progressivism

The Capitalist Paradox Meets the Interest-Group Paradox

An insightful post at Imlac’s Journal includes this quotation:

Schumpeter argued the economic systems that encourage entrepreneurship and development will eventually produce enough wealth to support large classes of individuals who have no involvement in the wealth-creation process. This generates apathy or even disgust for market institutions, which leads to the gradual takeover of business by bureaucracy, and eventually to full-blown socialism. [Matt McCaffrey, "Entrepreneurs and Investment: Past, Present, ... Future?," International Business Times, December 9, 2011]

This, of course, is the capitalist paradox, of which the author of Imlac’s Journal writes. He concludes with these observations:

[U]nder statist regimes, people’s choices are limited or predetermined. This may, in theory, obviate certain evils. But as McCaffrey points out, “the regime uncertainty” of onerous and ever changing regulations imposed on entrepreneurs is, ironically, much worse than the uncertainties of the normal market, to which individuals can respond more rapidly and flexibly when unhampered by unnecessary governmental intervention.

The capitalist paradox is made possible by the “comfort factor” invoked by Schumpeter. (See this, for example.) It is of a kind with the foolishness of extreme libertarians who decry defense spending and America’s “too high” rate of incarceration, when it is such things that keep them free to utter their foolishness.

The capitalist paradox also arises from the inability and unwillingness of politicians and voters to see beyond the superficial aspects of legislation and regulation. In Bastiat‘s words,

a law produces not only one effect, but a series of effects. Of these effects, the first alone is immediate; it appears simultaneously with its cause; it is seen. The other effects emerge only subsequently; they are not seen; we are fortunate if we foresee them.

The unseen effects — the theft of Americans’ liberty and prosperity — had been foreseen by some (e.g., Tocqueville and Hayek). But their wise words have been overwhelmed by ignorance and power-lust. The masses and their masters are willfully blind and deaf to the dire consequences of the capitalist paradox because of what I have called the interest-group paradox:

The interest-group paradox is a paradox of mass action….

Pork-barrel legislation exemplifies the interest-group paradox in action, though the paradox encompasses much more than pork-barrel legislation. There are myriad government programs that — like pork-barrel projects — are intended to favor particular classes of individuals. Here is a minute sample:

  • Social Security, Medicare, and Medicaid, for the benefit of the elderly (including the indigent elderly)
  • Tax credits and deductions, for the benefit of low-income families, charitable and other non-profit institutions, and home buyers (with mortgages)
  • Progressive income-tax rates, for the benefit of persons in the mid-to-low income brackets
  • Subsidies for various kinds of “essential” or “distressed” industries, such as agriculture and automobile manufacturing
  • Import quotas, tariffs, and other restrictions on trade, for the benefit of particular industries and/or labor unions
  • Pro-union laws (in many States), for the benefit of unions and unionized workers
  • Non-smoking ordinances, for the benefit of bar and restaurant employees and non-smoking patrons.

What do each of these examples have in common? Answer: Each comes with costs. There are direct costs (e.g., higher taxes for some persons, higher prices for imported goods), which the intended beneficiaries and their proponents hope to impose on non-beneficiaries. Just as importantly, there are indirect costs of various kinds (e.g., disincentives to work and save, disincentives to make investments that spur economic growth). (Exercise for the reader: Describe the indirect costs of each of the examples listed above.)

You may believe that a particular program is worth what it costs — given that you probably have little idea of its direct costs and no idea of its indirect costs. The problem is millions of your fellow Americans believe the same thing about each of their favorite programs. Because there are thousands of government programs (federal, State, and local), each intended to help a particular class of citizens at the expense of others, the net result is that almost no one in this fair land enjoys a “free lunch.” Even the relatively few persons who might seem to have obtained a “free lunch” — homeless persons taking advantage of a government-provided shelter — often are victims of the “free lunch” syndrome. Some homeless persons may be homeless because they have lost their jobs and can’t afford to own or rent housing. But they may have lost their jobs because of pro-union laws, minimum-wage laws, or progressive tax rates (which caused “the rich” to create fewer jobs through business start-ups and expansions).

The paradox that arises from the “free lunch” syndrome is…. like the paradox of panic, in that there is a  crowd of interest groups rushing toward a goal — a “pot of gold” — and (figuratively) crushing each other in the attempt to snatch the pot of gold before another group is able to grasp it. The gold that any group happens to snatch is a kind of fool’s gold: It passes from one fool to another in a game of beggar-thy-neighbor, and as it passes much of it falls into the maw of bureaucracy.

[The interest-group paradox] has dominated American politics since the advent of “progressivism” in the late 1800s. Today, most Americans are either “progressives” (whatever they may call themselves) or victims of “progressivism.” All too often they are both.

Related posts:
Democracy and Liberty
The Interest-Group Paradox
Is Statism Inevitable?
Inventing “Liberalism”
The Price of Government
Fascism and the Future of America
The Indivisibility of Economic and Social Liberty
Law and Liberty
The Devolution of American Politics from Wisdom to Opportunism
The Price of Government Redux
The Near-Victory of Communism
The Mega-Depression
Tocqueville’s Prescience
Accountants of the Soul
Ricardian Equivalence Reconsidered
The Real Burden of Government
Rawls Meets Bentham
Is Liberty Possible?
The Left
The Divine Right of the Majority
The “Forthcoming Financial Collapse”
Estimating the Rahn Curve: Or, How Government Inhibits Economic Growth
The Deficit Commission’s Deficit of Understanding
Our Enemy, the State
Understanding Hayek
The Bowles-Simpson Report
The Bowles-Simpson Band-Aid
The Stagnation Thesis
America’s Financial Crisis Is Now
Utilitarianism and Psychopathy
Estimating the Rahn Curve: A Sequel
Lay My (Regulatory) Burden Down
The Burden of Government
Economic Growth Since World War II
More Evidence for the Rahn Curve
Obamacare, Slopes, Ratchets, and the Death-Spiral of Liberty

Save Me from Self-Appointed Saviors

A recent NYT piece by Richard Zacks (“How Dry We Aren’t“) highlights the antics of Theodore Roosevelt:

When Theodore Roosevelt was police commissioner [of New York City], from 1895 to 1897, he tried to stop the sales of beer, wine and liquor on Sundays in saloons.

Men and women, who worked six days a week in that era, were not amused. New York State Sabbath laws already forbade attending sporting events or theater performances, or selling groceries, after 10 a.m. on Sundays; the excise laws also made it illegal to sell alcohol in bars, saloons and taverns all 24 hours of the Lord’s Day.

New Yorkers in droves defied that particular edict. (Sunday actually marked the barkeep’s biggest sales day.) Saloon owners handed a bribe to precinct cops who forwarded some loot to Tammany politicians, and the city’s thirsty could discreetly slip in the side doors of saloons. For almost 40 years, it was a popular pragmatic compromise.

Enter Roosevelt. Fearless and bullheaded, the new commissioner vowed to enforce the law, both to root out bribery in the Police Department and also to reunite families on Sundays….

Roosevelt’s liquor crackdown backfired…. The city’s spirit of place, what Stephen Crane once dubbed New York’s “wild impulse,” refused to be tamed.

Theodore Roosevelt the reformer was deeply proud of his efforts to clean up New York but in his illustrious later days, running for governor, then for vice president, then president, he never won a majority vote in the city. Never take a beer away from a New Yorker.

If only it were that easy to subvert the intentions of zealous office-holders.

In another recent NYT piece (“The C.E.O. in Politics“), David Brooks observes that

great leaders tend to have an instrumental mentality. They do not feel the office is about them. They are just God’s temporary instrument in service of a larger cause. Lincoln felt he was God’s instrument in preserving the union. F.D.R. felt he was an instrument to help the common man and defeat fascism.

Whatever FDR felt, he was not a great leader. Nor was his distant cousin, Teddy Roosevelt. What they shared with other so-called great leaders was overwhelming ego: the belief that their wishes should be everyone’s wishes. And, with the help of compliant Congresses and Supreme Courts, they made it so.

TR spoke and acted as if he were God’s instrument. As president, his aspiration to savior-hood led him to embrace Progressivism (e.g., trust-busting). His actions brought an end to 40 years of rapid economic growth, which — contrary to myth — had uplifted the masses as well as the “robber barons.” After a too-brief respite from dictatorship, under Taft, Woodrow Wilson (another “leader” who thought he was an instrument of God) extended the Progressive state, and economic growth slowed further.

The Great Depression, predictably enough, swept out Hoover, whose “do something” ethic turned a recession into a depression, and brought in FDR, with his second-rate mind. He soon enough began to think of himself as a savior, empowered (by perverse logic) to uplift the downtrodden by running roughshod over America’s businesses. What he accomplished, in fact, was a deeper and longer depression. (By contrast, the economy quickly rebounded from the deep recession of 1920-21 because “do nothing” Harding did nothing but encourage business.) LBJ’s deliberate mimicking of FDR’s New Deal put in motion the Great Society, the aftermath of which has been economic growth on a par with that of the TR-Wilson era.

Now comes Barack Obama, a storefront version of TR, FDR, and LBJ. “Bush fatigue” elected him and presented him with a Democrat-controlled Congress. He took his luck for a kind of divine mandate, which he exploited to impose upon Americans his ruinous visions of universal health care, Keynesian deficit-spending, and defensive weakness (masked by the inconsequential if satisfying erasure of bin Laden).

God save us from “leaders” who want to be our saviors. For every Lincoln — whose principal legacy was the forcible stitching up of a union that has yet to heal — there are too many TRs, WWs, FDRs, LBJs, and BHOs.

Related posts:
The Price of Government
Fascism and the Future of America
The Indivisibility of Economic and Social Liberty
The Price of Government Redux
The Real Burden of Government
The Illusion of Prosperity and Stability
The Mega-Depression
Estimating the Rahn Curve: Or, How Government Inhibits Economic Growth
Money, Credit, and Economic Fluctuations
A Keynesian Fantasy Land
The Keynesian Fallacy and Regime Uncertainty
Why the “Stimulus” Failed to Stimulate
Regime Uncertainty and the Great Recession
Regulation as Wishful Thinking
Vulgar Keynesianism and Capitalism
Why Are Interest Rates So Low?
Don’t Just Stand There, “Do Something”
Economic Growth Since World War II
The Commandeered Economy

Election 2010: Post-Mortem

UPDATED 11/05/10

This is a followup on my election-morning predictions, a prognosis about the next two years, and a diagnosis of the “progressive” disease.

I expected the GOP to gain eight seats in the Senate. But that prediction ran aground on the narrow wins by Democrats Michael Bennet and Harry Reid in Colorado and Nevada. The race in Washington hasn’t been decided, but it seems that Patty Murray will retain her seat.  The Alaska seat will wind up in GOP hands — it’s just a question of whose hands. So, when the dust settles, the GOP will have gained 6 seats and the Dems will retain a majority. That’s as good as it was likely to get. And it’s good enough, because with 47 seats (and only two or three RINOs in the mix) the GOP will command a cloture-proof minority.

Things turned out better in the House. I expected the GOP to end up with 237 seats. But when the dust settles on 10 9 undecided races, the GOP probably will hold between 239 seats (the current count) and 242 seats (adding 3 races now led by GOP candidates). Needless to say, the GOP will command the agenda in the House. The incoming tide of new Republican members will put a lot of pressure on GOP leaders to undo what Pelosi and company wrought. The stumbling blocks will be the Democrat-controlled Senate and the veto pen of BHO.

Republicans gained a lot of ground in the States, as indicated by the pickup of 12 governorships. (The Democrat pickup in California makes little difference in cloud-cuckoo-land, where the main difference between Arnold Schwarzenegger and his successor, Moonbeam Brown, is their accents.) Greater GOP strength at the State level will mean two things: more resistance to the expansion of federal power, and redistricting of the House in ways favorable to future Republican prospects.

The next two years at the “seat of government” (SOG) in D.C. will be filled with GOP initiatives to roll back the Obama agenda, name-calling by Democrats, and (I hope) gridlock combined with some rollback of Obamacare.

The next two years also will be filled with rationalizations by “progressives,” who — in so many words — will blame the backwardness of the American electorate for the events of November 2. “Progressives,” like their putative leader in the White House, already have adopted the myth that things would have turned out differently if only they had found a way to get their “message” across. Well, they did get their “message” across:

  • Pork disguised as stimulus, which did not and will not stimulate because the economy isn’t a hydraulic mechanism that responds automatically to pump-priming.
  • Financial regulations that will make it harder for Americans to borrow money.
  • A Rube Goldberg plan for reforming the health care “system” that will make it harder for Americans to obtain insurance and less rewarding for doctors and other providers to deliver medical services.

Such is “progressivism” at work: Good intentions (to put the best face on it) thwarted by unintended consequences because “progressives” believe that “hope and change” trump the realities of economic (and social behavior) — realities that “the masses” are able to grasp, if only viscerally.

Moreover, there was — and is — the disdain in which “progressives” hold “the masses,” who exist (in the “progressive” imagination) to be talked down to and led by the hand to the promised land of economic and social bliss — as it is envisioned by “progressives.”

I have news for “progressives.” When you talk down to most adults — and even to a lot of children — they quickly perceive three things: (a) you don’t respect their intelligence and (b) you are therefore trying to do something that’s against their interest. You really lose them when you promise things that they know (or suspect) will cost them liberty as well as money.

“Progressives” seem to believe in economic stability at any price, including the price of liberty and prosperity. A lot of “the masses” aren’t buying it. Good for them.

The Illusion of Prosperity and Stability

For reasons I outlined in “The Price of Government,” the post-Civil War boom of 1866-1907 finally gave way to the onslaught of Progressivism. Real GDP grew at the rate of 4.3 percent annually during the post-Civil War boom; it has since grown at an annual rate of 3.3 percent. The difference between the two rates of growth, compounded over a century, is the difference between $13 trillion (2009′s GDP in 2005 dollars) and $41 trillion (2009′s potential GDP in 2005 dollars).

As I said in “The Price of Government,” this disparity

may seem incredible, but scan the lists here and you will find even greater cross-national disparities in per capita GDP. Go here and you will find that real, per capita GDP in 1790 was only 4.6 percent of the value it had attained 218 years later. Our present level of output seems incredible to citizens of impoverished nations, and it would seem no less incredible to an American of 1790. In sum, vast disparities can and do exist, across nations and time.

The main reason for the disparity is the intervention of the federal government in the economic affairs of Americans and their businesses. I put it this way in “The Price of Government”:

What we are seeing [in the present recession and government's response to it] is the continuation of a death-spiral that began in the early 1900s. Do-gooders, worry-warts, control freaks, and economic ignoramuses see something “bad” and — in their misguided efforts to control natural economic forces (which include business cycles) — make things worse. The most striking event in the death-spiral is the much-cited Great Depression, which was caused by government action, specifically the loose-tight policies of the Federal Reserve, Herbert Hoover’s efforts to engineer the economy, and — of course — FDR’s benighted New Deal. (For details, see this, and this.)

But, of course, the worse things get, the greater the urge to rely on government. Now, we have “stimulus,” which is nothing more than an excuse to greatly expand government’s intervention in the economy. Where will it lead us? To a larger, more intrusive government that absorbs an ever larger share of resources that could be put to productive use, and counteracts the causes of economic growth.

One of the ostensible reasons for governmental intervention is to foster economic stability. That was an important rationale for the creation of the Federal Reserve System; it was an implicit rationale for Social Security, which moves income to those who are more likely to spend it; and it remains a key rationale for so-called counter-cyclical spending (i.e., “fiscal policy”) and the onerous regulation of financial institutions.

Has the quest for stability succeeded? If you disregard the Great Depression, and several deep recessions (including the present one), it has. But the price has been high. The green line in the following graph traces real GDP as it would have been had economic growth after 1907 followed the same path as it did in 1866-1907, with all of the ups and down in that era of relatively unregulated “instability.” The red line, which diverges from the green one after 1907, traces real GDP as it has been since government took over the task of ensuring stable prosperity.

Only by overlooking the elephant in the room — the Great Depression — can one assert that government has made the economy more stable. Only because we cannot see the exorbitant price of government can we believe that it has had something to do with our “prosperity.”

What about those fairly sharp downturns along the green line? If it really is important for government to shield us from economic shocks, there are much better ways of getting the job done that they ways now employed. There was no federal income tax during the post-Civil War boom (one of the reasons for the boom). Suppose that in the early 1900s the federal government had been allowed to impose a small, constitutionally limited income tax of, say, 0.5 percent on gross personal incomes over a certain level, measured in constant dollars (with an explicit ban on exemptions, deductions, and other adjustments, to keep it simple and keep interest groups from enriching themselves at the expense of others). Suppose, further, that the proceeds from the tax had a constitutionally limited use: the payment of unemployment benefits for a constitutionally limited time whenever real GDP declined from quarter to quarter.

Perhaps that’s too much clutter for devotees of constitutional simplicity. But wouldn’t the results have been worth the clutter? The primary result would have been growth at a rate close to that of 1866-1907, but with some of the wrinkles ironed out. The secondary result — and an equally important one — would have been the diminution (if not the elimination) of the “need” for governmental intervention in our affairs.

Related posts:
Basic Economics
The Economic and Social Consequences of Government

The Death of the Democrat Party?

Democracy is incompatible with liberty. But democracy is nevertheless considered a “good thing.” To call a political party “Democratic” imparts to that party an unwarranted veneer of beneficence. I refuse to lend this blog to that bit of moral confusion. Thus, on these pages, the “Democratic Party” is and always will be the “Democrat Party. End of mini-rant.

“Liberalism,” “progressivism,” and their variants are incompatible with liberty and progress. That is why I always enclose those terms in quotation marks.

If you see opposition to same-sex marriage as anti-libertarian, I suggest that you re-think your position, beginning with this.

James Taranto, of WSJ‘s Opinion Journal, opines:

If the Ninth Circuit upholds Walker’s decision [for same-sex marriage, in Perry v. Schwarzenegger], the Supreme Court would almost certainly agree to hear an appeal….

…When the Supreme Court takes up Perry v. Schwarzenegger … the justices will rule 5-4, in a decision written by Justice Kennedy, that there is a constitutional right to same-sex marriage.

This accepts the conventional assumption that the court’s “liberal” and “conservative” wings will split predictably, 4-4. Yet while Kennedy cannot be pigeonholed in terms of “ideology,” on this specific topic, he has been consistent in taking a very broad view of the rights of homosexuals. He not only voted with the majority but wrote the majority opinions in two crucial cases: Romer v. Evans (1996) and Lawrence v. Texas (2003).

Romer struck down an amendment to the Colorado Constitution that nullified state or local ordinances barring discrimination on the basis of “homosexual, lesbian or bisexual orientation, conduct, practices or relationships.” This provision, adopted by ballot initiative, violated the Equal Protection Clause of the 14th Amendment, Justice Kennedy wrote for the court….

In Lawrence, the court overturned a 1986 ruling and held that state laws criminalizing consensual homosexual sodomy violated the constitutional right of privacy….

Proposition 8 was adopted in “liberal” California by a margin of 52-48.  This is the same California that has preferred the Democrat candidate over his Republican opponent in the last five presidential elections, culminating in an Obama-slide of 61 percent vs. 39 percent for McCain and assorted wing-nuts.

Clearly, same-sex marriage is not beloved by all Democrats, or even an overwhelming majority of them. Voters in 31 States have blocked same-sex marriage in their States by rejecting proposals to allow it or (in most cases) approving constitutional amendments banning it. Only five States and the District of Columbia recognizes same-sex marriage. Needless to say, the deeds were done in those six jurisdictions by legislative or judicial fiat, and not by consulting voters about one of the rare issues that merits “democratic” consultation because it impinges directly on deep-rooted social norms.

If/when Judge Vaughn Walker’s judicial abomination is upheld by Justice Kennedy, voters will know where the blame lies: with the left wing of the Democrat Party and the gay-rights lobby, which is one of the Democrat Party’s favored constituencies. The resulting backlash among not-so-leftish Democrats would spell electoral disaster for the Democrat Party. Party leaders would then have two options:

  • Overtly move the party back from the extreme edge of American political opinion, in the hope that enough voters are taken in by such a cynical ploy to avert long-term disaster for the party.
  • Remain on the left edge of American political opinion, in the hope and belief that voters will (before too long) slide toward that edge.

My money is on the second option, because the leaders of the Democrat Party are deeply committed, in thought and word, to the “progressive” agenda: the cultivation of radical ideas and constituencies. (Why? Read this exquisite rant by Tom Smith.) And that, in the face of growing discontent about the power and cost of government, is a recipe for political suicide.

One can only hope.

Related posts:
Civil Society and Homosexual “Marriage”
Perry v. Schwarzenegger, Due Process, and Equal Protection

The Left

The “left” of the title refers, specifically, to left-statists or (usually) leftists.

I describe statism in “Parsing Political Philosophy“:

Statism boils down to one thing: the use of government’s power to direct resources and people toward outcomes dictated by government….

The particular set of outcomes toward which government should strive depends on the statist…. But all of them are essentially alike in their desire to control the destiny of others….

“Hard” statists thrive on the idea of a powerful state; control is their religion, pure and simple. “Soft” statists profess offense at the size, scope, and cost of government, but will go on to say “government should do such-and-such,” where “such-and such” usually consists of:

  • government grants of particular positive rights, either to the statist, to an entity or group to which he is beholden, or to a group with which he sympathizes
  • government interventions in business and personal affairs, in the belief that government can do certain things better than private actors, or simply should do [certain] things….

I continue by saying that left-statists (L-S)

prefer such things as income redistribution, affirmative action, and the legitimation of gay marriage….L-S prefer government intervention in the economy, not only for the purpose of redistributing income but also to provide goods and services that can be provided more efficiently by the private sector, to regulate what remains of the private sector, and to engage aggressively in monetary and fiscal measures to maintain “full employment.” It should be evident that L-S have no respect for property rights, given their willingness to allow government to tax and regulate at will….

L-S tend toward leniency and forgiveness of criminals (unless the L-S or those close to him are the victims)…. On defense, L-S act as if they prefer Chamberlain to Churchill, their protestations to the contrary….

L-S have no room in their minds for civil society; government is their idea of “community.”…

It is no wonder that most “liberals” (L) and “progressives” (P) try to evade the “leftist” label. (I enclose “liberal,” “progressive,” and forms thereof in quotation marks because L are anything but liberal, in the core meaning of the word, and the policies favored by P are regressive in their effects on economic and social liberty.) L and P usually succeed in their evasion because the center of American politics has shifted so far to the left that Franklin Roosevelt — a leftist by any reasonable standard — would stand at the center of today’s political spectrum.

Indeed, the growing dominance of leftism can be seen in the history of the U.S. presidency. It all started with Crazy Teddy Roosevelt, the first president to dedicate himself to the use of state power to advance his cause du jour. (I do not credit the anti-Lincoln zealotry of  the Ludwig von Mises Institute.) TR’s leftism was evident in his “activist” approach to the presidency. No issue, it seems, was beneath TR’s notice or beyond the reach of the extra-constitutional powers he arrogated to himself. TR, in other words, was the role model for Woodrow Wilson, Herbert Hoover (yes, Hoover the “do nothing” whose post-Crash activism helped to bring on the Great Depression), Franklin Roosevelt, Harry Truman, John Kennedy, Lyndon Johnson, Richard Nixon, Bill Clinton, and Barack Obama. (For more about American presidents and their predilections, see this, this, and this.) Countless members of Congress and State and local officials have been, and are, “activists” in the image of TR.

In sum, the problem with America — and it boils down to a single problem — is the left’s success in advancing its agenda. What is that agenda, and how does the left advance it?

The left advances its agenda in many ways, for example, by demonizing its opponents (small-government opponents are simply “mean”), appealing to envy (various forms of redistribution), sanctifying an ever-growing list of “victimized” groups (various protected “minorities”), making a virtue of mediocrity (various kinds of risk-avoiding regulations), and taking a slice at a time (e.g., Social Security set the stage for Medicare which set for Obamacare).

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). (For a broad enumeration, see this post.)

Leftists like to say that there is a difference between opposition and disloyalty. But, in the case of the left, opposition arises from a fundamental kind of disloyalty. For, at bottom, the left pursues its agenda because  it hates the idea of what America used to stand for: liberty with responsibility, strength against foreign and domestic enemies.

Most leftists are simply shallow-minded trend-followers, who believe in the power of government to do things that are “good,” “fair,” or “compassionate,” with no regard for the costs and consequences of those things. Shallow leftists know not what they do. But they do it. And their shallowness does not excuse them for having been accessories to the diminution of  America. A rabid dog may not know that it is rabid, but its bite is no less lethal for that.

The leaders of the left — the office-holders, pundits, and intelligentsia — usually pay lip-service to “goodness,” “fairness,” and “compassion.” But their lip-service fails to conceal their brutal betrayal of liberty. Their subtle and not-so-subtle treason is despicable almost beyond words. But not quite…

Related posts:
The State of the Union: 2010
The Shape of Things to Come

On Liberty
Parsing Political Philosophy
The Indivisibility of Economic and Social Liberty
Greed, Cosmic Justice, and Social Welfare
Positive Rights and Cosmic Justice
Fascism and the Future of America
Inventing “Liberalism”
Utilitarianism, “Liberalism,” and Omniscience
Utilitarianism vs. Liberty
Beware of Libertarian Paternalists
Negative Rights, Social Norms, and the Constitution
Rights, Liberty, the Golden Rule, and the Legitimate State
The Mind of a Paternalist
Accountants of the Soul
Rawls Meets Bentham
Is Liberty Possible?

The Commandeered Economy
The Price of Government
The Mega-Depression
Does the CPI Understate Inflation?
Ricardian Equivalence Reconsidered
The Real Burden of Government
The Rahn Curve at Work

Is Liberty Possible?

I must begin at the beginning, with my definition of liberty:

A state of liberty exists where people cohabit an extensive geographic area in peaceful, willing coexistence and its concomitant: beneficially cooperative behavior. The condition of peace requires mechanisms for thwarting fraud, coercion, and aggression inside the group, and from without. The condition of willing coexistence requires a combination of mutual restraint and mutual forbearance, that is, a general willingness to accept certain of others’ foibles and, in return, to honor certain constraints on one’s own behavior — even beyond fraud, coercion, and aggression.

Inherent in that definition, and essential to its fulfillment, are four things:

  • the general observance of evolved and evolving social norms and, accordingly, their enforcement through social censure
  • an accountable, minimal state, dedicated to the protection of its citizens and the enforcement of those social norms — and only those norms — that rise to the level of statutory law (e.g., acts that are generally recognized as fraudulent, coercive, and aggressive)
  • voice, the opportunity for dissent from social norms and laws (though not the right to have one’s dissent honored)
  • exit, the right to leave without penalty.

That we do not have liberty in the United States should be evident in the number of statutes and regulations that a far-from-minimal state imposes on us. With a few exceptions — most notably and laudably in the area of civil rights for blacks — liberty has been in retreat since the onset of the Progressive Era in the early 1890s. For, contrary to Fourth of July oratory, America has descended into statism. And, pace the The Star Spangled Banner, America is the land of the regulator and the home of the regulated.

Those of us lucky enough to have experienced life in small cities, towns, and villages in the 1940s know that something like liberty is possible. Ironically, and tragically, the small-town ethos that undergirds liberty has been the object of pseudo-intellectual scorn since the days of Main Street and Babbit.

Apropos the small-town ethos, I once said:

Think of life in a small town where “eveyone knows everyone else’s business.” The sense of being “watched” actually tends to foster liberty, in that it discourages crime. As a result, one’s life and property generally are safer in small towns than in large cities. By the same token, the sense of being “watched” can seem oppressive; one feels less free to do things that might draw social opprobrium, even if those things do no more than offend others’ sensibilities.

Why should everyone in a small town have to put up with small-town mores for the sake of a safer, saner life, you may ask? Well, if you don’t like small-town mores, fine, pack up and go to the big city, but don’t forget to take your handgun (if you’re allowed to have one in the big city), and keep your life and homeowner’s insurance paid up. (Alternatively, you can stay in the small town and try, through example and persuasion, to change its mores so that there is greater tolerance of social diversity.)

It seems to me that America began to lose its way as urban political machines came to dominate national politics in the early 1900s. It is true that populism, from which arose Progressivism, had its roots in small-town and rural America. But Progressivism and its later incarnations (“liberalism” a.k.a. “progressivism”) have hijacked the anti-elite rhetoric of populism in the service of a different kind of elitism: the “technocratic” regulation of personal and business conduct by puritanical, falsely omniscient bureaucrats.

Even in the unlikely event of a string of electoral victories by a Republican Party restored to its small-government roots, it seems unlikely that America can “go home” again. Urbanization — which leads citizens (wrongly) to believe that government must regulate our daily lives — is irreversible, barring an environmental or industrial catastrophe that throws us back onto the land.

Then there is the deep inculcation of statist habits of thought by schools, universities, the media, and various organizations with “progressive” agendas (e.g., teachers’ unions, labor unions, and issue-oriented organizations like AARP). As a result, a truly minimal state is beyond the imagination of most Americans.

Finally, there is the law itself, through which the “progressive” agenda has infiltrated almost every kind of decision made by Americans in their personal and business lives, from cradle to grave and from planting crops to disposing of waste. An electoral and intellectual revolution would have to be accompanied by a legal one, but the wheels of the law grind slowly and often in perverse ways.

Is liberty possible? Liberty, as I define it, seems impossible. All we can hope and fight for are second- or third-best outcomes. I would settle for an America like that of the 1940s and 1950s, with an overlay of equal treatment under the law (but not in private matters) for all citizens — even the putative white-male majority.

Selection Bias and the Road to Serfdom

Office-seeking is about one thing: power. (Money is sometimes a motivator, but power is the common denominator of politics.) Selection bias, as I argue here, deters office-seeking and voting by those (relatively rare) individuals who oppose the accrual of governmental power. The inevitable result — as we have seen for decades and are seeing today — is the accrual of governmental power on a fascistic scale.

Selection bias

most often refers to the distortion of a statistical analysis, due to the method of collecting samples. If the selection bias is not taken into account then any conclusions drawn may be wrong.

Selection bias can occur in studies that are based on the behavior of participants. For example, one form of selection bias is

self-selection bias, which is possible whenever the group of people being studied has any form of control over whether to participate. Participants’ decision to participate may be correlated with traits that affect the study, making the participants a non-representative sample. For example, people who have strong opinions or substantial knowledge may be more willing to spend time answering a survey than those who do not.

I submit that the path of politics in America (and elsewhere) reflects a kind of self-selection bias: On the one hand, most politicians run for office in order to exert power. On the other hand, most voters — believing that government can “solve problems” or one kind or another — prefer politicians who promise to use their power to “solve problems.” In other words, power-seekers and their enablers select themselves into the control of government and the receipt of its (illusory) benefits.

Who is self-selected “out”? First, there are libertarian* office-seekers — a rare breed — who must first attain power in order to curb it. Self-selection, in this case, means that individuals who eschew power are unlikely to seek it in the first place, understanding the likely futility of their attempts to curb the power of the offices to which they might be elected. Thus the relative rarity of libertarian candidates.

Second, there are libertarian voters, who — when faced with an overwhelming array of power-seeking Democrats and Republicans — tend not to vote. Their non-voting enables non-libertarian voters to elect non-libertarian candidates, who then accrue more power, thus further discouraging libertarian candidacies and driving more libertarian voters away from the polls.

As the futility of libertarianism becomes increasingly evident, more voters — fearing that they won’t get their “share” of (illusory) benefits — choose to join the scramble for said benefits, further empowering anti-libertarian candidates for office. And thus we spiral into serfdom.

HAPPY INDEPENDENCE DAY!

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* I use “libertarian” in this post to denote office-seekers and voters who prefer a government (at all levels) whose powers are (in the main) limited to those necessary for the protection of the people from predators, foreign and domestic.

Modernism in the Arts and Politics

David Friedman has a theory about the “modern” movement:

Suppose you are the first city planner in the history of the world. If you are very clever you come up with Cartesian coordinates, making it easy to find any address without a map, let alone a GPS—useful since neither GPS devices nor maps have been invented yet.

Suppose you are the second city planner. Cartesian coordinates have already been done, so you can’t make your reputation by doing them again. With luck, you come up with some alternative, perhaps polar coordinates, that works almost as well.

Suppose you are the two hundred and ninetieth city planner in the history of the world. All the good ideas have been used, all the so-so ideas have been used, and you need something new to make your reputation. You design Canberra. That done, you design the Combs building at ANU, the most ingeniously misdesigned building in my personal experience, where after walking around for a few minutes you not only don’t know where you are, you don’t even know what floor you are on.

I call it the theory of the rising marginal cost of originality—formed long ago when I spent a summer visiting at ANU.

It explains why, to a first approximation, modern art isn’t worth looking at, modern music isn’t worth listening to, and modern literature and verse not worth reading. Writing a novel like one of Jane Austen’s, or a poem like one by Donne or Kipling, only better, is hard. Easier to deliberately adopt a form that nobody else has used, and so guarantee that nobody else has done it better.

In other words, if you can’t readily do better than your predecessors, you take the easy way out by doing something different — ugly as it may be. And you call it “progress.” As I wrote here:

In the early decades of the twentieth century, the visual, auditory, and verbal arts became an “inside game.” Painters, sculptors, composers (of “serious” music), choreographers, and writers of fiction began to create works not for the enjoyment of audiences but for the sake of exploring “new” forms. Given that the various arts had been perfected by the early 1900s, the only way to explore “new” forms was to regress toward primitive ones — toward a lack of structure…. Aside from its baneful influence on many true artists, the regression toward the primitive has enabled persons of inferior talent (and none) to call themselves “artists.” Thus modernism is banal when it is not ugly.

Painters, sculptors, etc., have been encouraged in their efforts to explore “new” forms by critics, by advocates of change and rebellion for its own sake (e.g., “liberals” and “bohemians”), and by undiscriminating patrons, anxious to be au courant. Critics have a special stake in modernism because they are needed to “explain” its incomprehensibility and ugliness to the unwashed.

The unwashed have nevertheless rebelled against modernism, and so its practitioners and defenders have responded with condescension, one form of which is the challenge to be “open minded” (i.e., to tolerate the second-rate and nonsensical). A good example of condescension is heard on Composers Datebook, a syndicated feature that runs on some NPR stations. Every Composers Datebook program closes by “reminding you that all music was once new.” As if to lump Arnold Schoenberg and John Cage with Johann Sebastian Bach and Ludwig van Beethoven.

All music, painting, sculpture, dance, and literature was once new, but not all of it is good. Much (most?) of what has been produced since 1900 is inferior, self-indulgent crap.

As it was in the arts, so it was in politics. Yes, there was sleaze before 1900, and plenty of it. But presidents, members of Congress, and justices of the Supreme Court generally remained faithful to the Constitution, especially its restraints on the power of the federal government. Then along came populism and “progressivisism” — the twin pillars of political modernism in the United States — and down went liberty and prosperity.

The Price of Government

UPDATED on 04/17/10, to include GDP estimates for 2009 and slight revisions to GDP estimates for earlier years. The bottom line remains the same: The price of government is exorbitant.

he federal government is mounting an economic intervention on a scale unseen since World War II. The excuse for this intervention is that without it the present recession will turn into a full-blown depression. Yet, with the Democrats’ and RINOs’ “stimulus” barely underway, the economy already shows signs of rebounding from an economic dip that bears no comparison with the calamitous gulch that was the Great Depression.

Despite the horror stories about a financial meltdown, what we have experienced since late 2007 is not much more than the downside of a typical, post-World War II business cycle. (For more on that score, see this post — especially the third graph and related discussion.) Would it have been worse were all failing financial institutions allowed to fail? I doubt it. Hard, fast failure leaves in its wake opportunities for the organization of new ventures by investors who still have money (and there are plenty of them). But those same investors are being shouldered out and scared off by Obama’s schemes for nationalization, taxation, regulation, and redistribution.

What we are seeing is the continuation of a death-spiral that began in the early 1900s. Do-gooders, worry-warts, control freaks, and economic ignoramuses see something “bad” and — in their misguided efforts to control natural economic forces (which include business cycles) — make things worse. The most striking event in the death-spiral is the much-cited Great Depression, which was caused by government action, specifically the loose-tight policies of the Federal Reserve, Herbert Hoover’s efforts to engineer the economy, and — of course — FDR’s benighted New Deal. (For details, see this, and this.)

But, of course, the worse things get, the greater the urge to rely on government. Now, we have “stimulus,” which is nothing more than an excuse to greatly expand government’s intervention in the economy. Where will it lead us? To a larger, more intrusive government that absorbs an ever larger share of resources that could be put to productive use, and counteracts the causes of economic growth.

Can we measure the price of government intervention? I believe that we can do so, and quite easily. The tale can be told in three graphs, all derived from constant-dollar GDP estimates available here. The numbers plotted in each graph exclude GDP estimates for the years in which the U.S. was involved in or demobilizing from major wars, namely, 1861-65, 1918-19, and 1941-46. GDP values for those years — especially for the peak years of World War II — present a distorted picture of economic output. Without further ado, here are the three graphs:

The trend line in the first graph indicates annual growth of about 3.7 percent over the long run, with obviously large deviations around the trend. The second graph contrasts economic growth through 1907 with economic growth since: 4.2 percent vs. 3.6 percent. But lest you believe that the economy of the U.S. somehow began to “age” in the early 1900s, consider the story implicit in the third graph:

  • 1790-1861 — annual growth of 4.1 percent — a booming young economy, probably at its freest
  • 1866-1907 — annual growth of 4.3 percent — a robust economy, fueled by (mostly) laissez-faire policies and the concomitant rise of technological innovation and entrepreneurship
  • 1908-1929 — annual growth of 2.2 percent — a dispirited economy, shackled by the fruits of “progressivism” (e.g., trust-busting, regulation, the income tax, the Fed) and the government interventions that provoked and prolonged the Great Depression (see links in third paragraph)
  • 1970-2008 — annual growth of 3.1 percent –  an economy sagging under the cumulative weight of “progressivism,” New Deal legislation, LBJ’s “Great Society” (with its legacy of the ever-expanding and oppressive welfare/transfer-payment schemes: Medicare, Medicaid, a more generous package of Social Security benefits), and an ever-growing mountain of regulatory restrictions.

Had the economy of the U.S. not been deflected from its post-Civil War course, GDP would now be about three times its present level. (Compare the trend lines for 1866-1907 and 1970-2008.) If that seems unbelievable to you, it shouldn’t: $100 compounded for 100 years at 4.3 percent amounts to $6,700; $100 compounded for 100 years at 3.1 percent amounts to $2,100. Nothing other than government intervention (or a catastrophe greater than any we have known) could have kept the economy from growing at more than 4 percent.

What’s next? Unless Obama’s megalomaniacal plans are aborted by a reversal of the Republican Party’s fortunes, the U.S. will enter a new phase of economic growth — something close to stagnation. We will look back on the period from 1970 to 2008 with longing, as we plod along at a growth rate similar to that of 1908-1940, that is, about 2.2 percent. Thus:

  • If GDP grows at 2.2 percent through 2109, it will be 58 percent lower than if we plod on at 3.1 percent.
  • If GDP grows at 2.2 percent for through 2109, it will be only 4 percent of what it would have been had it continued to grow at 4.3 percent after 1907.

The latter disparity may seem incredible, but scan the lists here and you will find even greater cross-national disparities in per capita GDP. Go here and you will find that real, per capita GDP in 1790 was only 4.6 percent of the value it had attained 218 years later. Our present level of output seems incredible to citizens of impoverished nations, and it would seem no less incredible to an American of 1790. In sum, vast disparities can and do exist, across nations and time. We have every reason to believe in the possibility of a sustained growth rate of 4.4 percent, as against one of 2.2 percent, because we have experienced both.

We should look on the periods 1908-1940 and 1970-2009 as aberrations, and take this lesson from those periods: Big government inflicts great harm on almost everyone (politicians and bureaucrats being the main exceptions), including its intended beneficiaries. Such is the price of government when it does more than “establish Justice, insure domestic Tranquility, [and] provide for the common defence” in order to “promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity.”

The Interest-Group Paradox

The interest-group paradox is a paradox of mass action (my own coinage). In this post, I illustrate the concept of mass-action paradox with two examples, then turn to the interest-group paradox.

The paradox of thrift is probably the best-known paradox of mass action. According to an article at Wikipedia, the paradox (propounded by John Maynard Keynes) states that if, in the face of an economic downturn, large numbers of individuals try to save more money, the attempt to do so will worsen the downturn. That, in turn, will cause reductions in the incomes of large numbers of individuals, who will then be able to save less, not more. (The article continues with an explanation of the mechanism behind the paradox. The criticisms summarized in the article are unconvincing.)

Another familiar paradox of mass action has to do with the behavior of panicked crowds. If someone shouts “fire” in a crowded theater, many members of the audience may rush madly toward the exits instead of walking calmly, in lines. The mad rush likely will cause pileups at the exits, leading to more panic and worse pileups. As a result, many (perhaps most) of the theater-goers will die, if not from fire and smoke inhalation, then from being trampled and suffocated in a pileup. The paradox here is that the (panicked) effort by members of the crowd to save themselves may well result in their deaths. I call this the paradox of panic.

The paradox of thrift and the paradox of panic are paradoxes of mass action because, in both instances, large numbers of individuals come to harm when each of them tries to do something that he believes to be in his best interest.

I now turn to the main subject of this post: the paradox of mass action that I call the interest-group paradox. Pork-barrel legislation exemplifies the interest-group paradox in action, though the paradox encompasses much more than pork-barrel legislation. There are myriad government programs that — like pork-barrel projects — are intended to favor particular classes of individuals. Here is a minute sample:

  • Social Security, Medicare, and Medicaid, for the benefit of the elderly (including the indigent elderly)
  • Tax credits and deductions, for the benefit of low-income families, charitable and other non-profit institutions, and home buyers (with mortgages)
  • Progressive income-tax rates, for the benefit of persons in the mid-to-low income brackets
  • Subsidies for various kinds of “essential” or “distressed” industries, such as agriculture and automobile manufacturing
  • Import quotas, tariffs, and other restrictions on trade, for the benefit of particular industries and/or labor unions
  • Pro-union laws (in many States), for the benefit of unions and unionized workers
  • Non-smoking ordinances, for the benefit of bar and restaurant employees and non-smoking patrons.

What do each of these examples have in common? Answer: Each comes with costs. There are direct costs (e.g., higher taxes for some persons, higher prices for imported goods), which the intended beneficiaries and their proponents hope to impose on non-beneficiaries. Just as importantly, there are indirect costs of various kinds (e.g., disincentives to work and save, disincentives to make investments that spur economic growth). (Exercise for the reader: Describe the indirect costs of each of the examples listed above.)

You may believe that a particular program is worth what it costs — given that you probably have little idea of its direct costs and no idea of its indirect costs. The problem is millions of your fellow Americans believe the same thing about each of their favorite programs. Because there are thousands of government programs (federal, State, and local), each intended to help a particular class of citizens at the expense of others, the net result is that almost no one in this fair land enjoys a “free lunch.” Even the relatively few persons who might seem to have obtained a “free lunch” — homeless persons taking advantage of a government-provided shelter — often are victims of the “free lunch” syndrome. Some homeless persons may be homeless because they have lost their jobs and can’t afford to own or rent housing. But they may have lost their jobs because of pro-union laws, minimum-wage laws, or progressive tax rates (which caused “the rich” to create fewer jobs through business start-ups and expansions).

The paradox that arises from the “free lunch” syndrome is much like the other two paradoxes discussed here. It is like the paradox of thrift, in that large numbers of individuals are trying to do something that makes certain classes of persons better off, but which in the final analysis makes those classes of persons worse off. It is like the paradox of panic, in that there is a  crowd of interest groups rushing toward a goal — a “pot of gold” — and (figuratively) crushing each other in the attempt to snatch the pot of gold before another group is able to grasp it. The gold that any group happens to snatch is a kind of fool’s gold: It passes from one fool to another in a game of beggar-thy-neighbor, and as it passes much of it falls into the maw of bureaucracy.

I call this third, insidious, paradox the interest-group paradox. It is the costliest of the three — by a long shot. It has dominated American politics since the advent of “progressivism” in the late 1800s. Today, most Americans are either “progressives” (whatever they may call themselves) or victims of “progressivism.” All too often they are both.

(Related concepts: tragedy of the commons, ratchet effect. Related post: “Slopes, Ratchets, and the Death Spiral of Liberty.”)