating new, innocent victims who are deemed guilty until they can prove their innocence.

In sum, the line between positive liberty and positive rights is so fine that the advocacy of positive liberty, however well meant, easily becomes the basis for preserving and extending the burden of positive rights that Americans now carry. (“Positive Liberty vs. Liberty”)

Positive liberty and positive rights are aspects of social justice, a concept that Hayek rightly rejected. If some are granted positive rights in the name of positive liberty or social justice, others must perforce be denied liberty — at the whim of the state. Those who presume to decide who is deserving and who is not are arrogant accountants of the soul.

Fukuyama, ends by echoing (unwittingly, I suspect) Oakeshott’s critique:

In the end, there is a deep contradiction in Hayek’s thought. His great insight is that individual human beings muddle along, making progress by planning, experimenting, trying, failing and trying again. They never have as much clarity about the future as they think they do. But Hayek somehow knows with great certainty that when governments, as opposed to individuals, engage in a similar process of innovation and discovery, they will fail. He insists that the dividing line between state and society must be drawn according to a strict abstract principle rather than through empirical adaptation. In so doing, he proves himself to be far more of a hubristic Cartesian than a true Hayekian. (Fukuyama, op. cit.)

William Easterly responds:

To say Hayek’s skepticism about government was based on “great certainty” is not just wrong, it is so much the opposite of  Hayek, it’s like accusing Michele Bachmann of excessive belief in the Koran.

Hayek’s view of knowledge was that it was partial and dispersed among many. The market gave individuals the incentives to apply this knowledge, and coordinated the uses of this local knowledge in a way that rewards each of us who knows best about any particular narrow area…. Government usually lacks both the incentives and the coordination mechanism. In government we don’t know who knows best, so which knowledge wins the argument could often be wrong. (“Saving Private Hayek”)

A good summation is found in a blog post by Peter Boettke:

Hayek [in The Road to Serfdom] was not diagnosing the situation in Russia and Germany, but offering a warningto the countries of the West that they could in fact go down the same path as Russia and Germany if they didn’t resist the lure of socialist ideology.  And critical to his argument was that democratic institutions were not a robust bulwark against the excesses that logically result from socialist planning.  In short, even a civilized attempt at democratic socialism will have unintended and undesirable consequences.

Another way to think about this is that Hayek begins his work with full knowledge (and acceptance) of Mises’s critique of socialism, but he is examining a world where political leaders and intellectuals do not accept that critique and so they will pursue the socialist plans anyway.  They think the problem with Soviet Russia or Nazi Germany is the non-democratic nature of the political systems, and not the economic planning being pursued.  So planning advocates in the West, wanted to pursue economic planning within the context of a democratic political system.  Hayek is just pursuing the logic of what results given the nature of economic planning….

Critical to the current discussion on Hayek, Keynes and Planning is not the liberal credentials of the two thinkers, nor their intentions, but the logical tracing out of the intended and unintended consequences of economic planning.  As Keynes’s letter to Hayek about The Road to Serfdom reveals, he believed that he and Hayek were in essential agreement about the horrors of Soviet and Nazi planning, but in disagreement about the question of whether planning is the problem.  Instead, Keynes argues we want more, not less, planning provided that the planning was being done by men of high character.  In essence, Keynes didn’t get the point about the Mises-Hayek critique of socialism. (“What Was the Argument in The Road to Serfdom?“)

And so it goes. In the 67 years since the first publication of The Road to Serfdom, Americans have been herded (often willingly) down that road. Why? Because of economic illiteracy (a widespread belief in the “free lunch,” for example), the interest-group paradox (the belief that I can have my “free lunch” but I will not have to pay for the “free lunches” of others), and the kind of “soft despotism” (fascism’s friendly face) that was foreseen by Alexis de Tocqueville.

Hayek was not a rationalist. He was a profound realist and, unfortunately, a prescient one.

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Related posts (most of the posts listed at the following links):
Liberty and Rights in Principle and Practice
Basic Economics
The Economic and Social Consequences of Government
Political Incorrectness — Antidotes to “Liberal” Cant

Empathy Is Overrated

Simon Baron-Cohen writes:

Empathy is like a universal solvent. Any problem immersed in empathy becomes soluble. It is effective as a way of anticipating and resolving interpersonal problems, whether this is a marital conflict, an international conflict, a problem at work, difficulties in a friendship, political deadlocks, a family dispute, or a problem with the neighbour. Unlike the arms industry that costs trillions of dollars to maintain, or the prison service and legal system that cost millions of dollars to keep oiled, empathy is free. And, unlike religion, empathy cannot, by definition, oppress anyone. (From “The science of empathy,” which was at guardian.co.uk, and is now available here.)

The unfortunate implication to be drawn from the quoted passage — by undiscerning readers — is that empathy is a substitute for defense, prisons, the legal system, and religion (“oppressive,” of course). What twaddle!

Perhaps my reaction is predictable, given my unempathic nature. I scored 12 (out of 80) on a quiz that accompanies the article. My score, according to the key at the bottom, places me below persons with Asperger’s or low-functioning autism, who score about 20. My result is not a fluke; it is consistent with my MBTI type: Introverted-iNtuitive-Thinking-Judging (INTJ), and with my scores on the Big-five personality traits:

Extraversion — 4th percentile for males over the age of 21/11th percentile for males above the age of 60

Agreeableness — 4th percentile/4th percentile

Conscientiousness – 99th percentile/94th percentile

Emotional stability — 12th percentile/14th percentile

Openness — 93rd percentile/66th percentile

What do the scores mean? In general, it seems that males become slightly more introverted as they age; that is, my level of extraversion relative to males over the age of 21 is not quite as low relative to that of males over the age of 60. Similarly, older males are somewhat more conscientious than younger ones  The most marked difference has to do with openness (to experience), where I move from very high to almost average. I suspect that the age-related difference have to do with the effects of aging and the tendency of exhibitionistic-less-conscientious-uninquisitive persons to extinguish themselves earlier than their opposites, out of recklessness and ignorance.

At any rate, here are some excerpts of the official report:

Introverts … tend to be quiet, low-key, deliberate, and disengaged from the social world. Their lack of social involvement should not be interpreted as shyness or depression; the introvert simply needs less stimulation than an extravert and prefers to be alone. The independence and reserve of the introvert is sometimes mistaken as unfriendliness or arrogance.

Disagreeable individuals … are generally unconcerned with others’ well-being, and therefore are unlikely to extend themselves for other people. Sometimes their skepticism about others’ motives causes them to be suspicious, unfriendly, and uncooperative…. [A]greeableness is not useful in situations that require tough or absolute objective decisions. Disagreeable people can make excellent scientists, critics, or soldiers.

Conscientious individuals avoid trouble and achieve high levels of success through purposeful planning and persistence. They are also positively regarded by others as intelligent and reliable. On the negative side, they can be compulsive perfectionists and workaholics.

People low in emotional stability are emotionally reactive. They respond emotionally to events that would not affect most people, and their reactions tend to be more intense and consuming than normal. Low scorers are generally more sensitive, emotional and prone to feelings that are upsetting, such as anxiety or guilt. [“Emotional stability” is also called “neuroticism,” “a tendency to experience unpleasant emotions easily, such as anger, anxiety, depression, or vulnerability.” My “neuroticism” does not involve anxiety, except to the extent that I am super-conscientious and, therefore, bothered by unfinished business. Nor does it involve depression or vulnerability. But I am easily angered by incompetence, stupidity, and carelessness.]

Openness to Experience describes a dimension of cognitive style that distinguishes imaginative, creative people from down-to-earth, conventional people. Open people are intellectually curious, appreciative of art, and sensitive to beauty. They tend to be, compared to closed people, more aware of their feelings. They tend to think and act in individualistic and nonconforming ways. Intellectuals typically score high on Openness to Experience; consequently, this factor has also been called Culture or Intellect.

I offer these insights to my own personality for the sake of candor, and to make a point about empathy: It is not a substitute for things such as defense, prisons, the legal system, and religion. It would be a substitute only if everyone were so empathic that there were no aggression and no need for religion, which remains the leading institutional source of moral teachings.

But given that people are much more varied and complex than is suggested by Baron-Cohen’s simplistic prescription for a better world, there is a crying need for unsociable introverts, who tend (more than other types) to be thinkers, strivers, organizers, defenders, and justice-dispensers. If we did not exist, the world would be full of ill-fed, ill-housed, untutored savages. I suspect that their vaunted empathy would not survive the stress of existence and coexistence.