Are You in the Bubble?

Charles Murray’s new book, Coming Apart: The State of White America, 1960–2010, is a hot topic in the sector of the blogosphere that I frequent. Kay S. Hymowitz summarizes Murray’s thesis:

According to Murray, the last 50 years have seen the emergence of a “new upper class.” By this he means something quite different from the 1 percent that makes the Occupy Wall Streeters shake their pitchforks. He refers, rather, to the cognitive elite that he and his coauthor Richard Herrnstein warned about in The Bell Curve. This elite is blessed with diplomas from top colleges and with jobs that allow them to afford homes in Nassau County, New York and Fairfax County, Virginia. They’ve earned these things not through trust funds, Murray explains, but because of the high IQs that the postindustrial economy so richly rewards.

Murray creates a fictional town, Belmont, to illustrate the demographics and culture of the new upper class. Belmont looks nothing like the well-heeled but corrupt, godless enclave of the populist imagination. On the contrary: the top 20 percent of citizens in income and education exemplify the core founding virtues Murray defines as industriousness, honesty, marriage, and religious observance….

The American virtues are not doing so well in Fishtown, Murray’s fictional working-class counterpart to Belmont. In fact, Fishtown is home to a “new lower class” whose lifestyle resembles The Wire more than Roseanne. Murray uncovers a five-fold increase in the percentage of white male workers on disability insurance since 1960, a tripling of prime-age men out of the labor force—almost all with a high school degree or less—and a doubling in the percentage of Fishtown men working less than full-time…..

Most disastrous for Fishtown residents has been the collapse of the family, which Murray believes is now “approaching a point of no return.” For a while after the 1960s, the working class hung on to its traditional ways. That changed dramatically by the 1990s. Today, under 50 percent of Fishtown 30- to 49-year-olds are married; in Belmont, the number is 84 percent. About a third of Fishtowners of that age are divorced, compared with 10 percent of Belmonters. Murray estimates that 45 percent of Fishtown babies are born to unmarried mothers, versus 6 to 8 percent of those in Belmont.

And so it follows: Fishtown kids are far less likely to be living with their two biological parents. One survey of mothers who turned 40 in the late nineties and early 2000s suggests the number to be only about 30 percent in Fishtown. In Belmont? Ninety percent—yes, ninety—were living with both mother and father. City Journal, January 25, 2012)

What is the moral of Murray’s tale? According to Hymowitz, it is that

America has become a segregated, caste society, with a born elite and an equally hereditary underclass. A libertarian, Murray believes these facts add up to an argument for limited government. The welfare state has sapped America’s civic energy in places like Fishtown, leaving a population of disengaged, untrusting slackers. It has also diminished upper-class confidence: the well-to-do dare not suggest they have a recipe for the good life. “The underpinning of the welfare state,” Murray writes, “is that, at bottom, human beings are not really responsible for the things they do.”

Not only that, but as Ilya Somin puts it,

Murray argues that a new elite class has emerged that is much more ignorant about the lives of ordinary Americans than were the elites of earlier generations….

If Murray is right, this kind of elite ignorance is the flip side of the general public’s political ignorance. Public ignorance is dangerous because it reduces the quality of voting decisions; elite ignorance because it reduces the quality of the decisions made by elites once they get into positions of power. (“Charles Murray on Elite Ignorance of Ordinary Americans,” The Volokh Conspiracy, January 25, 2012)

Somin adds:

I am far from certain that the kind of knowledge Murray describes is actually important in improving the quality of public policy. Yes, elites who make policy that affects the lives of truck drivers should have some knowledge of “their priorities.” But it’s not clear to me that knowledge of TV shows, foods, preferred sports, etc., of truck drivers is all that useful to understanding those priorities. Even the experience of living with a low income or working at a job where your body hurts at the end of the day (both stressed by Murray s especially important) may be overrated. You don’t have to do either to realize that poverty imposes substantial constraints on your life, or that physical pain is extremely unpleasant….

To be sure, there is an important sense in which elite ignorance reduces the quality of public policy. In a complex society where people have a wide variety of preferences, not even the most knowledgeable elite experts can really have enough information to impose efficient paternalistic regulations that preempt individual choice. But this problem would persist even if all our elites had a deep and extensive knowledge of non-elite culture. The solution is not so much an elite that is better-informed about the culture of the masses, but an elite whose power over those masses is more limited and decentralized.

To put it another way, the real public-policy problem is that the elites — empowered by the regulatory-welfare state — are able to impose policies that harm the social and economic fabric, and therefore harm the working class. If elites knew more about the actual “priorities” of the working class (whatever those “priorities” might be), the elites would simply concoct more misbegotten policies.

To put it yet another way, the elites relish the power of the regulatory-welfare state. It is the exercise of that power which matters to the elites, not the “real people” of the “real world,” who are an excuse for the exercise of power. In Murray’s view, which I share, those “real people” are unreal to the elites because the elites live in an upper-middle-class bubble, remote from the “real world” of Fishtown and its like.

I am proud to say that I do not live in the upper-middle-class bubble, even though my career, income history, and tastes qualify me as a resident of the bubble. My upbringing (outlined here) inoculated me from elitism. The effects of that inoculation are reflected in my score of 51 on the quiz that Murray presents in Chapter 4 of his book, “How Thick Is Your Bubble?” Murray gives the following interpretation of scores:

A lifelong resident of a working-class neighborhood with average television and moviegoing habits. Range: 48–99. Typical: 77.
A ﬁrst- generation middle-class person with working-class parents and average television and moviegoing habits. Range: 42–100. Typical: 66.
A ﬁrst- generation upper-middle- class person with middle-class parents. Range: 11–80. Typical: 33.
A second- generation (or more) upper-middle-class person who has made a point of getting out a lot. Range: 0–43. Typical: 9.
A second- generation (or more) upper-middle-class person with the television and moviegoing habits of the upper middle class. Range: 0–20.Typical: 2.The scoring of the archetypes reﬂects a few realities about socioeconomic background and the bubble

I defy Murray’s categorization, for I am a first-generation upper-middle-class person with working-class parents and the television and moviegoing habits of the upper middle class. But no matter. My quiz score indicates my comprehension of the “real world” and the “real people” who inhabit it. They are not faceless game pieces to be shunted about in the name of “society” for the sake of my ego or power cravings. That is why I am neither a “liberal” nor a pseudo-libertarian like this fellow and this bunch.

Denseness about Density

Robert Bryce’s article, “Get Dense” (City Journal, Winter 2012) includes this strange paragraph:

Perhaps the most familiar example of environmentally friendly density, though, is the way humanity has concentrated itself by moving from the country to cities, a process that is happening especially rapidly in the developing world. The opposite process, suburbanization, requires far more land area per resident—and therefore more miles of streets, electricity cables, and sewer lines (see “Green Cities, Brown Suburbs,” Winter 2009). In a 2009 essay for the Atlantic, architect and author Witold Rybczynski wrote that “being truly green means returning to the kinds of dense cities and garden suburbs Americans built in the first half of the 20th century.”

Well, so what? There is much more to life than “efficiency.” Why does Bryce suppose that suburbs grew while many large cities rotted from within? The answer is that there is a strong preference for living away from crowding, filth, noise, and crime: the hallmarks of large cities.

And it may come as a surprise to Bryce to learn that “more land area per resident” is a positive good that is widely valued. Does Bryce propose to force people out of suburbs and into large cities? That seems to be the implication of his statement.

I had heretofore found the offerings of City Journal to be in the conservative-to-libertarian camp. I hope that Bryce’s article is an aberration.

Prohibition, Abortion, and “Progressivism”

I am belatedly watching Prohibition, a production of Ken Burns and Lynn Novick, which first aired on PBS in October. The program, in typical Burns style, delivers history in easy-to-swallow doses. I have seen only one of the three episodes, but that episode whets my appetite for the others because it added much to my sketchy knowledge of the events that led to the passage of the Eighteenth Amendment.

There is a libertarian slant to Prohibition, though perhaps not a deliberate one. For all that Prohibition says about the evils of “demon rum,” it says more about the evils and unintended consequences of governmental efforts to dictate private behavior. One of the talking heads points out that prohibition was as much a brainchild of “progressives” as it was of religious fundamentalists.

Although eugenics is not mentioned in Prohibition, it looms in the background. For eugenics — like prohibition of alcohol and, later, the near-prohibition of smoking — is symptomatic of the “progressive” mentality. That mentality is paternalistic, through and through. And “progressive” paternalism finds its way into the daily lives of Americans through the regulation of products and services — for our own good, of course. If you can think of a product or service that you use (or would like to use) that is not shaped by paternalistic regulation or taxes levied with regulatory intent, you must live in a cave.

However, the passing acknowledgement of “progressivism” as a force for the prohibition of alcohol is outweighed by the attention given to the role of “evangelicals” in the enactment of prohibition. I take this as a subtle swipe at anti-abortion stance of fundamentalist Protestants and adherents of the “traditional” strands of Catholicism and Judaism. Here is the “logic” of this implied attack on pro-lifers: Governmental interference in a personal choice is wrong with respect to the consumption of alcohol and similarly wrong with respect to abortion.

By that “logic,” it is wrong for government to interfere in or prosecute robbery, assault, rape, murder and other overtly harmful acts, which — after all — are merely the consequences of personal choices made by their perpetrators. Not even a “progressive” would claim that robbery, assault, etc., should go unpunished, though he would quail at effective punishment.

Not that “progressivism” is a thing of logic. It is, as many commentators have noted, a shifting set of attitudes. A “progressive” (or “liberal” or leftist) is simply a person who adheres to the current set of attitudes — the “progressive” program du jour — which the “progressive” seeks to impose by force, for our own good. The essential character of “progressivism” is paternalism wedded to statism.

George Will puts it this way:

….

Obama, an unfettered executive wielding a swollen state, began and ended his [state of the union] address by celebrating the armed forces. They are not “consumed with personal ambition,” they “work together” and “focus on the mission at hand” and do not “obsess over their differences.” Americans should emulate troops “marching into battle,” who “rise or fall as one unit.”

Well. The armed services’ ethos, although noble, is not a template for civilian society, unless the aspiration is to extinguish politics. People marching in serried ranks, fused into a solid mass by the heat of martial ardor, proceeding in lock step, shoulder to shoulder, obedient to orders from a commanding officer — this is a recurring dream of progressives eager to dispense with tiresome persuasion and untidy dissension in a free, tumultuous society.

Progressive presidents use martial language as a way of encouraging Americans to confuse civilian politics with military exertions, thereby circumventing an impediment to progressive aspirations — the Constitution and the patience it demands. As a young professor, Woodrow Wilson had lamented that America’s political parties “are like armies without officers.” The most theoretically inclined of progressive politicians, Wilson was the first president to criticize America’s founding. This he did thoroughly, rejecting the Madisonian system of checks and balances — the separation of powers, a crucial component of limited government — because it makes a government that cannot be wielded efficiently by a strong executive.

Franklin Roosevelt agreed. He complained about “the three-horse team of the American system”: “If one horse lies down in the traces or plunges off in another direction, the field will not be plowed.” And progressive plowing takes precedence over constitutional equipoise among the three branches of government. Hence FDR’s attempt to break the Supreme Court to his will by enlarging it.

In his first inaugural address, FDR demanded “broad executive power to wage a war against the emergency, as great as the power that would be given to me if we were in fact invaded by a foreign foe.” He said Americans must “move as a trained and loyal army” with “a unity of duty hitherto evoked only in time of armed strife.” The next day, addressing the American Legion, Roosevelt said it was “a mistake to assume that the virtues of war differ essentially from the virtues of peace.” In such a time, dissent is disloyalty….

Obama, aspiring to command civilian life, has said that in reforming health care, he would have preferred an “elegant, academically approved” plan without “legislative fingerprints on it” but “unfortunately” he had to conduct “negotiations with a lot of different people.” His campaign mantra “We can’t wait!” expresses progressivism’s impatience with our constitutional system of concurrent majorities. To enact and execute federal laws under Madison’s institutional architecture requires three, and sometimes more, such majorities. There must be majorities in the House and Senate, each body having distinctive constituencies and electoral rhythms. The law must be affirmed by the president, who has a distinctive electoral base and election schedule. Supermajorities in both houses of Congress are required to override presidential vetoes. And a Supreme Court majority is required to sustain laws against constitutional challenges.

“We can’t wait!” exclaims Obama, who makes recess appointments when the Senate is not in recess, multiplies “czars” to further nullify the Senate’s constitutional prerogative to advise and consent, and creates agencies (e.g., Obamacare’s Independent Payment Advisory Board and Dodd-Frank’s Consumer Financial Protection Bureau) untethered from legislative accountability.

Like other progressive presidents fond of military metaphors, he rejects the patience of politics required by the Constitution he has sworn to uphold. (“Obama to the Nation: Onward Civilian Soldiers,” The Washington Post, January 27, 2011)

* * *

A Nation of (Unconstitutional) Laws

I have long viewed the Constitution as a contract, which was entered into initially by the States, as authorized by the people of each State in a ratifying convention. At some point, probably long before the Civil War, the Constitution ceased to be a contract and became a law — or a conglomeration of laws, variously interpreted and enforced by the factions then in control of Congress, the executive branch, and the Supreme Court. The Civil War cemented the status of the Constitution as law by imposing it forcibly on dissenting parties: the members of the Confederate States of America.

The original contract was a compact among the States and the people thereof to form a central government of limited, enumerated powers. The main purposes of that government were to keep peace among the States, ensure a free flow of trade among the States, ensure uniformity in the rules of inter-State and international commerce, face the world with a single foreign policy and a national armed force, and ensure the even-handed application of the Constitution and of constitutional laws.

The central government is no longer the creature of a contract, bound by the terms of that contract. It has become the unaccountable arbiter of its own doings. Its laws — legislative enactments, executive orders, and judicial holdings — sometimes pay lip service to the Constitution. But the central government’s conduct is almost entirely unrelated to and unconstrained by the Constitution. Judicial holdings that affirm the original contract are notable because they are unusual.

What began as a grand bargain among equals has become a Faustian bargain.

In Defense of the 1%

“Liberalism,” its adherents claim, is about things like “fairness” and “social justice.” Where “fairness” and “social justice” are lacking — as they usually are in the “liberal” worldview — the state must intervene and penalize the “privileged” so that the “less privileged” may enjoy “fairness” and “social justice.” (I call it blaming the blameless.) This kind of retributive governance cannot stand logical or empirical scrutiny, but it pleases the masses and feeds the power-lust of “liberal” politicians.

Who are the “privileged”? These days they are those who have (temporarily, at least) scaled the heights of the income distribution. They are the so-called 1%, who (in the “liberal” and left-libertarian view) are there because they are able to “game the system” better than the 99%. Will Wilkinson has a good answer to that allegation:

I think anti-1% rhetoric is misguided and perhaps politically self-defeating. By failing to distinguish between those who became wealthy primarily by creating wealth and those who became wealthy by appropriating wealth, 1%-er/anti-oligarchy language implicitly sets itself in opposition to the kind of inventive, productive people many of us nobly aspire to become. As Kinsley says, a lot of folks really resent this, and they’re not wrong.

Making more money than 99% of one’s countrymen is, by itself, no more morally objectionable than scoring in the 99th percentile of the SAT. Indeed, generally, it’s much more morally praiseworthy; creating wealth benefits people other than oneself. Of course, some people cheat on the SAT. Cheating is wrong. But high-scorers generally aren’t screwing anyone over. Likewise, some people do get rich by cheating and screwing people over. But most people who get rich do it playing by the rules. It’s a mistake to base a protest movement on the refusal to acknowledge this….

If we’re all embedded in a fundamentally unjust, exploitative global economic structure, it’s hard to see why the American 1% should be especially salient. Why not the global 1%, or the global 10 or 20%, which would include pretty much the whole American population. If it is morally imperative to confiscate exceptional wealth and use it to meet human needs, then it is imperative to confiscate most of the wealth in all wealthy countries, not just the wealth of the wealthiest of the wealthy, and transfer it to the world‘s poor, not to the relatively well-to-do poor of the wealthiest countries.

If it’s not possible to bring in $600,000 in a year without therefore being guilty of complicity in a exploitative global system, which invalidates one’s moral claim to one’s income, it’s probably not possible to bring in an untainted, secure $60,000 either.

Of course, most complaints about the American 1% are not grounded on the view that the global political economy is a comprehensive web of exploitation. It’s based on the supposition that the domestic 1% is guilty of something or other the domestic 10 or 30 or 50% isn’t, and therefore deserves to be a target of scorn in a way the 10 or 30 or 50% does not. But, however you slice it, it’s going to be true that a lot of people in the top 1% got there in pretty much the same way a lot of people in the top 30 or 50% got there. If there’s nothing wrong with a way of making money at the 50th percentile, there’s nothing wrong with it at the 99th. And if there’s something wrong with it at the 99th, there’s something wrong with at the 50th. The unwillingness to identify specific mechanisms of unjust income acquisition, and the insistence on treating income-earners above a arbitrary cut-off point as a unified class deserving special contempt, strike me as symptoms of intellectually laziness and a less than thoroughgoing interest in justice.

There is a further, crucial criticism of the anti-1% mentality. The 1%, for the most part, consists of individuals who are smart and ambitious enough to do quite well without the unspecified mechanisms that supposedly favor them. Even with a hypothetically appealing but practically unattainable “level playing field,” I would not expect the composition of the 1% to change markedly.

In any event, there will always be a 1% of one kind or another, the left’s penchant for Nirvana fallacies to the contrary. The real-world choice is not between equality and inequality, it is between liberty and tyranny. Liberty allows a 1% consisting of an (ever-changing) economic “elite”; tyranny allows a 1% consisting of a tyrant’s henchmen and courtiers. The futile flight from economic inequality has delivered America into the hands of rabble-rousing petty tyrants — “soft” despots, if you will — who have badly damaged our economic and social liberties without quite extinguishing them.

These rabble-rousers — who are exemplified by the Roosevelts, Woodrow Wilson, LBJ, and BHO — have been enabled by the decline of constitutional republicanism and the rise of interest-group democracy. The rabble-rousers have exploited the masses’ envy and fear. But, unbeknownst to the masses, the rabble-rousers have failed to deliver prosperity and have instead delivered impoverishment.* Why? Because the rabble-rousers’ essential program is to penalize the productive through progressive taxation, affirmative action, and restrictive regulations. But the rabble-rousers seem not to know or care that their schemes also penalize the less-productive and unproductive by hindering economic growth and job creation.

If anything, the 1% is to be applauded for having succeeded against great odds. And for delivering value.

* For more about the impoverishing effects of government, see the preceding post and follow the links at the bottom of that post.

Estimating the Rahn Curve: A Sequel

Another Entry in the Sunstein Saga

Alec Rawls, writing at his blog, Error Theory:

As Congress considers vastly expanding the power of copyright holders to shut down fair use of their intellectual property, this is a good time to remember the other activities that Obama’s “regulatory czar” Cass Sunstein wants to shut down using the tools of copyright protection. For a couple of years now, Sunstein has been advocating that the “notice and take down” model from copyright law should be used against rumors and conspiracy theories, “to achieve the optimal chilling effect.”

Why?

Sunstein seems most intent on suppressing is the accusation, leveled during the 2008 election campaign, that Barack Obama “pals around with terrorists.” (“Look Inside” page 3.) Sunstein fails to note that the “palling around with terrorists” language was introduced by the opposing vice presidential candidate, Governor Sarah Palin (who was implicating Obama’s relationship with domestic terrorist Bill Ayers). Instead Sunstein focuses his ire on “right wing websites” that make “hateful remarks about the alleged relationship between Barack Obama and the former radical Bill Ayers,” singling out Sean Hannity for making hay out of Obama’s “alleged associations” (pages 13-14).

What could possibly be more important than whether a candidate for president does indeed “pal around with terrorists”? Of all the subjects to declare off limits, this one is right up there with whether the anti-CO2 alarmists who are trying to unplug the modern world are telling the truth. And Sunstein’s own bias on the matter could hardly be more blatant. Bill Ayers is a “former” radical? Bill “I don’t regret setting bombs” Ayers? Bill “we didn’t do enough” Ayers?

For the facts of the Obama-Ayers relationship, Sunstein apparently accepts Obama’s campaign dismissal of Ayers as just “a guy who lives in my neighborhood.” In fact their relationship was long and deep. Obama’s political career was launched via a fundraiser in Bill Ayers’ living room; Obama was appointed the first chairman of the Ayers-founded Annenberg Challenge, almost certainly at Ayers’ request; Ayers and Obama served together on the board of the Woods Foundation, distributing money to radical left-wing causes; and it has now been reported by full-access White House biographer Christopher Andersen (and confirmed by Bill Ayers) that Ayers actually ghost wrote Obama’s first book Dreams from My Father.

Whenever free speech is attacked, the real purpose is to cover up the truth. Not that Sunstein himself knows the truth about anything. He just knows what he wants to suppress, which is exactly why government must never have this power.

As Rawls notes, Sunstein also wants to protect “warmists” from their critics, that is, to suppress science in the name of science:

In climate science, there is no avoiding “reference to the machinations of powerful people, who have also managed to conceal their role.” The Team has always been sloppy about concealing its machinations, but that doesn’t stop Sunstein from using climate skepticism as an exemplar of pernicious conspiracy theorizing, and his goal is perfectly obvious: he wants the state to take aggressive action that will make it easier for our powerful government funded scientists to conceal their machinations.

Rawls’s thesis is entirely unsurprising to me. This is from “Fascism with a Friendly Face,” a post I wrote almost three years ago:

Regarding the suppression of dissent, it is noteworthy that Obama’s has tagged Cass Sunstein (a Chicago crony) to head the Office of Information and Regulatory Affairs in the White House. (See this article for more about the likely direction of OIRA under Sunstein.) My biggest concern about Sunstein, who figures to be a strong influence on Obama, is his embrace of the oxymoronical thing known as “libertarian paternalism.” (For an exposition of its flaws, see this post and its predecessors, linked therein.)

“Libertarian paternalism” is nothing more than a dressed-up version of paternalism, in which the government is used to “nudge” people toward making the kinds of decisions that Sunstein and his ilk would make. That is to say, Sunstein (like too many other bright individuals) likes to believe that he knows what’s best for others. (That conceit is demolished in the posts mentioned at the end of the preceding paragraph and in these posts by an avowed utilitarian.)

“Libertarian paternalism” may seem innocuous, but there’s more to it than a bit of “nudging” (hah!) by the one-ton gorilla in the room (i.e., the federal government). Perhaps the most frightening item on Sunstein’s paternalistic agenda ties into Sen. Rockefeller’s proposal to give the president the power to shut down the internet — which amounts to the power to control the content of the internet. And make no mistake about it, Sunstein would like to control the content of the internet — for our own good, of course. I refer specifically to Sunstein’s “The Future of Free Speech,” in which he advances several policy proposals, including these:

4. . . . [T]he government might impose “must carry” rules on the most popular Websites, designed to ensure more exposure to substantive questions. Under such a program, viewers of especially popular sites would see an icon for sites that deal with substantive issues in a serious way. They would not be required to click on them. But it is reasonable to expect that many viewers would do so, if only to satisfy their curiosity. The result would be to create a kind of Internet sidewalk, promoting some of the purposes of the public forum doctrine. Ideally, those who create Websites might move in this direction on their own. If they do not, government should explore possibilities of imposing requirements of this kind, making sure that no program draws invidious lines in selecting the sites whose icons will be favoured. Perhaps a lottery system of some kind could be used to reduce this risk.

5. The government might impose “must carry” rules on highly partisan Websites, designed to ensure that viewers learn about sites containing opposing views. This policy would be designed to make it less likely for people to simply hear echoes of their own voices. Of course, many people would not click on the icons of sites whose views seem objectionable; but some people would, and in that sense the system would not operate so differently from general interest intermediaries and public forums. Here too the ideal situation would be voluntary action. But if this proves impossible, it is worth considering regulatory alternatives. [Emphasis added.]

A Left-libertarian defends Sunstein’s foray into thought control, concluding that

Sunstein once thought some profoundly dumb policies might be worth considering, but realized years ago he was wrong about that… The idea was a tentative, speculative suggestion he now condemns in pretty strong terms.

Alternatively, in the face of severe criticism of his immodest proposal, Sunstein merely went underground, to await an opportunity to revive his proposal. I somehow doubt that Sunstein, as a confirmed paternalist, truly abandoned it. The proposal certainly was not off-the-cuff, running to 11 longish web pages. Now, judging by the bulleted list above, the time is right for a revival of Sunstein’s proposal. And there he is, heading the Office of Information and Regulatory Affairs. The powers of that office supposedly are constrained by the executive order that established it. But it is evident that the Obama adminstration isn’t bothered by legal niceties when it comes to the exercise of power. Only a few pen strokes stand between Obama and a new, sweeping executive order, the unconstitutionality of which would be of no import to our latter-day FDR.

Cass Sunstein is a dangerous man because he is intelligent, power-hungry, and overtly in favor of liberty, even as he fosters its demise.

* * *

Three Inglorious Years

Net disapproval rating: percentage of likely voters strongly disapproving of BO, minus percentage of likely voters strongly approving of BO. Derived from Rasmussen Reports’ Daily Presidential Tracking Poll.

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.

Stocks for the Long Run? (Part II)

In “Stocks for the Long Run?” I say that

unless the course of the regulatory-welfare state is reversed, a prolonged downward shift in the real rate of GDP growth is in the works — probably to about 2 percent. At that rate, expect a continuation of the present trend [since 2000] — stock-price “growth” [adjusted for inflation] of about -4 percent a year.

Be sure to note the minus sign in front of the 4.

Stocks are not bound to rise predictably over time, despite graphs like the next one, which I constructed from the data set cited in “Stocks for the Long Run?”. “Price” (the blue line) traces the real growth in the value of S&P Composite Index; “price + dividends” (the orange line) traces real growth in the value of the S&P Composite Index plus dividends paid on the stocks comprised in the index; “dividends reinvested” (the green line) traces the real value of the S&P Composite Index if dividends had been reinvested in shares of the stocks comprised in the index (green line):

From 1871 through 2010, the average annual increase in the value of the S&P Composite, with dividends reinvested, was 6.7 percent. This kind of hypothetical long-term “return” is cited often as a reason for buying and holding stocks. But a real return of 6.7 percent is not graven in stone, as the following chart indicates.

After a period of decline in the early 1900s, the cumulative rate of return on the S&P Composite, with dividends reinvested, dropped to 5.3 percent in 1920, jumped to 8.3 percent in 1929, plummeted to 5.4 percent in 1932, returned to 7.6 percent in 1966, dipped to 6.2 percent in 1982, climbed back to 7.4 percent in 2000, and (as noted above) dropped to 6.7 percent by the end of 2010. In other words, long-run averages can be moved considerably by short run bouts of what I call “irrational exuberance and rational pessimism.”

Moreover, as a practical matter, the buy-hold-reinvest strategy would not work if there were a massive influx of stock-buyers intent on buying, holding, and reinvesting dividends. They would be chasing illusory returns because massive purchases of stocks would not be rewarded (quickly, at least) by proportionate increases in corporate earnings, which is the main driver of stock prices in the long run. The more likely result would be a bubble — like those of the late 1920s and late 1990s — which would burst, leading to lower stock prices and a greater reluctance to invest in stocks.

More realistic measures of expected returns from buying and holding stocks are depicted by the “price” and “price + dividends” lines. At the end of 2010, the average annual real return on the S&P Composite Index since 1871 was 2 percent. With dividends, the average annual real return was 2.3 percent. But almost no one — not even an institutional investor — is likely to hold stocks in the S&P Composite Index for 140 years.

It makes sense, therefore, to consider shorter holding periods: 10, 20, and 30 years.

If history is any guide, consistently positive real returns on stocks are available only to the relatively rare investor who adheres doggedly to the buy-hold-reinvest strategy for 20 years or longer.

But history is not a reliable guide because — unless the course of the regulatory-welfare state is reversed — the rate of GDP growth will continue to fall, and stock prices are likely to fall in sympathy.

Society and the State

Michael Oakeshott writes:

A modern state, as it emerged from a medieval realm, a patrimonial estate, a military protectorate, or a collection of colonial settlements, had three distinct features that it has never lost: an office of authority, an apparatus of power, and a mode of association….

…[S]ince a modern state has never ceased to be recognized as an association in the making, attention has always been directed to the sort of association it might be made to become no less than to what it may be perceived to be. But the exploration of this theme has been sadly hindered by confusion.

First, it is usually conducted in terms of the vocabularies of authority or of power, but in this connection these words are meaningless. To say, for example, that the conditions of association are or should be “democratic” is absurd…. [T]here are no “democratic ” rules of relationships…. Secondly, this inquiry has been almost obliterated by drivel about something called “society,” a fanciful total of unspecified relationships which only a simpleton would think of identifying with a state. (“Talking Politics,” Rationalism in Politics and Other Essays, pp. 441, 450)

There can be such a thing as “society,” but only in rare circumstances. And Oakeshott is correct when he says that only a simpleton would identify society with a state. But, as I will discuss, it is not only simpletons who identify society with a state but also cynical politicians and leftist opportunists.

With respect to society, I begin with Margaret Thatcher, who often is quoted as saying that “there is no such thing as society.” When Mrs. Thatcher said that, she was arguing against the entitlement mindset, as in ” ‘society’ owes me a roof over my head and three meals a day.” As she put it, “people must look to themselves first. It’s our duty to look after ourselves and then, also to look after our neighbor.”

There is, in fact, such a thing as society. But what is it? “Society” has many meanings. This one rings truest:

an enduring and cooperating social group whose members have developed organized patterns of relationships through interaction with one another

In other words, the state is not society. The state — in the guise of a nation, a city, a village, etc. — may compel certain behaviors, including the transfer of one’s income to strangers. Compulsion by the state is the antithesis of societal cooperation.

There is, nevertheless, a tendency — especially on the part of leftists — to claim that the state represents and serves society. The claim is wrong:

For the reasons given above, the identification of the state with society is nothing more than a rhetorical sleight-of-hand by which utilitarians, paternalists, do-gooders, politicians, and pundits justify the imposition of their preferences on the masses.

The specific acts of the state often are malign rather than benign. See, for example, any of the 140 issues of Regulation that have been published to date. Moreover, acts of the state generally involve regulatory and tax burdens that, at once, stifle prosperity and liberty.

The fact of the matter is that the state destroys society in two ways. First, it usurps the functions served by society, most notably the functions of charity and marriage. Second, it compels certain kinds of behavior instead of allowing behavior to evolve cooperatively.

Two of the stated aims of compulsion are the advancement of “social justice” and “diversity.” The former is redistributionism, pure and simple. The latter forces social and economic interactions between persons of dissimilar cultures, religions, and races — to no good end.

“Social justice” is usually

code for redistributing income, either directly (through the taxing and spending power of government) or indirectly (through the power of government to require favoritism toward certain groups of persons). Make no mistake, there is no justicein “social justice,” which is nothing more than a euphemism for coercion by the state.

Social justice is possible only where there is a true society, not the bogus “society” or “community” to which bleeding hearts and statists refer when they mean the United States or most of its political subdivisions — which have become nothing more than geopolitical prisons.

A true society or community is one in which persons are bound by more than merely residing in the same nation, state, city, or other geographic entity. A true society is one whose members voluntarily commit acts of kindness and charity toward one another, as part of the social “bargain” that is known as the Golden Rule.

That “bargain” amounts to a delicate balance of self-interested and voluntarily beneficial behavior. The self-interested aspect of behavior is mutual forbearance — leaving others alone so that they will leave you alone. The voluntarily beneficial aspect is the commission of acts of kindness and charity. It is the latter that enables the former, because acts of kindness and charity help to build a true feeling of community by creating an atmosphere of mutual respect and trust.

Purveyors of “social justice” say that the voluntary arrangements of true communities are inadequate for the purpose of meeting this or that desideratum. Whence the desiderata? From the preconceptions of the purveyors of “social justice,” of course. They would substitute their “wisdom” for the wisdom that it embedded in voluntary social and economic arrangements. And they usually succeed because their arrogance incorporates a good measure of power-lust.

In sum, true social justice is possible only in a voluntary community that is founded on mutual forbearance, respect, and trust. It cannot be found in the kind of forcible leveling that is favored by advocates of “social justice.” There is nothing just about coercion.

“Diversity” — which encompasses and extends the state’s effort to force “equality” — is a case study in the state’s socially destructive power. In “The downside of diversity,” at The Boston Globe, Michael Jonas reports on a study by Harvard political scientist Robert Putnam, “E Pluribus Unum: Diversity and Community in the Twenty-first Century.” Putnam, according to Jonas,

has found that the greater the diversity in a community, the fewer people vote and the less they volunteer, the less they give to charity and work on community projects. In the most diverse communities, neighbors trust one another about half as much as they do in the most homogeneous settings. The study, the largest ever on civic engagement in America, found that virtually all measures of civic health are lower in more diverse settings.

John Leo, writing at City Journal (“Bowling with Our Own“), first discusses Putnam’s findings; e.g.:

Putnam’s study reveals that immigration and diversity not only reduce social capital between ethnic groups, but also within the groups themselves. Trust, even for members of one’s own race, is lower, altruism and community cooperation rarer, friendships fewer. The problem isn’t ethnic conflict or troubled racial relations, but withdrawal and isolation. Putnam writes: “In colloquial language, people living in ethnically diverse settings appear to ‘hunker down’—that is, to pull in like a turtle.”…

Neither age nor disparities of wealth explain this result. “Americans raised in the 1970s,” he writes, “seem fully as unnerved by diversity as those raised in the 1920s.” And the “hunkering down” occurred no matter whether the communities were relatively egalitarian or showed great differences in personal income. Even when communities are equally poor or rich, equally safe or crime-ridden, diversity correlates with less trust of neighbors, lower confidence in local politicians and news media, less charitable giving and volunteering, fewer close friends, and less happiness….

Leo then discusses the fact that Putnam had delayed announcing his findings:

Putnam has long been aware that his findings could have a big effect on the immigration debate. Last October, he told the Financial Times that “he had delayed publishing his research until he could develop proposals to compensate for the negative effects of diversity.” He said it “would have been irresponsible to publish without that,” a quote that should raise eyebrows. Academics aren’t supposed to withhold negative data until they can suggest antidotes to their findings…

Though Putnam is wary of what right-wing politicians might do with his findings, the data might give pause to those on the left, and in the center as well. If he’s right, heavy immigration will inflict social deterioration for decades to come, harming immigrants as well as the native-born. Putnam is hopeful that eventually America will forge a new solidarity based on a “new, broader sense of we.” The problem is how to do that in an era of multiculturalism and disdain for assimilation.

Myron Magnet, also writing at City Journal (“In the Heart of Freedom, in Chains“), addresses “elite hypocrisy, gangsta culture, and failure in black America.” Magnet asks

how can there still exist a large black urban underclass imprisoned in poverty, welfare dependency, school failure, nonwork, and crime? How even today can more black young men be entangled in the criminal-justice system than graduate from college? How can close to 70 percent of black children be born into single-mother families, which (almost all experts agree) prepare kids for success less well than two-parent families?

And answers:

The legacy of slavery and racism isn’t the reason….

Beginning around 1964, the rates of black high school graduation, workforce participation, crime, illegitimacy, and drug use all turned sharply in the wrong direction. While many blacks continued to move forward, a sizable minority solidified into an underclass, defined by self-destructive behavior that all but guaranteed failure.What was going on in the mid-sixties that could explain such a startling development? Political scientist Charles Murray gave the first answer to that question: welfare benefits sharply rose just at that moment. Offering more purchasing power than a minimum-wage job, the dole, he argued, provided an economic incentive for women to have out-of-wedlock babies and for their boyfriends to live off their welfare payments, too.

A decade after Murray, I suggested that, though welfare was part of the answer, the real explanation was larger. It was cultural, not economic. Begun by the elites, vast changes reshaped mainstream attitudes in the 1960s. Sex became fine outside marriage, and illegitimacy lost its stigma. Drugs were cool; social authority and tradition weren’t. America was deemed a racist, unjust society that victimized and impoverished blacks, who could rarely better their condition and who therefore deserved generous welfare benefits as reparations for past and present oppression. If blacks committed crime, the system that drove them to it, out of poverty or as an act of protest, was at fault: we shouldn’t blame the victim, as the saying went—meaning the poor criminal, not his prey. Since people shape their actions according to the ideas and beliefs they hold, when these new attitudes reached the inner cities, what could result but an epidemic of social dysfunction?

“Diversity” — which was born of misplaced white guilt about slavery and racism — exemplifies the state’s long habit of adopting and magnifying the destructive, anti-social consequences of elite opinion.

“Social justice” and “diversity” — and the other leftist slogans that are meant to stifle resistance to statist oppression — have nothing to do with “society” and everything to do with the use of the state to coerce the many for the satisfaction of the few. And it does not stop there.

Read on:
Intellectuals and Capitalism
Greed, Cosmic Justice, and Social Welfare
Positive Rights and Cosmic Justice
Democracy and Liberty
The Indivisibility of Economic and Social Liberty
Tocqueville’s Prescience
Accountants of the Soul
Down with “We”
The Divine Right of the Majority
I Want My Country Back
An Encounter with a Marxist
Our Enemy, the State
“Intellectuals and Society”: A Review
Social Justice
The Left’s Agenda
The Meaning of Liberty
Positive Liberty vs. Liberty
More Social Justice
On Self-Ownership and Desert
Luck-Egalitarianism and Moral Luck
The Left and Its Delusions
Externalities and Statism
Merit Goods, Positive Rights, and Cosmic Justice
The Spoiled Children of Capitalism
Politics, Sophistry, and the Academy
Subsidizing the Enemies of Liberty
More about Merit Goods

The Equal-Protection Scam and Same-Sex Marriage

Steven Horwitz, writing at Bleeding Heart Libertarians, opines that

In the world that exists, where the state is involved in marriage, I believe that….

Libertarianism requires [federal recognition of same-sex marriage], as we often forget that the classical liberal tradition was built on two pillars: the rights of the individual against the state and equality before the law. The state may not discriminate. If it offers a benefit to some, it must offer it to all who are equally situated….

Suppose we had a Social Security system in which all residents of the US paid FICA but only white ones received the benefits. Would you argue that the libertarian position is to continue to deny people of color access to Social Security benefits on the grounds that giving the benefits to them would “extend federal power?” Would you continue to insist that the only libertarian position is to argue for the elimination of Social Security even though it continues to benefit only whites?

Double hogwash!

First, homosexuals are not “equally situated” with respect to heterosexuals. They want to call “marriage” something that cannot be marriage, as marriage has been understood for thousands of years: the union of a man and a woman in a lifelong commitment to each other. Homosexuals may choose to enter into private relationships that they call “marriage” — and no one can stop them — but those relationships are not manifestations of the time-honored social institution known as marriage.

Second, the analogy with Social Security is inapt. The recognition of marriage by the state is not a “benefit” in the same way as Social Security; that is, it is not a form of remuneration based on “contributions” to a (fictional) insurance pool. Social Security benefits are a quid pro quo; the recognition of marriage is a grant of status, in the same way that naturalization is a grant of status — the status of citizen. The state may make and change the qualifications for citizenship, because the power to do so is inherently a function of the state. But the state may not make and change the essential nature of marriage, which is a social phenomenon.

Where the state chooses to call a homosexual “marriage” a marriage, it simply indulges in legal fiction. But it is not harmless legal fiction — a crucial point that eludes “libertarians” like Horwitz; thus:

The recognition of homosexual “marriage” by the state — though innocuous to many, and an article of faith among most libertarians and liberals — is another step down the slippery slope of societal disintegration. The disintegration began in earnest in the 1930s, when Americans began to place their trust in chimerical, one-size-fits-all “solutions” offered by power-hungry, economically illiterate politicians and their “intellectual” enablers and apologists. In this instance, the state will recognize homosexual “marriage,” then bestow equal benefits on homosexual “partners,” and then require private entities (businesses, churches, etc.) to grant equal benefits to homosexual “partnerships.” Individuals and businesses who demur will be brought to heel through the use of affirmative action and hate-crime legislation to penalize those who dare to speak against homosexual “marriage,” the privileges that flow from it, and the economic damage wrought by those privileges.

It should be evident to anyone who has watched American politics that even-handedness is not a matter of observing constitutional limits on government’s reach, regardless of who asks for an exception; it is, rather, a matter of expanding the privileges bestowed by government so that no one is excluded. It follows that the recognition and punitive enforcement of same-sex “marriage” would be followed by the recognition and bestowal of benefits on other arrangements, including transient “partnerships” of convenience. And that surely will weaken heterosexual marriage, which is the axis around which the family revolves. The state will be saying, in effect, “Anything goes. Do your thing. The courts, the welfare system, and the taxpayer — above all — will pick up the pieces.” And so it will go….

Given the signals being sent by the state, the rate of formation of traditional, heterosexual marriages will continue to decline. (According to the Census Bureau, the percentage of adult males who are married dropped steadily from 71.1 percent in the 1960 census to 58.6 percent in the 2000 census; for females, the percentage dropped from 67.4 to 54.6. (The latest available figures, for 2009, show no significant change since 2000.) About half of each drop is explained by a rise in the percentage of adults who never marry, the other half by a rise in the percentage of divorced adults. Those statistics are what one should expect when the state signals — as it began to do increasingly after 1960 — that traditional marriage is no special thing by making it easier for couples to divorce, by subsidizing single mothers, and by encouraging women to work outside the home.

The well-known effects of such policies include higher rates of crime and lower levels of educational and economic achievement. (See this and this, for example.) Same-sex marriage would multiply these effects for the sake of mollifying a small minority of the populace.

A “libertarian” like Horwitz will assert that all such considerations are beside the point — as if the only point of liberty is “self-actualization” or similar clap-trap. I do wish that these self-styled “libertarians” would grow up and shut up.

We Owe It to Ourselves

Don Boudreaux of Cafe Hayek is having a good time with Paul Krugman’s assertion that “U.S. debt is, to a large extent, money we owe to ourselves.” This bold claim comes in the midst of yet another of Krugman’s seemingly infinite number of columns touting deficit spending as a panacea for what ails the American economy.

Boudreaux’s posts (to date) are here, here, here, here, here, and here. I will not try to match Boudreaux’s deep and weighty commentary on Krugman’s outrageous assertion. Instead, I offer the following non-academic observations for Mr. Krugman’s consideration:

1. Who are “we”? If government borrows money and spends it on goodies for Congressman X, Y, and Z’s districts, how do I get my cut? Or does the happiness generated in Congressman X, Y, and Z’s districts simply radiate in waves across the country, eventually reaching me and making me feel better?

2. I know of no magical power that enables government to ensure that deficit spending absorbs unemployed resources without diverting already-employed resources from productive uses. So this leads me to ask why it wouldn’t be better to take the borrowed money and flush it down a toilet, rather than sending it to Congressman X, Y, and Z’s districts.

3. Anyway, if the borrowed money makes (some) people in Congressman X, Y, and Z’s districts better off, why is it that “we” (i.e. the rest of us and/or our descendants) end up repaying the debt that made those others better off? I don’t understand how I “owe it to myself” when (a) I didn’t ask to borrow the money and (b) I gained nothing as a result of the borrowing.

You might claim that my personal wishes are of no account because Congress and the president are duly elected by majorities of voters. But that is tantamount to saying that Congress and the president possess a kind of omniscient super-consciousness that somehow overrides the harm, hate, and discontent that flow from their acts. I don’t think you’d agree with that, given your views about the many and various “sins” committed by the Bush administration, usually with the connivance of Congress. Or, perhaps only Democrats possess omniscient super-consciousness. Yes, that must be it.

With regard to my not having gained as a result of borrowing, perhaps you think that I ought to be happy simply because (some) people in Congressman X, Y, and Z’s districts are happier as a result of deficit spending. Perhaps I should be, but I am just a curmudgeon who has 12 grandchildren who will be less well off because of the extra taxes that I, their parents, and/or they will pay for the privilege of making some strangers happier. Are you telling me that you — or anyone — has a way of making everyone happier by making a lot of people less happy? Or are you telling me that you don’t care who is made less happy as long as government does what you think it should do? My money is on the latter proposition.

If I do, indeed, owe some portion of the U.S. debt to myself, I hereby forgive my share of the debt and absolve myself of any obligation to pay it.

Lock ‘Em Up

Charles Murray writes:

Here is a graph that shows the violent crime rate per 100,000 population and the number of prisoners per 1,000 violent offenses from 1960–2010:

Source: Bureau of Justice Statistics, FBI Uniform Crime Reports. “Prisoners” refers to inmates of state and federal prisons and does not include persons in jail.

….

When crime gets safer, crime goes up very quickly as a response. In the late 1950s, the “prison only makes people into smarter criminals” school became dominant in criminal justice circles. By the early 1960s, imprisonment rates were plummeting. For that matter, even the raw number of prisoners fell. One consequence was that every cohort of young people saw acquaintances start to get probation for offenses that would have sent them to prison or reform school in the 1950s. I still remember my shock as a 17-year-old in that era when a friend of mine who shoplifted several thousand dollars of clothes from the store where he worked got probation. Once he had been arrested, it had not occurred to me that he wouldn’t go to reform school.

Pushing that toothpaste back into the tube takes a lot longer. Kids who are amazed when a friend gets away with a serious crime aren’t amazed when, say, 19 percent of their friends arrested for a serious crime are incarcerated instead of 15 percent. Understandably, crime continued to rise after imprisonment rates started to rise after 1974. Even in 1990, after 15 years of rising imprisonment rates, the risk of going to prison if you committed a violent crime was still far lower than it had been in 1960.

Cumulatively, however, two things happen. First, more and more of the “dirty 7 percent” of offenders who commit about 50 percent of all crime end up in prison. They cannot commit crimes, except against other criminals. Second, the cumulative impact of much higher imprisonment rates does make an impression—the idea that crime doesn’t pay is no longer completely a joke. For violent crime, the tipping point occurred in 1992, when imprisonment rates were heading straight up. By the time that the imprisonment rate for violent crime reached its 1960 level in 1998, the downward trendline was well established.

So how much of the reduction in violent crime was produced by increased incarceration? This kind of analysis doesn’t tell us…. (“Keep locking ’em up,” The Enterprise Blog, December 29, 2011)

I assessed the effect of imprisonment on the crime rate in a post that is now more than four years old. The following material is excerpted from that post.

I … considered as explanatory variables the existence of mandatory federal sentencing guidelines (1989-2004), number of male enlisted personnel in the armed forces (in proportion to population), and year-over-year growth in real GDP per capita — in addition to the number of persons aged 15-24, number of prisoners, and number of blacks in proportion to total population, as before. (For sources, see the footnote to this post.) 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. (It would also help to alleviate our self-inflicted impotence, by putting more “boots on the ground” — and missiles in readiness.) 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 growth avoids 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).

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….

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….

* * *

Stocks for the Long Run?

This post examines the relationship between stock prices and GDP and considers the long-term outlook for stock prices. I begin with a question: Do swings in stock prices — as as measured by a broad index like the S&P Composite — portend swings in the rate and direction of economic growth?

Here is a chart of constant-dollar GDP, indexed to its value in 1871, which I derived from estimates of constant-dollar GDP that are available at What Was U.S. GDP Then?:

Drawing on the data set for Robert Shiller’s Irrational Exuberance — a data set that Shiller keeps up to date — I graphed the real value of the S&P Composite Index and identified major turning points in the constant-dollar value of the S&P Composite:

A comparison of the two charts suggests that stock prices react strongly to transient events (e.g., shifts in the rate of inflation and consumer confidence), but that there is not a strong relationship between GDP and the daily, weekly, monthly, or quarterly gyrations of the stock market. There is a weak but statistically significant correlation between annual changes in stock prices and GDP, which is evident in the following comparison of stock prices and GDP, dating back to 1950, which I derived from historical prices of the S&P 500 (available here) and estimates of constant-dollar GDP (available here).

In words, the first three graphs suggest that stock prices, measured broadly, oscillate jaggedly around the GDP trend, in cycles of irrational exuberance and rational pessimism.

On closer inspection of the long-term trends depicted in the first two graphs, I found some evidence that major turns in stock prices mark major turns in the course of economic growth. I should emphasize that the points of coincidence between major turns in stock prices and economic growth are evident only with long hindsight; I advise against attempts to predict the near-term course of GDP by transitory changes in stock prices, and vice versa.

Specifically, I calculated the changes in stock prices and GDP that occurred between the turning points identified in the second graph above, with this result:

Market turning point (Year and month)	Duration of trend (years and months)	Real S&P change (annual rate)	Read GDP change (annual rate)




1877.06
	28.07	5.2%	4.4%
1906.01
	14.11	-7.7%	1.9%
1920.12
	8.09	20.6%	4.0%
1929.09
	2.09	-44.9%	-9.4%
1932.06
	33.07	6.5%	5.0%
1966.01
	16.07	-5.6%	2.7%
1982.08
	18.00	12.0%	3.3%
2000.08
	11.04	-3.8%	1.5%
2011.12

(December 2011 probably is not a turning point. I include the period from August 2000 to the present only to show that the trend in stock prices since August 2000 has mirrored the trend in GDP growth since that date.)

The relationship between rates of change in real GDP and stock prices seems to be robust:

A similar relationship holds even with the removal of the “outlier” (1929-1932):

Both correlations are statistically significant, despite the small sample sizes. And they are similar to the following (also significant) correlation, which is drawn from the data presented in the third chart above:

The bottom line is that stock prices can decline even as GDP rises. A long-term, downward shift in the real rate of GDP growth is likely to trigger a significant downward shift in the movement of stock prices.

In fact, unless the course of the regulatory-welfare state is reversed, a prolonged downward shift in the real rate of GDP growth is in the works — probably to about 2 percent. At that rate, expect a continuation of the present trend — stock-price “growth” of about -4 percent a year.

If you think that I am being unduly pessimistic, look at the trend for 1906-1920 (the aftermath of Progressivism’s rise) and the trend for 1966-1982 (the aftermath of the formation of the Great Society). What we have today is a vast regulatory-welfare state built on the foundations of Progressivism, the New Deal, the Great Society.

Happy New Year!

* * *

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