The Social Animal and the “Social Contract”

Here we go again, into “all men are brothers” territory:

“Morality can do things it did not evolve (biologically) to do,” says [Joshua] Greene [author of Moral Tribes: Emotion, Reason, and the Gap between Us and Them]. How can it do this? By switching from the intuitive “automatic mode” that underpins our gut reactions to the calculating, rational “manual mode”. This, for Greene, means embracing utilitarianism, “the native philosophy of the manual mode”. Utilitarianism takes the idea that “happiness is what matters, and everyone’s happiness counts the same”, generating the simple three-word maxim, “maximise happiness impartially”.

Greene is not the first to think that he has found “a universal moral philosophy that members of all human tribes can share” and that those who disagree are simply not being rational enough. Many a philosopher will raise an eyebrow at his claim that “the only truly compelling objection to utilitarianism is that it gets the intuitively wrong answers in certain cases”.

At least one strong objection is suggested by what Greene himself says. He knows full well that the kind of absolutely impartial perspective demanded by utilitarianism – in which the interests of your own child, partner or friends count for no more than any others – “is simply incompatible with the life for which our brains were designed”. Greene takes this as a flaw of human beings, not his preferred moral theory. But when someone, for example, dedicates a book to his wife, as Greene does, this does not reflect a failure to be appropriately objective. A world in which people showed no such preferences would be an inhuman, not an ideal, one. A morality that values human flourishing, as Greene thinks it should, should put our particular attachments at its core, not view them as “species-typical moral limitations” to be overcome.

That’s an excerpt of Julian Baggiani’s commendable review of Greene’s book and two others (“The Social Animal,”, January 3, 2014).

Greene makes two errors. First, he assumes that it’s wrong to prefer those who are closest to one, geographically and by kinship, to those who are farther away. Second, he assumes that happiness can be added, and that what should matter to a person is not his happiness but the sum of all the happiness in the world. The errors are so obvious that I won’t dwell on them here. If you want to read more about them, start with “Liberalism and Sovereignty,” “Inside-Outside,” “Modern Utilitarianism,” “The Social Welfare Function,” and “Utilitarianism vs. Liberty.” And by all means read “The Fallacy of Human Progress,” which addresses Steven Pinker’s rationalistic thesis about overcoming human nature (The Better Angels of Our Nature: Why Violence Has Declined).

Yes, human beings are social animals, but human beings are not “brothers under the skin,” and there is no use in pretending that we are. Trying to make us so, by governmental fiat, isn’t only futile but also wasteful and harmful. The futility of forced socialization is as true of the United States — a vast and varied collection of races, ethnicities, religions, and cultures — as it is of the world.

Despite the blatant reality of America’s irreconcilable diversity, American increasingly are being forced to lead their lives according to the dictates of the central government. Some apologists for this state of affairs will refer to the “common good,” which is a fiction that I address in the third, fourth, and fifth of the above-linked posts. Other apologists like to invoke the “social contract,” another fiction that Michael Huemer disposes of quite nicely:

[I]t is often said that the government derives its powers from a “social contract,” whereby the people have granted these special powers to the government. The only problem with this theory is that it is factually false—I have not in fact agreed to have a government, to pay taxes, or to obey the government’s laws.

A number of suggestions have been made as to how, despite my protestations to the contrary, I really have agreed to all those things. Here I will just mention one, because it is the one most often heard in conversation. This is the suggestion that I have “implicitly” agreed to have a government merely by residing in the government’s territory. (“If you don’t want a government, simply move to Antarctica!”) Very briefly, the problem with this suggestion is that it presupposes that the state owns all the territory over which it claims jurisdiction, or that for some other reason it has the right to exclude people from that area. But there is no way to establish such a right on the part of the state, unless one has already shown that the state has legitimate authority. This therefore cannot be presupposed in an argument designed to establish the state’s authority. In this case, the statist’s claim seems analogous to the leader of a protection racket claiming that his victims have voluntarily agreed to pay him protection money, merely by living in their own houses. There are other ways in which social contract enthusiasts claim that we have accepted the social contract, but as I explain in the book, each of them falls to equally serious objections, which show that the social contract does not come close to satisfying the generally accepted principles of real, valid contracts.

Another popular suggestion is that, in democratic nations (about half the world today), the democratic process confers authority on the government. The motivation behind this view is initially puzzling. Recall that the problem is to explain why the state may undertake actions that would be considered rights violations if anyone else were to perform them. Typically, if some type of action violates someone’s rights—for instance, theft, kidnapping, or murder—the action will not be converted into an ethically permissible, non-rights-violating one if a larger number of people support the action than oppose it. If you’re in a group of friends, and five of them decide they want to rob you, while only three oppose robbing you, this does not make it ethically permissible to rob you. Similarly, even if every law were directly authorized by a popular referendum of everyone affected by the law, it is unclear why this would render legitimate a law that would otherwise have been a rights violation. Matters are only more problematic in a society in which a minority of people vote, and they vote merely to select representatives who may or may not keep their promises, and may or may not do what their supporters wanted.

But doesn’t the government have to coerce us in the ways that it does in order to maintain itself in existence, so that it can provide law and order? And without government, wouldn’t society degenerate into a constant war of everyone against everyone? The first thing to note about this argument is that it could at most justify a tiny minority of all the powers claimed by any modern state. Perhaps the government must make laws against violence and theft and provide a court system to adjudicate disputes, in order to prevent a Hobbesian war of all against all. But why must the government control what drugs you may put into your body, what wages you may pay your employees, how much wheat you may grow on your farm, and whether you buy health insurance? Why must they subsidize agribusiness, send rockets to Mars, fund the arts, provide college loans, and run their own school system? The question is not, “Why are those programs beneficial?” The question is, “How are those programs justified by the threat of the Hobbesian war that would supposedly result from anarchy?”

Granted, sometimes it is necessary to use coercion to prevent some disaster from occurring. But having done so, one is not then ethically permitted to continue using coercion beyond the minimal amount necessary to prevent that disaster. If we really stand in danger of some sort of all-out Hobbesian war, then the state would be justified in employing the minimum coercion necessary to prevent the state of war from occurring. This would not justify their continuing to employ coercion whenever it strikes their fancy, or whenever they think they can achieve some benefit by doing so. (“The Problem of Authority,” Cato Unbound, March 4, 2013)

A point that Huemer doesn’t make in his essay is to compare Americans with the “boiling frog“:

The premise is that if a frog is placed in boiling water, it will jump out, but if it is placed in cold water that is slowly heated, it will not perceive the danger and will be cooked to death. The story is often used as a metaphor for the inability or unwillingness of people to react to significant changes that occur gradually.

The metaphor is apt. Americans — or a very large fraction of Americans — have been “boiled” stealthily:

Power has been passing to Washington for more than 100 years, in defiance of the Constitution, because of … the Nirvana fallacy, unrepresentative government, logjams and log-rolling, fiefdoms and egos, and the ratchet effect and interest-group paradox. Thus Washington is able to exert its power on the entire country, bringing big government to places that don’t want it….

[G]overnmental acts and decrees have stealthily expanded and centralized government’s power, and in the process have usurped social norms. The expansion and centralization of power occurred in spite of the specific limits placed on the central government by the original Constitution and the Tenth Amendment. These encroachments on liberty are morally illegitimate because their piecemeal adoption has robbed Americans of voice and mooted the exit option. And so, liberty-loving Americans have discovered — too late, like the proverbial frog in the pot of water — that they are impotent captives in their own land.

Voice is now so muted by “settled law” (e.g., “entitlements,” privileged treatment for some, almost-absolute control of commerce) that there a vanishingly small possibility of restoring constitutional government without violence. Exit is now mainly an option for the extremely wealthy among us. (More power to them.) For the rest of us, there is no realistic escape from illegitimate government-made law, given that the rest of the world (with a few distant exceptions) is similarly corrupt. (“‘We the People’ and Big Government,” Politics & Prosperity, November 16, 2013)

And, no, “we” — that is all of “us” — don’t want it to be that way:

If there is an “American psyche,” it has multiple-personality disorder.

What do you think when a snobbish European generalizes about Americans — a bunch of crude, gun-toting, money-grubbers? Do you think that such generalizations are correct? You probably don’t. And if you don’t, why would you think (or speak and write) as if Americans are like ants, that is, of one mind and collectively responsible for the actions of government? …

There’s no need to look abroad for inapplicable generalizations about America…. [C]onservatives and liberals have been separating themselves from each other. Only a cock-eyed optimist — the kind of person who believes that living in the same (very large) geographic requires unity — would call this a bad thing. As if proximity yields comity. It doesn’t work for a lot of families; it doesn’t work for most blacks and whites; it doesn’t work for upper-income and lower-income groups. Why should it work for most conservatives and liberals? …

But aren’t “we all in this together,” as proponents of big and bigger government are wont to proclaim? Not at all. The notion that “we are all in this together” is just a slogan, which really means “I want big and bigger government” to “solve” this or that problem — usually at the expense of persons who have done nothing to create the “problem.” “We are all in this together” is a call for action by government, not proof of a mythical “national will.” If “we” were “all in this together,” we wouldn’t need to be reminded of it. Like a good sports team or military unit, we would simply act that way. (Op. cit.)

It’s true that most human beings crave some kind of social connection. But the gap between that craving and the faux connectedness of one-size-fits-all big government can’t be bridged by ringing phrases (“We the People”), by appeals to patriotism, or by force.

Government can take my money, and it can make me do things the way “technocrats” want them done — and it can do the same to millions of other Americans. But government can’t make me (or those other millions) love the recipients of my money or feel happier because I’m doing things the “right” way. It can only make my (and those other millions) despise the recipients and detest forced conformity. Only divisiveness can prevent the complete destruction of liberty in the name of “society.”

Social unity is found not in government but in genetic kinship:

[G]enetic kinship is indispensable to society, where society is properly understood as “an enduring and cooperating social group whose members have developed organized patterns of relationships through interaction with one another.” (“Genetic Kinship and Society,” Politics & Prosperity, August 16, 2012)

It takes overeducated dunderheads like Joshua Greene to denigrate the bonds of genetic kinship, even while openly prizing them.

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Other related posts:
On Liberty
Rights, Liberty, the Golden Rule, and the Legitimate State
Tocqueville’s Prescience
What Is Conservatism?
Zones of Liberty
Society and the State
I Want My Country Back
The Golden Rule and the State
Government vs. Community
Evolution, Human Nature, and “Natural Rights”
More about Conservative Governance
The Meaning of Liberty
Evolution and the Golden Rule
Understanding Hayek
The Golden Rule as Beneficial Learning
True Libertarianism, One More Time
Human Nature, Liberty, and Rationalism
Utilitarianism and Psychopathy
Why Conservatism Works
Reclaiming Liberty throughout the Land
Rush to Judgment
Secession, Anyone?
Race and Reason: The Achievement Gap — Causes and Implications
Liberty and Society
The Eclipse of “Old America”

“We the People” and Big Government

This post incorporates three earlier installments and completes the series.

When the Framers of the Constitution began the preamble with “We the People” and spoke as if the Constitution had been submitted to “the People” for ratification, they were indulging in rhetorical flourishes (at best) and misleading collectivization (at worst). The Founders may have been brave and honorable men, and their work — as long as it lasted — served liberty-loving Americans well. But do not forget that the Framers were politicians eager to sell a new framework of government. They were not gods or even demi-gods. They served liberty ill when they invoked the idea of a national will — expressed through government. Their coinage lends undeserved credence and emotional support to the rhetoric of statist demagogues, a breed of which Barack Obama is exemplary.

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I make two basic points in this very long post:

1. It is a logical and factual error to apply the collective “we” to Americans, except when referring generally to the citizens of the United States. Other instances of “we” (e.g., “we” won World War II, “we” elected Barack Obama) are fatuous and presumptuous. In the first instance, only a small fraction of Americans still living had a hand in the winning of World War II. In the second instance, Barack Obama was elected by amassing the votes of fewer than 25 percent of the number of Americans living in 2008 and 2012. “We the People” — that stirring phrase from the Constitution’s preamble — was never more hollow than it is today.

2. Further, the logical and factual error supports the unwarranted view that the growth of government somehow reflects a “national will” or consensus of Americans. Thus, appearances to the contrary (e.g., the adoption and expansion of national “social insurance” schemes, the proliferation of cabinet departments, the growth of the administrative state) a sizable fraction of Americans (perhaps a majority) did not want government to grow to its present size and degree of intrusiveness. And a sizable fraction (perhaps a majority) would still prefer that it shrink in both dimensions. In fact, The growth of government is an artifact of formal and informal arrangements that, in effect, flout the wishes of many (most?) Americans. The growth of government was not and is not the will of “we Americans,” “Americans on the whole,” “Americans in the aggregate,” or any other mythical consensus.

Continued below the fold. Continue reading

Addendum to “A Short Course in Economics”

The first 19 points appear in “A Short Course in Economics.”

20. The interest-group paradox is a variant of the paradox of thrift. Many Americans (perhaps most of them) favor certain government programs because (they believe) those programs will benefit the class of persons to which they belong, or a class of persons for which they have sympathy. Each such program then becomes a “free lunch,” and you know that there’s no such thing as a free lunch — someone must pay for it, somehow. In the case of government programs, most of us wind up paying for a lot of free lunches 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. And there goes your free lunch.

Wait, it’s worse than that. Picture a row of beer-drinkers at a bar. Each of them is determined to get a bigger free lunch, so each of them eats more. Result? A rise in the price of the beer. Some 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).

21. The interest-group paradox is closely related to the fallacy described by Frédéric Bastiat in his essay “What Is Seen and What Is Not Seen“:

In the economic sphere an act, a habit, an institution, 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.

There is only one difference between a bad economist and a good one: the bad economist confines himself to the visible effect; the good economist takes into account both the effect that can be seen and those effects that must be foreseen.

Yet this difference is tremendous; for it almost always happens that when the immediate consequence is favorable, the later consequences are disastrous, and vice versa….

The pursuer of the free lunch grasps the free lunch but fails to grasp the unintended and costly consequences of his pursuit.

22. Perhaps the gravest of economic fallacies is the belief that regulated economic activity produces better results than unregulated economic activity. This fallacy stems from the fallacy pointed out by Bastiat. Most of us take comfort in plans of one kind or another because we can “see” what the plan intends. What we fail to grasp is that plans — all plans — have unforeseen, unintended, and undesirable consequences. It is those consequences — what is not seen — that undo economic plans and turn hoped-for benefits into actual costs.

By the same token, most of us fail to grasp the fact that unregulated economic activity yields positive results because it involves willing actors engaged in mutually beneficial exchanges of goods and services. Adam Smith was never more correct when he wrote that every individual

[b]y pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good.

That which is produced and consumed voluntarily benefits both its producers and consumers. That which is produced through government fiat may benefit those who dictate its production, while harming consumers by (a) failing to produce that meets their needs and/or (b) producing something that partially meets their needs, but at a higher cost than necessary.

23. Moreover, to quote Wilhelm von Humbolt:

“If men were left to their own deeds and devices, deprived of all outside help that did not manage to obtain themselves, they would also frequently run into difficulty and misfortune whether through their own fault or not. But the happiness for which a man is destined is none other than that which he achieves by his own energies. And it is these very situations which sharpen a man’s mind and develop his character.” (The Limits of State Action [1792]).

A sense of self-worth is important to us; it has economic value of its own. Economics isn’t (or shouldn’t be) the “science” of wealth or output maximization; it is (or ought to be) the “science” of happiness-seeking.

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.”)

A Short Course in Economics

In which I begin with pithy statements of principles and work my way toward more complex (but brief) explorations of selected economic issues.

1. Self-interest drives us to do good things for others while striving to do well for ourselves.

2. Profit is good because it entices invention, innovation, and investments that yield new and better products and services.

3. Incentives matter: Just as self-interest and profit drive progress, taxation and regulation stifle it.

4. Only slaves and dupes can be exploited. (Wal-Mart employees are not exploited; they are not forced to work at Wal-Mart. Anti-Wal-Mart activists are exploited; they’re dupes of the anti-business Left.)

5. There is no free lunch, all costs (including taxes) must be covered by someone, somewhere, at some time.

6. The appearance of a free lunch (e.g., Social Security, tax-subsidized health insurance) leads individuals to make bad decisions (e.g., not saving enough for old age, overspending on health care).

7. Paternalism is for children: When adults aren’t allowed to make economic decisions for themselves they don’t learn from mistakes and can’t pass that learning on to their children.

8. All costs matter; one cannot make good economic decisions by focusing on one type of cost, such as the cost of energy.

9. The best way to deal with pollution and the “depletion” of natural resources is to assign property rights in resources now held in common. The owners of a resource have a vested interest (a) in caring for it so that it remains profitable, and (b) in raising its price as it becomes harder to obtain, thus encouraging the development of alternatives.

10. Discrimination is inevitable in a free society; to choose is to discriminate. In free and competitive markets — unfettered by Jim Crow, affirmative action, or other intrusions by the state — discrimination is most likely to be based on the value of one’s contributions.

11. Voluntary exchange is a win-win game for workers, consumers, and businesses. When exchange is distorted by taxation and constrained by regulation, the losers are workers (fewer jobs and lower wages) and consumers (higher prices and fewer choices).

12. Absent force or fraud, we earn what we deserve, and we deserve what we earn.

13. The economy isn’t a zero-sum game; for example:

Bill Gates is immensely wealthy because he took a risk to start a company that has created things that are of value to others. His creations (criticized as they may be) have led to increases in productivity. As a result, many people earn more than they would have otherwise earned; Microsoft has made profits; Microsoft’s share price rose considerably for a long time; Bill Gates became the wealthiest American (someone has to be). That’s win-win.

14. Externalities are everywhere.

Like the butterfly effect, everything we do affects everyone else. But with property rights those externalities (e.g., pollution) are compensated instead of being legislated against or fought over in courts. Relatedly . . .

15 . There is no such thing as a “public good.”

Public goods are thought to exist because certain services benefit “free riders” (persons who enjoy a service without paying for it). It is argued that, because of free riders, services like national defense be provided by government because it would be unprofitable for private firms to offer such services.

But that analysis overlooks the possibility that those who stand to gain the most from the production of a service such as defense may, in fact, value that service so highly that they would be willing to pay a price high enough to bring forth private suppliers, free riders notwithstanding. The free-rider problem isn’t really a problem unless the producer of a “public good” responds to requests for additional services from persons who don’t pay for those services. But private providers would not be obliged to respond to such requests.

Moreover, given the present arrangement of the tax burden, those who have the most to gain from defense and justice (classic examples of “public goods”) already support a lot of free riders and “cheap riders.” Given the value of defense and justice to the orderly operation of the economy, it is likely that affluent Americans and large corporations — if they weren’t already heavily taxed — would willingly form syndicates to provide defense and justice. Most of them, after all, are willing to buy private security services, despite the taxes they already pay.

I conclude that there is no “public good” case for the government provision of services. It may nevertheless be desirable to have a state monopoly on police and justice — but only on police and justice, and only because the alternatives are a private monopoly of force, on the one hand, or a clash of warlords, on the other hand. (See this post, for instance, which also links to related posts.)

You may ask: What about environmental protection? Isn’t it a public good that must be provided by government? No. Read this and this. Which leads me to “market failure.”

16. There is no such thing as “market failure.

The concept of market failure is closely related to the notion of a public good. When the market “fails” to do or prevent something that someone thinks should be done or prevented, the “failure” is invoked as an excuse for government action.

Except where there is crime (which should be treated as crime), there is no such thing as market failure. Rather, there is only the failure of the market to provide what some persons think it should provide.

Those who invoke market failure are asserting that certain social and economic outcomes should be “fixed” (as in a “fixed” boxing match) to correct the “mistakes” and “oversights” of the market. Those who seek certain outcomes then use the political process to compel those outcomes, regardless of whether those outcomes are, on the whole, beneficial. The proponents of compulsion succeed (most of the time) because the benefits of government intervention are focused and therefore garner support from organized constituencies (i.e. interest groups and voting blocs), whereas the costs of government intervention are spread among taxpayers and/or buyers of government debt.

There are so many examples of so-called public goods that arise from putative market failures that I won’t essay anything like a comprehensive list. There are, of course, protective services and environmental “protection,” both of which I mentioned in No. 15. Then there is public education, Social Security, Medicare, Medicaid, Affirmative Action, among the myriad federal, State, and local programs that perversely make most people worse off, including their intended beneficiaries. Arnold Kling explains:

[T]he Welfare State makes losers out of people who want to get ahead through hard work, thrift, or education. Those are precisely the activities that produce economic growth and social wealth, and they are hit particularly hard by Welfare State redistribution.

The Welfare State certainly has well-organized constituencies. The winners, such as the AARP and the teachers’ unions, know who they are. The losers — the working poor, children stuck in low-quality school districts — have much less political clout. The Welfare State has friends in both parties, as evidenced by the move to add a prescription drug benefit to Medicare.

As the Baby Boomers age, longevity increases, and new medical technology is developed, the cost of the Welfare State is going to rise. Economists agree that in another generation the share of GDP required by the Welfare State will exceed the share of GDP of total tax revenues today. The outlook for the working poor and other Welfare State losers is decidedly grim.

17. Borders are irrelevant, except for defense.

It is not “bad” or un-American to “send jobs overseas” or to buy goods and services that happen to originate in other countries. In fact, it is good to do such things because it means that available resources can be more fully employed and put to their best uses. Opponents of outsourcing and those who decry trade deficits want less to be produced; that is, they want to shelter the jobs of some Americans at the expense of making many more Americans worse off through higher prices.

For example, when Indian computer geeks operate call centers for lower salaries than the going rate for American computer geeks, it makes both Indians and Americans better off. Few Americans are computer geeks, but many Americans are computer users who benefit when they pay less for geek services (or the products with which geek services are bundled). Those who want to save the jobs of American computer geeks assume that (a) American computer geeks “deserve” their jobs (but Indians don’t) and (b) American computer geeks “deserve” their jobs at the expense of American consumers.

See also this, and this, and this.

18. Government budget deficits aren’t bad for the reason you think they’re bad.

Government spending is mostly bad (see No. 15) because it results in the misallocation of resources (and it’s inherently inflationary). Government spending — whether it is financed by taxes or borrowing — takes resources from productive uses and applies them to mostly unproductive and counterproductive uses. Government budget deficits are bad in that they reflect that misallocation — though they reflect only a portion of it. Getting hysterical about the government’s budget deficit (and the resulting pile of government debt) is like getting hysterical about a hangnail on an arm that has been amputated.

There’s no particular reason the federal government can’t keep on making the pile of debt bigger — it has been doing so continuously since 1839. As long as there are willing lenders out there, the amount the amount of debt the government can accumulate is virtually unlimited, as long as government spending does not grow to the point that its counterproductive effects bring the economy to its knees.

For more, see this, this, this, and this.

19. Monopoly (absent force, fraud, or government franchise) beats regulation, every time.

Regulators live in a dream world. They believe that they can emulate — and even improve on — the outcomes that would be produced by competitive markets. And that’s precisely where regulation fails: Bureaucratic rules cannot be devised to respond to consumers’ preferences and technological opportunities in the same ways that markets respond to those things. The main purpose of regulation (as even most regulators would admit) is to impose preferred outcomes, regardless of the immense (but mostly hidden) cost of regulation.

There should be a place of honor in regulatory hell for those who pursue “monopolists,” even though the only true monopolies are run by governments or exist with the connivance of governments (think of courts and cable franchises, for example). The opponents of “monopoly” really believe that success is bad. Those who agitate for antitrust actions against successful companies — branding them “monopolistic” — are stuck in a zero-sum view of the economic universe (see No. 13), in which “winners” must be balanced by “losers.” Antitrusters forget (if they ever knew) that (1) successful companies become successful by satisfying consumers; (2) consumers wouldn’t buy the damned stuff if they didn’t think it was worth the price; (3) “immense” profits invite competition (direct and indirect), which benefits consumers; and (4) the kind of innovation and risk-taking that (sometimes) leads to wealth for a few also benefits the many by fueling economic growth.

What about those “immense” monopoly profits? They don’t just disappear into thin air. Monopoly profits (“rent” in economists’ jargon) have to go somewhere, and so they do: into consumption, investment (which fuels economic growth), and taxes (which should make liberals happy). It’s just a question of who gets the money.

But isn’t output restricted, thus making people generally worse off? That may be what you learned in Econ 101, but that’s based on a static model which assumes that there’s a choice between monopoly and competition. I must expand on some of the points I made in the original portion of this commandment:

  • Monopoly (except when it’s gained by force, fraud, or government license) usually is a transitory state of affairs resulting from invention, innovation, and/or entrepreneurial skill.
  • Transitory? Why? Because monopoly profits invite competition — if not directly, then from substitutes.
  • Transitory monopolies arise as part of economic growth. Therefore, such monopolies exist as a “bonus” alongside competitive markets, not as alternatives to them.
  • The prospect of monopoly profits entices more invention, innovation, and entrepreneurship, which fuels more economic growth.

20. Stay tuned to this blog.